Orascom Construction net income drops 54 percent

Egypt's Orascom Construction reported a 54 percent fall in first-quarter net income on Monday, partly due to the sale of a stake in US grains merchant Gavilon and also lower sales volumes and a drop in prices at OCI's fertilizer business.

OCI, Egypt's biggest company by market value, is in the process of splitting its construction and fertilizer businesses into two new companies. It has been benefiting from infrastructure growth across the Middle East despite economic turmoil at home.

Net profit fell to US$94 million from $206.3 million in the same period a year earlier. That compares to a consensus estimate by 14 analysts of $129.5 million.

Consolidated revenue rose by 1.4 percent to $1.28 billion from $1.26 billion, while earnings before interest, tax, depreciation and amortization dropped 24 percent to $255.8 million from $334.8 million in the same period a year earlier.

"Our first quarter results have been impacted by lower selling prices for ammonia and melamine," Chairman and Chief Executive Officer Nassef Sawiris said in a statement.

"Moving forward, we expect to weather the impacts on the first quarter results with the resurgence in fertilizer prices during late March and increases in production rates from our new fertilizer plants," Sawiris said. He also said the firm expected an improvement in earnings for the rest of the year.

OCI's consolidated order backlog at end-March grew to $6.5 billion, a 1.4 percent increase from the end-December figure and a 15.5 percent jump from the same period a year earlier.

The company registered new orders worth $841 million during the quarter, with infrastructure and industrial work making up 61 percent of the construction group's backlog.

OCI said in late May it would earn $605 million from the sale of its 16.8 percent stake in US grains merchant Gavilon to Japanese trading house Marubeni.

The deal is part of a $3.6 billion takeover by Marubeni of Gavilon, whose other owners include billionaire investor George Soros and hedge fund manager Dwight Anderson.

The investment income related to the Gavilon stake was taken out during the quarter and reclassified as an investment held for sale, OCI said.

"We expect to use part of the proceeds to finance the fertilizer group's expansion in North America and potentially invest in other opportunities under review," the firm said, adding that part of the proceeds will be paid as dividends.

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