Egypt's Orascom Construction Q2 profit slides amid 'challenging' global climate

Revenue during the period grew 8% annually to $934.9m on new project awards

Orascom Construction signed new contracts worth $1.76 billion in the second quarter of this year. Dana Smillie / The National
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Egypt's Orascom Construction posted a 13 per cent annual decline in net profit during the second quarter of 2022, citing “challenging” global conditions as countries struggle with higher inflation and supply chain issues.

Net profit attributable to shareholders for the three months to the end of June declined to $20.8 million, from $23.8m in the same period last year, the company said on Wednesday.

However, net income during the period increased by about 59 per cent from the first three months of this year.

Second-quarter revenue also rose 8 per cent annually to $934.9m as the company secured new contracts in projects across the transport, water and commercial sectors.

The company's Middle East and Africa business accounted for 68 per cent of total revenue while its US operations contributed the remainder.

Consolidated earnings before interest, taxes, depreciation and amortisation for the three-month period decreased by about 14 per cent annually to $42.6m.

“Our Q2 2022 results reflect the group’s resilience against a challenging global environment,” said chief executive Osama Bishai.

“We remain focused on several important pillars such as project execution, controls, supply chain and collections.”

The company also remains focused on its business development efforts across strategic sectors such as infrastructure and data centres, he said.

Orascom Construction, which has building material, equipment services, infrastructure asset and operations and maintenance subsidiaries, signed new contracts worth $1.76 billion in the second quarter, an increase of 55 per cent from the same period last year.

This pushed its consolidated backlog for the first six months of the year to $6.5bn, up 10 per cent from the first half of 2021.

The second-quarter project awards were mainly driven by an improvement in the Egyptian market, where Orascom Construction signed new contracts worth $1.6bn in the first half, of which contracts valued at $1.2bn were added in the second quarter.

In May, Orascom Construction and its consortium partners Siemens Mobility and The Arab Contractors signed an agreement with the National Authority for Tunnels to expand Egypt's new high-speed rail network to 2,000 kilometres.

The company's subsidiary, SIDC, also signed an agreement in May with Al Ahly Capital Holding, the investment arm of the National Bank of Egypt, to develop a 220-hectare industrial park in Abu Rawash in Egypt.

In the US, Orascom Construction signed new contracts valued at $817m in the first half of 2022, of which deals worth $526m were added in the second quarter.

New project awards included sizeable projects in the data centre sector, where the group continues to expand, it said.

Since 2017, the group completed six data centres in the US and is currently building three more.

The stand-alone consolidated project backlog of Belgian contractor Besix, in which Orascom Construction controls a 50 per cent stake, stood at €4.9bn ($4.9bn) as of June 30, up more than 15 per cent annually.

New awards stood at about €760m in the second quarter, bringing the total for the first half of the year to €1.5bn.

“We also continue [to] evaluate new investment opportunities in infrastructure assets that provide construction opportunities and long-term recurring income,” the contractor said.

Updated: August 31, 2022, 8:29 AM