Company continues MENA expansion; plans to add 10 million tons to cement production capacity in next 6 months
CAIRO: Orascom Construction Industries (OCI) reported late last week net income reached LE 2.67 billion in 2006 on nearly LE 16.5 billion in consolidated revenues for its construction and cement groups.
The figures represent a 57 percent increase in net income and 45 percent increase in revenues as the company secured $2.6 billion (LE 14.8 billion) in new construction contracts in the Middle East, North Africa and Europe. Construction revenues accounted for just over LE 13 billion while OCI’s cement production brought in almost LE 5 billion.
Outside of Egypt, OCI owns cement factories in several countries including Algeria, Iraq, Turkey and Pakistan. In early March, the company announced the formation of a 50-50 partnership with Saudi Arabia’s Al Khayyat Group to enter the cement sector in the Kingdom with the establishment of a $360 million factory near King Abdullah Economic City with a projected output capacity of 2 million tons annually.
Although cement sales accounted for just 25 percent of revenues, they represented nearly 60 percent of the company’s net income due to the sector’s naturally higher profit margins and the increase in global prices in 2006.
OCI’s production rose by 38 percent to 13.9 million tons while the capacity of its factories reached 21 million tons. The company has announced plans to add another 10 million tons in the coming six months through planned expansion in Iraq, Nigeria, Algeria and the United Arab Emirates.
In addition to construction and cement, OCI has also increased its regional expansion activities in recent months with quarry acquisitions in Spain. Last week, OCI announced its 50 percent-owned GLA Group has acquired rights to two quarries in Spain containing some of the largest carbonate and barite reserves in Southern Europe.
Despite strong growth, OCI remains a prime target for accusations of contributing to the local rise in cement prices at its Egyptian subsidiary, the Egyptian Cement Company, which has grown to become the second largest producer behind Suez Cement. Both producers are now leading a list of companies in the sector under investigation by the government’s anti-trust commission for the use of monopolistic practices. The commission is due to release its report in mid-summer.