CAIRO: Orascom Construction Industries (OCI), Egypt s largest construction company, reported a drop in second-quarter profit, missing forecasts, but said demand from industrial clients was picking up. The group, also the country s biggest producer of nitrogen fertilizers, said on Thursday net profit fell 58 percent from a year ago to $102.4 million, missing expectations of four analysts, who predicted $105 million to $121 million. OCI Chairman and Chief Executive Nassef Sawiris told Reuters the company s construction business had benefited over the last two to three months from the return of industrial clients, including consumer goods and steel firms. The company added $1.17 billion of new work during the quarter, allowing it to keep its construction backlog little changed from end-March at $7.21 billion. We are now seeing a lot of regional multinational companies dusting off their delayed projects for capacity increases that had totally come to a (halt) since September 2008, Sawiris said. People are negotiating and want to conclude contracts in a matter of weeks. HC brokerage analyst Mennatallah El Hefnawy, who had forecast net income of $105.9 million, said the level of new orders in the second quarter had beaten her firm s estimates. OCI s fertilizers segment was ahead of plan on volumes, but the pricing environment was tougher, Sawiris said. Urea or nitrogen fertilizers have suffered a bit as a result of the Indian drought. That has shaved a bit of demand in the summer season, which has prevented the product s price from continuing its rise, Sawiris said. Urea is trading close to the cost of production in several European countries and its price cannot go lower, the CEO added. OCI s 700,000-ton-per-year ammonia plant in Egypt, Egyptian Basic Industries Corporation (EBIC), began production earlier this year and is now running above its nominal capacity. Its Sorfert Algeria plant, due to be commissioned in 2011, was 76 percent complete as of Aug. 31. Ahmed Shams of EFG-Hermes, who forecast net income of $106 million, said: The main driver was construction ... We expect it to remain the main driver till the end of the year. OCI said second quarter earnings were impacted by a one-off inventory write-down from Gavilon as a result of lower fertilizer prices, low volumes in the United States and lower than expected performance of its grains business. OCI owns 18 percent of Gavilon, a business whose activities include providing logistical and other services to the agriculture and energy markets. But Sawiris said he was very happy with the results, considering the overall expectations before the quarter. Revenues in the three months from April to June period rose to $1.091 billion from $974.4 million a year ago. The EBITDA margin was 17.1 percent.
