Orascom Construction reports drop in second-quarter profit amid coronavirus pandemic

Company says its Besix joint venture experienced losses related to projects in the Netherlands and the UAE

Egypt-based Orascom Construction reported a 69 per cent drop in its net profit during the second-quarter of 2020. Dana Smillie for The National

Egypt-based Orascom Construction reported a 69 per cent drop in net profit during the second-quarter of 2020 during what chief executive Osama Bishai described as "a challenging environment impacted by Covid-19".

Net profit attributable to shareholders for the three months ending June 30 declined to $9.8 million (Dh36m), the company said in a statement on Wednesday. Revenue was largely flat at  $791.2m, which indicated "a healthy rate of execution" despite the pandemic, Mr Bishai said.

“While we saw some pressure on gross margins in the second-quarter of 2020, particularly more pronounced in May during a nationwide slowdown in Egypt, we maintain our focus on important elements of our business such as project controls, cost optimisation and cash flow,” he added.

Profits in the second quarter were also affected by losses at Besix, the contractor in which it has a 50 per cent stake, which was “impacted by additional charges on certain projects in the UAE and The Netherlands”, the company said.

Besix management are “exerting major effort and focus to tackle this and return to profitability in the second half of 2020,” Mr Bishai said.

Cairo-based Orascom Construction is an engineering and construction contractor primarily focused on infrastructure, industrial and high-end commercial projects in the Middle East, Africa and the United States.

During the first half of the year, net profit slid 43 per cent to $34.8m, while revenue rose 8.2 per cent to $1.62 billion.

“Our operating cash flow turned positive during the quarter, amounting to $53.2m in the first half of 2020, while our net cash position increased significantly to $309.4m as of June 30. We also reiterated our commitment to shareholders and distributed a dividend of $0.21 per share earlier this month,” Mr Bishai said.

The company signed $950m of new contracts – primarily in Egypt – during the first-half, of which $620m were added in the second quarter. Its US subsidiaries also signed $371m worth of agreements.

Notable new awards during the quarter included projects in the infrastructure, transportation and commercial sectors. These included a contract to build the first phase of Ora Developers' ZED Sheikh Zayed mixed-use project in containing residential towers, a mall and a garage built around a park in Cairo.

It also secured finance for a $4.5bn monorail project in Cairo being carried out as part of a consortium with Arab Contractors and Bombardier.