Dubai-listed Orascom Construction declares net loss in first quarter

Rising costs at the $2bn Iowa Fertiliser Company (IFCo) plant being built for its former parent OCI NV 'have weighed on financial performance this year'.

Orascom Construction declared a net loss of US$334.4 million during its first year as an independent company, which it blamed on a one-off loss from a project to build a huge fertilizer plant in Iowa in the US.

The Nasdaq Dubai-listed contractor, which was for­mally demerged from its Netherlands-listed chemicals and fertilizer group in March last year, declared revenue of $3.9 billion for last year – $2bn of which was earned from the Mena region, with the rest coming from operations in the United States.

The company’s chief executive, Osama Bishai, said in a statement that rising costs at the $2bn Iowa Fertilizer Company (IFCo) plant being built for its former parent, OCI, “have weighed on our financial performance this year, overshadowing the success of other major parts of the business”.

“At the same time, we have worked to mitigate the challenging issues at IFCo to avoid further losses,” the statement said.

Reports in the US have said that the company is being sued by a contractor in relation to the IFCo project. Maintenance Enterprises claimed that Orascom Construction stopped paying the company last October, and owes it more than $50m. Other contractors are understood to have filed claims.

IFCo is the biggest gas-fired fertilizer plant to be built in the US for years. It is being built on a 130-hectare site and once complete should be capable of producing 2 million tonnes of fertilizers and industrial chemicals per year.

Orascom Construction declared $158.7m of provisions during the year, including a $136m charge against “onerous contracts”. It also drew down $150m in payments from OCI that had been set aside if Orascom Construction incurred losses on any projects being built for it.

The construction group said that it expected to return to profit this year, “starting with the first quarter which already indicates revenue in the range of $900m and positive consolidated Ebitda”, said Mr Bishai.

The company also said that its backlog had grown by 14 per cent over the course of the year, thanks partly to a contract secured in the last quarter of the year in Egypt to convert the West Damietta and Assiut power plants into combined cycle plants.

Mr Bishai said he expected revenue contribution from Algeria to increase as a result of increased awards but said that its backlog in Saudi Arabia (now just 10 per cent of its total) is expected to decline as no new awards have come through since the first half of last year.

BMI Research predicted that the value of Egypt’s construction market will grow by 9.1 per cent this year to $16.7bn, and then by 6.5 per cent next year to $17.8bn. Within the past month, it has been announced that Abu Dhabi-backed Capital Group Properties has launched a $4.5bn project for 30,000 homes on a 4.9-square kilometre site near Suez and that an alliance between Egyptian, UAE, Lebanese and Saudi Arabian contractors known as Asec Capital will develop a new industrial city by the Suez Canal.

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