Orascom Construction Industries' acquisition of an ammonia facility in Texas should give the Egypt-based firm better access to US markets.
OCI purchases Texan ammonia methanol plant
An Egyptian petrochemicals company's purchase of a plant in Texas could bode well for the stock, analysts say.
Orascom Construction Industries (OCI) bought an integrated ammonia methanol facility that should increase its total ammonia production by almost 17 per cent to 1.73 tonnes a year, from 1.48 tonnes, by the end of this year.
"It is definitely positive news in my view," said Ahmed Badr, an analyst at Credit Suisse in Dubai.
The company remains his top pick in Egypt, with an "outperform" rating and target price of 289.7 Egyptian pounds a share, 13 per cent above its close yesterday at 255 pounds.
The total cost will be US$65 million, which includes the acquisition and the planned expense to rehabilitate the plant's operating systems and environmental controls.
The plant, based in Beaumont, Texas, has a capacity of 250,000 tonnes of ammonia and 750,000 tonnes of methanol per annum. The facility also has an ammonia storage tank with a capacity of 18,000 tonnes and two methanol storage tanks, each with a capacity of 22,000 tonnes.
OCI acquired this facility in partnership with Janus Methanol. The joint venture between the two companies is named Pandora Methanol, and OCI owns slightly more than 50 per cent.
In addition to the benefits from increased ammonia production, in an environment where ammonia and urea prices are experiencing sustainable growth, OCI will have better access to the US market through the joint venture and should be able to achieve better distribution in the US from its plants across the world, Mr Badr said.
Ammonia production is expected to start in the fourth quarter of this year and methanol production is targeted to start next year. The joint venture is also studying the possibility of increasing both production and storage-tank capacity on site.