Orascom Construction Q1 net rises 76% to $34.6m

Egypt contractor lifted by fertiliser sales as operation revenue gains

Orascom's projects are in Egypt and North Africa.
Orascom's projects are in Egypt and North Africa.

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Orascom Construction Industries said its net income for the first quarter soared 76% against the same period last year, with revenue also rising, despite the political revolution in Egypt that brought the stock market and industry to a halt.

The Egyptian contractor, which also produces and sells nitrogen-based fertiliser as well as construction materials, said it made $34.64m (EGP206.1m) for the first three month, far outpacing the $19.57m (EGP116.5m) the previous year. Revenue from continuing operations rose 28% to $211m (EGP1.26 bn) from $165.46 (EGP985m), with gross profits lifting more than 37% to $68.53m (EGP408m).

The company targets large industrial and infrastructure projects principally in Egypt and North Africa, the region that has seen some of the most intense civil unrest since mid-January.

Some contractors and developers have put their Egyptian and Libyan projects on hold and removed their staff from the affected areas until further notice on the back of popular uprisings in Tunisia and Egypt as well as the ongoing conflict in Libya. Some consultants, such as Aecom, have been able to fare better during the unrest, continuing their project management work despite removing employees, according to David Barwell, CEO.

Orascom said its income from operations rose 45.9% to EGP268.3m ($45.1m), although results also show that it has increased its debt by 27% by the end of the first quarter compared to the end of 2010.

But Prime Securities believed that the results were achieved through the improved prices for fertiliser and the consolidation of OCI Nitrogen. It also sounded a note of caution as to the tender opportunities in the region this year, despite acknowledging of the strength of the company’s offering.

“We do not believe that major projects will be tendered during 2011 except for projects that would be financed by foreign institutions and through international grants, in which OCI is a front runner,” it wrote in a report this week.

The company this week completed the acquisition of an ammonia methanol plant in Texas through its wholly-owned subsidiary in the Netherlands. The analyst team at Bloomberg estimated that the “small but favourable acquisition” could add E 11 to the team’s estimated ‘less than fair value’ of E 357.1 per share.

The results are some of the strongest for the region and far outpace Gulf-based contractors that have projects in the Middle East. Arabtec Holding net revenue fell 80% to $7.2m.

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