Orascom Construction Q4 net falls more than expected

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By Tom Pfeiffer / Reuters

CAIRO: Egyptian group Orascom Construction reported a 34 percent drop in quarterly net income, missing expectations after being hit by debt restructuring and other charges.

The company’s shares gained 2.6 percent as analysts welcomed its construction backlog, which continued growing at the end of a year of major economic disruption in its home market following a popular uprising.

OCI said on Tuesday fourth-quarter net profit fell to $123 million, compared with a forecast for $176 million in a poll of 16 analysts supplied by the company.

The biggest company in Egypt by market value has managed to keep operating profit growing as it boosts fertilizer exports and benefits from infrastructure growth across the Middle East.

Its consolidated construction backlog was $6.4 billion by the end of last year, up 7.7 percent from three months earlier.

“What is especially positive is that this was done in 2011 which was arguably the toughest year for the Egyptian market,” said Omar Taha, an analyst at Beltone Financial.

Chief Executive Nassef Sawiris told Reuters that OCI had not received requests to delay projects because of the economic troubles in Egypt.

He said OCI was not dependent on real estate developers — which were among the businesses that suffered most during last year’s turmoil — and was involved in a wide range of projects such as roads and power plants, a museum and a dam.

“We’re entering the year with a strong backlog so we expect a normal performance” in Egypt, he said in a telephone interview.

“Egypt has good economic prospects and a lot of demand… As soon as we restore normalcy, we think we’re going to have a major uptick.”

OCI said its fertilizer plants operated at full capacity in the fourth quarter, urea and ammonia prices had recovered and its planned capacity expansion in the United States, Egypt, Algeria and the Netherlands was on track.

The company plans to split the construction and fertilizer businesses and aims to hold a shareholder meeting in April to approve the demerger.

Sawiris said the final split should take place around two months after it secures shareholder approval.

OCI had said in December it expected to complete the demerger process by the end of March.

Earnings before interest, tax, depreciation and amortization grew 6.8 percent to $341 million, compared with a forecast for $347 million, while revenue grew 7 percent to $1.41 billion.

One-off items pulled net income down by $51.5 million, including charges related to early repayment of debt, expenses for an employee stock option plan and a reduction in investment income, OCI said.

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