Orascom Construction reports 6.2% drop in Q3 profit as new contracts decline

The company's backlog remained steady at $5.3bn at the end of the nine-month period

Egypt’s Orascom Construction reported a 6.2% in third quarter net profit on Thursday. Dana Smillie / The National

Egypt-based Orascom Construction reported a 6.2 per cent drop in third quarter net profit as the number of new contracts declined amid a global economic recession-induced by the Covid-19 pandemic.

Net profit attributable to shareholders for the three months to the end of September fell to $30.2 million, the company said in a statement on Thursday. However, quarterly revenue increased 4.4 per cent to $824.5m from the same period in 2019.

New contract awards during the reporting period almost halved to $674.4m from a year-earlier. The company's net cash position reached $208.9m at the end of September.

“Our focus on project execution and controls, cash preservation and collections, and cost optimisation are reflected in our financial results for the quarter,” Orascom chief executive Osama Bishai, said.

The quarterly revenue increase, he said, indicated continued operations of the firm “on a full-fledged basis”.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) rebounded in the third quarter, surging 44.9 per cent from the previous quarter to $51m.

The rise in Ebitda reflects “successful efforts in project controls and cost optimisation,” Mr Bishai said.

The Cairo-based company is an engineering and construction contractor primarily focused on infrastructure, industrial and high-end commercial projects in the Middle East, Africa and the US.

Net profit in the first nine months of the year fell nearly 31 per cent to $65m from the same period a year earlier. Revenue in the first nine months rose 6.9 per cent to $2.44 billion on an annual basis.

The company's backlog remained steady at $5.3bn at the end of September. New awards during the nine-month period, however, declined 27.5 per cent to $2bn.

The group signed $1.4bn worth of new awards in the first nine months, primarily in Egypt, of which $480m were added in the third quarter of the year.

Main projects won during the first half were for transportation, data centres, water and commercial sectors. New work picked up in the third quarter includes contracts in Egypt’s growing logistics sector, the country’s New Administrative Capital and Al Alamein city.

In the US, the company’s subsidiaries signed $570m worth of contracts during the nine-month period. Data centre projects in the US account for a significant portion of new awards in the third quarter, it said.

The standalone backlog of Besix, in which Orascom Construction controls a 50 per cent stake, fell 7.1 per cent year-on-year to €4.2bn. New awards totalled €407m in the third quarter, bringing the total in the first nine months to €1.5bn for BESIX, according to the statement.