Egypt's OCI Q2 net grows; sees bigger backlog

Egypt's Orascom Construction (OCI) posted a 15 percent rise in second-quarter net income on Tuesday and said it 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, 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 Nassef Sawiris, makes infrastructure, industrial facilities and buildings and produces fertilisers.

OCI reported net income of $165.2 million, up from $144 million in the second quarter of 2010. It was expected to make net income of $191.4 million, according to the average forecast from 15 brokerage and investment banks.

"I think 2011 will be better in terms of order intake, for sure, than 2010," Sawiris told Reuters in an interview. Its consolidated construction backlog on June 30 was $5.23 billion, up 2.4 percent from March 31.

OCI said its consolidated construction backlog on June 30 was $5.23 billion, up 2.4 percent from March 31.

It said it was in advanced negotiations for construction contracts worth more than $1 billion.

Sawiris said 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 Sawiris was bullish on Egypt's prospects.

"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," he said. "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, he said.

GROWING APART

Sawiris said the decision to split OCI into two separate companies would make it easier for both firms to form partnerships and expand on their own.

Asked whether the move was aimed at facilitating future merger and acquisition activity, Sawiris told Reuters: "Never say never... Our priority right now is exclusively organic growth".

OCI's fertiliser producing capacity is set to grow by some 60 percent in the next six months, he said, as it ramps up operations in Algeria, the United States, the Netherlands and Egypt.