Orascom Construction Industries (OCI) reported a 34.1 percent drop in net income from continuing operations for the fourth quarter ending Dec. 31, 2011, to US$122.6 million on revenues of $1.41 billion, versus the year-ago $186 million on sales of $1.32 billion. Much of the decline was due to one-time charges of $51.5 million, including a reclassification of OCI’s stake in Gavilon Group LLC and Notore Chemical Industries Ltd. as “assets held for sale,” which resulted in a $19.7 million drop in investment income compared to the year-ago quarter.
OCI told analysts that the sale of its 16.8 percent stake in Gavilon is imminent, and that there has been strong interest. In addition, it notes that Notore, a Nigerian company, is planning an initial public offering in which OCI expects to monetize its 13.5 percent stake in that company.
Other one-time charges included a $22.2 million debt restructuring charge as a result of early repayment of existing loans to facilitate demerger related refinancing, and a $12.8 million charge related to the Employee Share Option Plan (ESOP), usually expensed in a single quarter with a view to amortize such future expense over four quarters.
OCI said its fertilizer group operated at full capacity during the quarter with sales of approximately 1 million mt of nitrogen, totaling 4.2 million mt for the year. So far this year, OCI said it has seen a noticeable recovery in ammonia and urea prices, with good prospects for the rest of the year. The company also said there has been improved industrial ammonia demand. It said urea prices are up over 25 percent so far this year, and attributed this to tight supplies and a strong planting season.
Overall, OCI said its nitrogen fertilizer capacity is expected to increase 60 percent once all of its expansion plans are completed. It said the OCI Beaumont plant in Texas has been running steadily since December 2011, and is expected to produce 250,000 mt/y. The plant’s 750,000 mt of melamine is expected to come online in June 2012. OCI said it had $89 million in capital expenditures for the Beaumont startup during the fourth quarter, and investment costs associated with the purchase of the 50 percent of outstanding shares of the Beaumont facility.
In Algeria, Sorfert Algeria has entered final commissioning stages for Line I, which is expected to start production in April, with Line II to follow in the third quarter. Sorfert will add 1.2 million mt of urea and 800,000 mt of ammonia annually at full capacity.
In the Netherlands, OCI Nitrogen has completed the expansion for a 26 percent increase in CAN capacity, to 1.45 million mt. It also restarted a 30,000 mt melamine plant in Geleen during the fourth quarter, which has been idle since the business was acquired, increasing Geleen’s capacity to 250,000 mt/y.
In Egypt, Egyptian Fertilizer Co. expects to complete a 20 percent increase in urea production capacity to 1.55 million mt/y by mid-2012.
Fourth-quarter EBITDA was up 6.8 percent, to $340.8 million from the year-ago $319.2 million. The fertilizer unit contributed 72.7 percent to OCI EBITDA, and 72.6 percent of net income for the fourth quarter.
For the fiscal year ending Dec. 31, 2011, OCI reported a 13.9 percent increase in net income, to $676.9 million on revenues of $5.5 billion, compared to 2010’s $594.3 million on revenues of $4.89 billion. EBITDA was up 29.3 percent, to $1.41 billion from 2010’s $1.09 billion.
OCI reports that it expects to hold its annual general assembly meeting, as well as its extraordinary general meeting, in April. The latter pertains to the demerger of the company’s construction business from its fertilizer business.
As for the unrest in Egypt, OCI told analysts that the only post-revolution change that it has seen has been an increase in its tax rate, from 20 to 25 percent.