Builder Orascom first-quarter profit rises on US business boost
Orascom Construction announced a 22 per cent year-on-year increase in net profit for the first three months of 2017 to US$28 million (Dh102.8m) on the back of higher sales and an improved contribution from Besix and its US business.
The Nasdaq Dubai-listed company said sales grew by 10 per cent to almost US$1.07 billion. Net profit from Besix, which has a major presence in the UAE, increased more than five-fold to $10.5m from $2m in the sameperiod last year. Net profit from Orascom’s US operations more than doubled to $4.6m, but profit from its own Mena operations fell by 32 per cent to $12.9m.
Speaking on a conference call to investors, Orascom Construction’s chief executive, Osama Bishai, said the improved profit was “not only due to operational efforts but also due to management of costs and cost-cutting efforts across the board”.
He also said the company had made progress with new awards, landing a second major desalination plant in Egypt, following the award of an almost identical project in the final quarter of last year. Mr Bishai said he anticipated “economies of scale” by carrying out both projects.
Orascom Construction secured $387.4m of awards in the first quarter, which is a 24 per cent drop year-on-year. Combined with its share in Besix, it secured $838.4m, which is 14.2 per cent lower than last year. Mr Bishai said its pro forma backlog, including its 50 per cent share in Besix, stands at more than $6.8bn. This means it has between 16 and 18 months of work in hand, which, “is quite a healthy number given the market condition in the Mena region”.
Orascom Construction is working with Besix on a joint venture contract to develop the heavy infrastructure for Dubai’s Expo 2020 site. Besix also has a joint venture with the South Korean contractor Ssangyong for the new Royal Atlantis hotel at Dubai’s Palm Jumeirah.
The company’s chief financial officer, Mark Littel, said the drop in Orascom Construction’s Mena income (ebitda margin in the region fell to 6.2 per cent, from 8.5 per cent) was partly because it has taken provisions against some debts owed to it.
“Part of it relates to Saudi but also to some older accounts receivables, which we still think we’re entitled to but it’s safer to have certain provisions for those,” he said.
A report produced by Ventures Onsite for dmg events – the organiser of the The Big 5 trade shows – is forecasting a recovery in the GCC contracting market in 2017. It said the value of contract awards is likely to rise by 7 per cent this year to $85.6bn, with 47 per cent ($40.5bn) of these in the UAE.
“With a number of mega projects underway, rebound of the regional construction sector will roll out its positive results starting from Q3 2017,” said Richard Pavitt, the event director of The Big 5 Heavy trade show for machinery and concrete firms.
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