Egypt's, biggest listed company, Orascom Construction Industries announced a 28 percent drop in net income for the second quarter on Thursday, most caused by start-up costs at its Algerian and U.S. fertilizer plants.
Net income fell to $119.4 million from $165.2 million last year, OCI said in a statement, which also blamed the drop on a higher effective tax rate from a bigger contribution to earnings from its European operations. The net income figure was in line with the average forecast from 13 analysts polled by the company.
OCI announced a $1.4 billion fertilizer investment in the United States late on Wednesday, in which its wholly owned subsidiary Iowa Fertilizer Company would build a new greenfield nitrogen fertilizer production plant to supply increased needs for customers in the U.S. corn belt.
“As a result of the drop in yields and the need to increase acreage, we expect strong demand for fertilizer products in the upcoming harvesting season and we expect prices to remain firm for the remainder part of the year,” Chairman Nassef Sawiris said in a statement on Thursday.
The OCI Fertilizer Group is already a top fertilizer producer, with a production capacity which will exceed 7.0 million metric tons in 2012. The state of Iowa Governor, Terry Branstad, welcomed OCI in a statement, saying: “Their project is the largest investment ever made in our state.”
OCI also said it expected its new Sorfert Algeria business to begin exports this month, and that its Egyptian Fertilizer Company had completed a stoppage to overcome bottlenecks.
OCI, which employs more than 72,000 people in 35 countries around the globe, has sought to attract projects from across the Middle East to offset a slowdown at home since Egypt's leader was ousted in 2011.
With Turkish groups among its main rivals in the Gulf, OCI's competitiveness was blunted by a 20 percent increase in the Egyptian pound's value against the Turkish lira over two years.
Earnings before interest, tax, depreciation and amortization at the construction business represented 11 percent of sales, down from 13 percent a year earlier, the company said. Revenue fell 8.5 percent to $1.349 billion, below the average analyst forecast of $1.427 billion.
OCI said its construction business would increase its focus on infrastructure programs in Saudi Arabia and Iraq after reporting a 9.2 percent decline in its consolidated backlog from the first quarter to $5.89 billion.
Sawiris said the company was continuing with plans to split of OCI's fertilizer and construction businesses, which he expected to be completed towards the end of the year.