Profits at Besix help to shore up Orascom's third-quarter results

Orascom Construction reported a 6.1 per cent increase in third-quarter profits attributable to shareholders to US$26 million, which was due mainly to an improved performance by contractor Besix — in which it has a 50 per cent share.

The Egyptian-headquartered company, whose shares are listed on Nasdaq Dubai, reported a 16 per cent decline in revenue to $962.1m during the three months and saw its operating profit margin decline by 1.2 per cent to 4.2 per cent. However, profit at Besix rose to $10.5m from $1.5m a year ago.

For the nine-month period, net profit was 17.3 per cent higher at $75.4m, despite a 2 per cent decline in revenue to $2.96bn.

The company’s chief executive, Osama Bishai, praised the performance of Besix, which has just completed construction of Legoland Dubai at the Dubai Parks and Resorts site. He said that Besix had managed to increase new awards by 24 per cent this year to €1.4 billion (Dh5.47bn), increasing its total backlog by 10 per cent year-on-year to €3.3bn.

“Orascom and Besix continue to collaborate on existing and potential projects in Egypt and the region,” he said.

Orascom’s total backlog, including its 50 per cent share in Besix, fell by 2 per cent and stands at just over $9.3bn.

Mr Bishai said the company is continuing to win new infrastructure work in Egypt and in the US through its Weitz and Contrack Watts subsidiaries. Both of these have meant the Orascom Construction has reduced its exposure to Saudi Arabia. The proportion of total revenue earned from the kingdom in the first nine months was just 3 per cent, and its backlog of projects in Saudi Arabia has dropped to just 4.4 per cent, compared with 20.4 per cent in February last year.

The company also said it is not heavily exposed to currency risk in its own market following the recent devaluation of the Egyptian pound because it has “significant foreign currency components” in its backlog. It also anticipates more work in Egypt if the recent measures taken by the government leads to increased investment.

Earlier this month, BMI Research stated that the devaluation in Egypt’s pound could result in a “substantial” increase in inflation. It has forecast that inflation will increase to 30 per cent by the end of the year — up from 14.2 per cent in September.