Orascom Construction profit up threefold on divestments and boost from Besix

Company reports $62.6m in profit for the April to June period

The group signed $293.3 million of new awards in Egypt in the second quarter. Dana Smillie for The National
Powered by automated translation

Orascom Construction said its net income jumped threefold annually in the second quarter of the year, mainly due to an improved performance by contractor Besix — in which it has a 50 per cent share — as well as the divestment of two subsidiaries.

Net profit attributable to shareholders for the three-month period to the end of June rose to $62.6 million, the Egyptian-headquartered company, whose shares are listed on Nasdaq Dubai, said on Wednesday.

Net income contribution from Besix increased 44.4 per cent year on year to $6.5 million in the second quarter.

"Net income in [the second quarter] benefitted from the divestment of two building material subsidiaries, and from foreign exchange gains due to the group’s favourable currency net asset position in Egypt," Orascom said.

The two subsidiaries were divested for a total gross value of 2.2 billion Egyptian pounds ($71 million), in May and June.

"We recently divested two of our non-strategic building materials subsidiaries in May and June," said Osama Bishai, chief executive of Orascom Construction.

"These transactions align with our approach to unlock value across our matured assets for allocation to growth and value accretive areas. Furthermore, as part of our commitment to effective capital allocation and long-term shareholder returns, we completed a share buyback of 5.6 per cent in June."

Earnings before interest, tax, depreciation and amortisation (ebitda) rose nearly 171 per cent to $115.3 million in the April to June period.

Revenue in the second quarter fell nearly 19 per cent to $758.6 million, with the company's Middle East and Africa operations comprising 60 per cent of total revenue during the period, and the US operations accounting for the remainder.

Including the group’s 50 per cent share in Besix, pro forma backlog declined 5.4 per cent annually to $8.5 billion as of June 30, the company said.

Pro forma new awards also dropped more than 47 per cent yearly to $1.1 billion in the second quarter.

The group signed $293.3 million of new awards in Egypt in the latest quarter, spanning the transportation, industrial and infrastructure sectors. Orascom's US subsidiaries signed $442.4 million of new awards in the second quarter, it said.

The company is currently working on its renewable energy investments.

"Construction at the new 500 megawatts build-own-operate wind farm in Egypt is well under way and ahead of schedule," Mr Bishai said.

It is aimed to supply energy to 800,000 homes in the country once complete.

"This project is seeing us leverage our key experience as a first mover in renewable energy in Egypt," he said.

"This project also exemplifies our growing concessions portfolio under development, which now encompasses several key sectors including water, renewable energy, and hydrogen in three different countries - Egypt, UAE and Saudi Arabia."

In May, the group signed a new contract to develop, own and operate a large-scale seawater treatment and water transportation project in Abu Dhabi for Adnoc.

Meanwhile, the Dammam West Independent Sewage Treatment Plant build-own-operate-transfer project is also expected to commence operations in the fourth quarter of this year, Orascom said.

This week, Orascom Construction signed a contract with Abu Dhabi-based developer Eagle Hills Properties to construct a project in Egypt, the Arab world’s most populous country.

Updated: August 30, 2023, 9:22 AM