Reuters reported that Egypt's Orascom Construction posted 15% rise in Q2 net income and expected orders to grow this year as governments in the Middle East try to create more jobs by boosting infrastructure spending.
OCI, the biggest company in Egypt by market value also said it planned to ask shareholders to approve a split of its operations into two independent companies with separate boards under a single holding company. The group, run by millionaire tycoon Mr Nassef Sawiris, constructs infrastructure, industrial facilities and buildings and produces fertilizers.
OCI reported net income of USD 165.2 million up from USD 144 million in the Q2 of 2010. It was expected to make net income of USD 191.4 million according to the average forecast from 15 brokerage and investment banks.
Mr Sawiris said that "I think 2011 will be better in terms of order intake, for sure than 2010."
OCI said that its consolidated construction backlog on June 30th 2011 was USD 5.23 billion up 2.4% from March 31st 2011. It was in advanced negotiations for construction contracts worth more than USD 1 billion.
Net income was held back by an increase in the Egyptian rate of corporate tax, levied on earnings since the start of 2011. Mr Sawiris also blamed part of the shortfall in net income compared with the consensus forecast on weaker fertilizer prices.
Mr Sawiris said that he expected Egypt to continue representing a fifth of OCI's construction backlog, despite a sharp economic downturn prompted by the overthrow in February of President Hosni Mubarak which led to a wave of strikes and the withdrawal of tourists and foreign investors. The unrest slowed construction activity in Egypt and delayed the launch of public private partnerships that OCI was eyeing. But Mr Sawiris was bullish on Egypt's prospects.
He said that there is no alternative. For Egypt to create additional jobs it needs to attract investment and it needs to create homes for those investments and one best home is infrastructure. I have no doubt that while private investment in infrastructure stopped, it will come back, probably after the elections. The region's construction outlook was strong because states such as Saudi Arabia, Algeria, Qatar and Morocco were spending more to create extra jobs, while inflation was lower which would support the value of OCI's backlog.
Mr Sawiris said that the decision to split OCI into two separate companies would make it easier for both firms to form partnerships and expand on their own. For the next 12 months, global agriculture fundamentals are strong. Fertilizer prices are somewhere in the region of 20 percent higher than three to four months ago.
(Sourced from Reuters)
