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OCI Announces FY 2012 Results

Apr 30 2013 12:00AM



AMSTERDAM, THE NETHERLANDS -- (Marketwired) -- 04/30/13 --

Results as at 31 December 2012 OCI Agrees to Payments in Settlement of Tax Claims with Egyptian Tax Authority, Reports EBITDA of USD 290.2 million and Net Loss of USD 81.2 million During the Fourth Quarter Including Extraordinary Charges of USD 181.2 millionSummary of Consolidated Results for Q4 2012:* Consolidated revenues increased 5.3% to USD 1,492.9 million (EGP9,088.2 million) versus USD 1,418.4 million (EGP 8,484.9 million) in Q42011* EBITDA decreased 14.9% to USD 290.2 million (EGP 1,767.6 million)versus USD 341.0 million (EGP 2,041.0 million) in Q4 2011* Consolidated EBITDA margin of 19.4% and Construction Group EBITDAmargin of 8.2% duringQ4 2012* Net income decreased 165.3% to a loss of USD 81.2 million (a lossof EGP 487.4 million) versus USD 124.4 million (EGP 746.9 million) inQ4 2011 and was impacted by extraordinary charges of USD 181.2 million(EGP 1,087.2 million). These charges included: - a one-off USD 82.0 million in additional interest expense related to delayed interest payments on the agreed to tax settlement with the Egyptian Tax Authority (ETA) for the years 2007-2010 - a one-off USD 99.2 million goodwill impairment for Egyptian Fertilizer Company (EFC) in light of the natural gas supply environment in Egypt* Net income excluding the extraordinary charges decreased 22.4% toUSD 96.5 million (EGP 587.5 million) versus USD 124.4 million (EGP746.9 million in Q4 2011) and was adversely affected by the followingitems: - a production loss at EFC and Egypt Basic Industries Corporation (EBIC) due to low natural gas supply experienced during the quarter - a drop in the Construction Group's margin to 8.2% during the fourth quarter of 2012 due to construction cost overruns at Sorfert AlgeriaSummary of Consolidated Results for FY 2012:* Consolidated revenues decreased 0.4% to USD 5,492.0 million (EGP33,262.5 million) versus USD 5,511.3 million (EGP 32,722.0 million) inFY 2011* EBITDA decreased 19.1% to USD 1,138.4 million (EGP 6,894.7million) versus USD 1,407.0 million (EGP 8,353.7 million) in FY 2011* Consolidated EBITDA margin of 20.7% and Construction Group EBITDAmargin of 9.8% duringFY 2012* Net income decreased 61.7% to USD 259.5 million (EGP 1,571.6million) versus USD 678.4 million (EGP 4,028.9 million) in FY 2011Consolidated Construction Group Backlog* Consolidated backlog as at 31 December 2012 stood at USD 7.04billion reflecting an increase of 24.9% over the backlog as at 30September 2012 and an increase of 10.0% over the same period last year* New awards totaled USD 1.84 billion during the quarter* Infrastructure and industrial work constitute 73.5% of theConstruction Group backlog as at 31 December 2012Statement from the Chairman and Chief Executive Officer - NassefSawirisDuring the fourth quarter and in recent months, OCI has been focused onrepositioning the business for the future and managing some seriouschallenges in the process.Share Exchange Offer & Listing of OCI N.V. on NYSE EuronextOn 18 January 2013, OCI N.V. launched an exchange offer to acquire allof the outstanding Regulation S global depositary receipts (GDRs) ofOrascom Construction Industries S.A.E. (OCI) in exchange for ordinaryshares in OCI N.V. At the close of the offer on 21 February 2013, GDRholders holding a total of 156,722,280 GDRs (being 99.0% of OCI's GDRsand representing 75.7% of total shares outstanding) accepted toexchange their GDRs for OCI N.V. shares. The transaction positioned OCIN.V. as the parent company to OCI with a current ownership of 75.7%.OCI N.V. also filed the necessary documentation with the EgyptianFinancial Supervisory Authority (EFSA) to acquire all of theoutstanding ordinary shares in OCI in exchange for OCI N.V. shares (or,at the election of the relevant holder, a cash amount of EGP 280 pershare). The Company remains committed to launching a tender offer forthe remaining ordinary shares with final terms including the cashalternative to be imminently announced.On 25 January 2013, OCI N.V. was admitted to trading on the NYSEEuronext stock exchange in Amsterdam.By listing on the NYSE EuronextAmsterdam, we sought to enhance the Company's international credit profile,attract a wider investor base, increase share liquidity, raise theCompany's profile in the international investment and banking communitiesand create more growth opportunities.In addition, OCI N.V. launched a level 1 over-the-counter AmericanDepository Receipts (ADRs) program on 15 April 2013. Pricing of thesecurity is currently in progress with the Bank of New York Mellonfiling the necessary documentation with the Financial IndustryRegulatory Authority (FINRA) and International Trading acting as thesponsor broker. OCI N.V. is also filing to upgrade the ADR program toOTCQX Premier status to increase liquidity.Settlement with Egyptian Tax Authority (ETA)OCI has been in a tax dispute with the ETA for almost a year for taxespertaining to years 2007 to 2010. In particular the ETA claims that OCIowes taxes related to the sale of its cement listed subsidiary OrascomBuilding Materials Holding (OBMH) in 2007. OCI continues to hold itsposition that it did not violate any laws. The settlement amount wasreached following months of challenging negotiations. In conjunctionwith this agreement, the ETA has determined that there was no taxevasion by the Company and is exonerating management and the Companyfrom any wrongdoing related to the transaction.OCI N.V.'s Board of Directors and management were faced with twochoices: 1) enter in to a prolonged legal battle with unpredictableoutcomes due to the prevailing political environment in Egypt; or 2)make the payment to the government, despite the unified view by theboard, management and auditors KPMG that all laws and regulations weresoundly applied and followed at all times. The Board and managementconcluded that a prolonged legal process would not serve the interestsof the Company's stakeholders, including its approximately 45,000employees in Egypt, who represent 50% of the Company's employee base.Consequently, OCI reached a settlement with the ETA whereby the Companywill pay EGP 7.1 billion over a 5-year period starting with an initialpayment of EGP 2.5 billion by mid May 2013, EGP 900 million by December2013 and six equal instalments of EGP 450 million and two finalinstalments of EGP 500 million in 2017. Currently, OCI has EGP 182million of tax credits with the ETA that will be set off against futuretax payments. OCI N.V. will loan OCI the necessary funds in foreigncurrency to finance the initial payment. Funds in foreign currency willbe channelled into the country through the Central Bank of Egypt. Theagreed to tax settlement has been accounted for in the followingmanner: a. EGP 6.0 billion reduction in retained earnings for the years 2007-2011 b. EGP 498.0 million increase in Q4 2012 interest expense to account for delayed interest payments on the agreed-to tax settlement c. EGP 166.0 million to be booked in Q1 2013's interest expense to account for delayed interest payments on the agreed-to tax settlement d. EGP 18.9 million to be booked per quarter between Q2 2013 and Q4 2017 to account for delayed interest payments on the agreed-to- tax settlementWith the settlement of the tax claim, OCI N.V. expects to proceed withits filing for the tender offer for the ordinary shares of OCI withdetails to be announced in due course.North American Operations & ExpansionsIowa Fertilizer Company (Iowa Fertilizer), our new Greenfield plant inWever, Iowa, has received all critical permits required to beginconstruction of the plant. Iowa Fertilizer is currently in the processof placing USD 1.194 billion of the Midwest Disaster Area Bonds (MDAB)for the project. The bond was given a credit rating of BB- by bothStandard & Poors (S&P) and Fitch. The roadshow to potential third partyinvestors was conducted in April and pricing/allocation for the USD1.194 billion bond in addition to full funding of the US USD 600 millionequity portion is expected during May. The plant will produce 1.5 - 2.0million metric tons of urea, urea ammonium nitrate (UAN), ammonia anddiesel exhaust fluid (DEF) upon completion. The project has a totalinvestment cost of USD 1.8 billion and is expected to begin productionof all products during Q4 2015.Our plant in Texas, OCI Beaumont, achieved optimal production levels onits ammonia and methanol lines and has maintained production levelsduring the first quarter of 2013 which we expect to positively reflecton profitability. The Company is planning a USD 100 milliondebottlenecking initiative on both its methanol and ammonia lines whichare scheduled for completion during the second half of 2014 with fullfinancial impact during 2015. The debottlenecking initiative isexpected to increase methanol capacity by approximately 25% to 875thousand tons per annum and ammonia capacity by approximately 15% to292 thousand tons per annum. The Company continues to adhere to thehighest safety standards in the industry in managing its existing andexpansion operations.On the construction side, The Weitz Company, a general Iowa-basedcontractor, was acquired in December 2012 and its balance sheet andbacklog were consolidated in to the Construction Group during thefourth quarter 2012. Weitz contributed USD 449.6 million to the groupbacklog and we expect to consolidate it fully during the first quarter2013. Weitz has already mobilized on Iowa Fertilizer's constructionsite and will be a key EPC contractor on-site in partnership withOrascom Construction. Weitz's wholly owned subsidiary, WattsContractors, which provides institutional construction services in theUnited States and the Pacific Rim, has been fully integrated intoContrack International to form a larger platform to pursue moreprojects with greater geographic reach. At present, Weitz is expandingits core competencies to include ability to pursue larger concessionsprojects including Public Private Partnerships (PPP) and Design BuildFinance Maintain (DBMF).Sorfert Algeria UpdateIn Algeria, OCI expects to receive final regulatory approvals from theAlgerian government to commence testing on Sorfert during the secondquarter and enter in to commercial production and commence exportswithin the coming weeks. All construction on both lines is nowcomplete. Sorfert is expected to contribute to consolidated earningsduring the second half of 2013.Construction Group UpdateThe Construction Group reported a 24.9% increase in backlog over theprevious quarter and the backlog as at the end of the fourth quarterstood at USD 7.04 billion. The Group's backlog grew by USD 1.41billion during the fourth quarter including Iowa Fertilizer's EPCcontract valued at USD 1.22 billion. New work secured during thefourth quarter totaled USD 1.84 billion and USD 3.33 billion duringthe year. The Group continues to increase its presence and work inSaudi Arabia and Iraq and is focusing on the United States'infrastructure program and petrochemical construction market throughits newly expanded US platform.Divestment of Non-Core AssetsDuring 2012, we announced a divestiture program for our non-core assetswhich include our 16.8% stake in the Gavilon Group (Gavilon) and our13.5% stake in Notore Chemical Industries (Notore).Full Year ResultsThe full year results reported for OCI have been prepared in accordancewith Egyptian general accounting standards. Going forward, OCI N.V.will publish quarterly, semi-annual and annual results in accordancewith IFRS standards as adopted by the European Union.We reported weaker results during FY2012 as compared to the previousyear. During the year, consolidated EBITDA and net income declined19.1% and 61.7%, respectively and during the fourth quarter, ourconsolidated EBITDA and net income declined 14.9% and 165.3%respectively compared to the same quarter last year. EBITDA and netincome declined during the quarter as compared to the same quarter lastyear on the back of natural gas supply cuts at both our plants inEgypt. Total lost time for both plants resulted in a production loss of188 thousand tons of urea and 87 thousand tons of ammonia during theyear.In addition, consolidated EBITDA and net income declined during thequarter as compared to the same period last year due to a drop in theConstruction Group's margin from 12.0% during the fourth quarter of2011 to 8.2% during the fourth quarter of 2012 due to cost overruns atSorfert Algeria. Net income during the fourth quarter was furtherimpacted by extraordinary charges of USD 181.2 million. These chargesincluded a one-off goodwill impairment for EFC of USD 99.2 million inlight of the natural gas supply environment in Egypt. In addition,these charges also included a one-off USD 82.0 million in additionalinterest expense related to delayed interest payments on the agreed totax settlement with the ETA for the years 2007-2010.Overall, net incomedecreased from USD 127.0 million in the third quarter to a loss ofUSD 81.2 million in the fourth quarter.For additional information contact:OCI Investor Relations Department: For additional information on OCI:Omar DarwazahEmail: www.orascomci.comErika Wakid OCI stock symbols: OCIC.CA / OCICEmail: EY / OCICqL / ORSD / ORSCY Orascom Construction Industries (OCI) Nile City Towers - SouthHassan Badrawi Tower 2005A Corniche El NilDirector Cairo, EgyptTel: +202 2461 1036/0727/0917Fax: +202 2461 94091 Consolidated financial figures presented in this press release areunaudited This information is provided by RNS The company news service from the London Stock ExchangeEND

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