Orascom Development Holding has returned to profitability for the first time in four years, thanks to improvements in its property and construction business and a series of cost-cutting measures.
The Egyptian developer, which was behind The Cove development in Ras Al Khaimah, yesterday reported a net profit of 31.5 million Swiss francs (Dh126.4m) for the first six months of the year, compared with a net loss of 48m Swiss francsin the first half of 2013, despite a mere 2 per cent rise in top line revenues to 120.6m Swiss francs. It is incorporated in Switzerland.
The developer’s bottom line has been hit hard by political instability in Egypt since the removal of Hosni Mubarak in February 2011, with losses deepening to 160.4m Swiss francs last year, compared with a profit of 122.3m Swiss francs in 2010.
“Having sustained its full activities during the period of unrest through executing on its earlier communicated strategies, the management is now capitalising on Egypt’s improved economic and political outlook, making use of its strong hotel portfolio and property projects to boost the Group’s performance,” Orascom said in a statement yesterday.
The company attributed the return to profitability to a more than doubling of its real estate and construction revenues, largely as a result of accelerated delivery of real estate units in its El Gouna, Ancient Sands and Makadi projects in the country.
Such an increase was offset by continuing pressure on its Egyptian hotel segment, which suffered a 32.2 per cent drop in revenues owing to a series of travel bans to the Sinai Peninsula issued by western European governments during the first half of the year, together with a 29 per cent loss in room capacity at its Taba Heights resorts in May because of flooding.
However, the company said it remains positive about an uptick in business during the second half.
“Most travel bans were lifted towards the beginning of the second half of 2014, with occupancy rates rising in the weeks since,” the company said.
“Moreover, the Egyptian ministry of finance is working on a stimulus package to promote private sector investments in select industries, including tourism.”
The company said that it had also completed the carve-out of its affordable housing unit Orascom Housing Communities, which is expected to have a positive effect on profitability from next quarter.
“We expect 2H14 to be better for ODHN, driven by ongoing monetisation and cost-saving initiatives, recovery seen in real estate and construction operations, and most importantly expected surge in tourism activities in Egypt,” said a Naeem Brokerage research note.
“Tourism recovery will continue to be the main catalyst for ODHN story and given the gradual improvement in on the ground situation in Egypt and recovery seen at some of the touristic destinations ... we believe 2H14 portrays an optimistic outlook.”
Orascom’s shares gained as much as 2 per cent in yesterday’s trading on the SIX Swiss Exchange.
jeverington@thenational.ae
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