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Abu Dhabi, UAEWednesday 12 December 2018

Egypt's Orascom Construction battles new order downturn

Profits fell 10.2 per cent in second quarter as revenues declined

Orascom Construction added $650m worth of contracts to its backlog in 2Q of 2018. Dana Smillie / The National
Orascom Construction added $650m worth of contracts to its backlog in 2Q of 2018. Dana Smillie / The National

Orascom Construction, the top Egyptian contractor by market share, yesterday reported a 10.2 per cent loss for the second quarter of 2017 as revenues slumped amid slowing economic activity.

Net income for the three months to June 30 fell to US$23.7 million (Dh87m) from $26.4m recorded for the same period in 2016, the company said in a statement to Nasdaq Dubai, where its shares are traded. Second-quarter revenue shrunk to $947.2m, a 7.5 per cent drop from $1.02 billion reported a year-earlier.

Contracting firms in the wider Middle East and North Africa (Mena) have generally struggled to maintain profitability as slumping oil prices have forced governments to cut spending. Egypt, the home market for Orascom Construction, has been seeking to diversify its funding sources to further its fiscal reform agenda. The most populous Arab nation has also agreed a $12bn funding programme with the IMF, devalued its currency, tapped international debt market this year, resumed public sector spending and kick-started economic ­activity.

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Osama Bishai, chief executive of Orascom, said the company continues to expand its presence in Egypt and is signing additional power and infrastructure projects.

“Our significant involvement in all major segments of Egypt’s construction market further strengthens our position to key areas of focus such as transportation and water treatment,” he said.

The consolidated new orders, excluding Besix in which it owns a 50 per cent stake, however have declined 83 per cent to $359.9m in the second quarter compared to $2.22bn a year earlier. Its backlog as of the end of June was impacted by 20 per cent due to the devaluation of the Egyptian pound.

“We remain confident that our current backlog will continue to fully support our profitability targets,” Mr Bishai said.

Infrastructure and industrial work continues to account for the majority of Orascom’s consolidated backlog of projects, representing 86 per cent of total.

The firm said, its focus on “quality over size continues to translate into improved profitability” while allowing it to pursue other opportunities.

The net income for the first six months of the of this year has improved slightly to $51.7m from $49.4m in the corresponding period of 2016.

The company, which specialises in infrastructure, industrial and high-end commercial projects in the Mena region, the US, and the Pacific rim, said it is looking to bag a number of significant projects in these markets during the second half of 2017.In July, the firm signed a contract worth $100m to build a new steam turbine power plant in Egypt, which takes the total capacity of plants being built by the company to 11,000 megawatts (MW), including the two biggest combined cycle power plants in the world.