Egypt's Orascom Construction net income drops 54 pct

Reuters, Monday 11 Jun 2012

The largest listed construction firm in Egypt sees net profit fall partially due to the sale of a stake in US grains firm

Egypt's Orascom Construction (OCI) reported a 54 per cent fall in first-quarter net income on Monday, partly due to the sale of a stake in U.S. grains merchant Gavilon and also lower sales volumes and a drop in prices at OCI's fertiliser business.

OCI, Egypt's biggest company by market value, is in the process of splitting its construction and fertiliser businesses into two new companies. It has been benefiting from infrastructure growth across the Middle East despite economic turmoil at home.

Net profit fell to $94 million from $206.3 million in the same period a year earlier. That compares to a consensus estimate by 14 analysts of $129.5 million.

Consolidated revenue rose by 1.4 per cent to $1.28 billion from $1.26 billion while earnings before interest, tax, depreciation and amortisation dropped 24 per cent to $255.8 million from $334.8 million in the same period a year earlier.

"Our first quarter results have been impacted by lower selling prices for ammonia and melamine," Chairman and Chief Executive Officer Nassef Sawiris said in a statement.

"Moving forward, we expect to weather the impacts on the first quarter results with the resurgence in fertiliser prices during late March and increases in production rates from our new fertiliser plants," Sawiris said. He also said the firm expected an improvement in earnings for the rest of the year.

OCI's consolidated order backlog at end-March grew to $6.5 billion, a 1.4 per cent increase from the end-December figure and a 15.5 per cent jump from the same period a year earlier.

The company registered new orders worth $841 million during the quarter, with infrastructure and industrial work making up 61 per cent of the construction group's backlog.

OCI said in late May it would earn $605 million from the sale of its 16.8 per cent stake in U.S. grains merchant Gavilon to Japanese trading house Marubeni.

The deal is part of a $3.6 billion takeover by Marubeni of Gavilon, whose other owners include billionaire investor George Soros and hedge fund manager Dwight Anderson.

The investment income related to the Gavilon stake was taken out during the quarter and reclassified as an investment held for sale, OCI said.

"We expect to use part of the proceeds to finance the fertiliser group's expansion in North America and potentially invest in other opportunities under review," the firm said, adding that part of the proceeds will be paid as dividends.

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