Nile Rating, an affiliate of Fitch Ratings, the international rating agency, has affirmed the A+egy senior unsecured national debt rating assigned to Orascom Construction Industries (OCI). The rating outlook on the rating has been revised to Positive from Stable.
Fitch's decision to revise the company's Outlook reflects the company's strong performance over the past three years, its solid management team, existence of local and/or multinational industry leaders as partners in subsidiaries, strong inter-group synergies that provide support for top-line growth and economies of scale.
OCI's rating continues to be supported by strong fundamentals, the diversified nature of its operations and its strong competitive position in its chosen markets. Its recent decision to expand outside Egypt may stretch management but OCI has an impressive track record and should be able to repeat its successful formula in Egypt in the region.
Established in 1998, OCI is the largest Egyptian private sector construction and building materials company. The company focuses on construction, building materials manufacturing and infrastructure development concessions.
OCI's fast and aggressive growth through acquisitions and new business start ups has enabled the company to consolidate its position in the domestic market and improve cashflow generation by concentrating on industries with strong growth potentials and high margin construction projects.
When bidding for large, technical contracts, OCI typically enters into joint ventures and consortiums with leading international construction companies including ThyssenKrupp, Polysius, N.V. Besix S.A, Consolidated Contractors Company (CCC), Kellog Brown & Root, Bechtel Group Inc., and Vinci S.A.
The participants are joint and severally liable to the customer for any overruns and damages. OCI offers its partners an experienced workforce and the largest fleet of vehicles and construction equipment. In return, it gains technical expertise that it can apply elsewhere and in future projects.
OCI's equity partners in the building materials manufacturing sector typically include international and national industry leaders with expertise in the related operations of the individual entities.
The rating also reflects OCI's complex group structure, which resulted in a multiplicity of inter-company accounts and the recent formation of the group along with the start-up nature of most of its subsidiaries and investments—a factor that limits the amount of financial history available to Nile Rating. Due to the nature of its businesses, the group is vulnerable to the volatility of the Egyptian macro economic conditions.
Despite the current unfavorable market conditions OCI reported 19 percent and 22 percent increase in revenues and EBITDA in year end 2001 respectively. The Egyptian Cement Company (ECC) contributed the most towards improvement in the group's consolidated EBITDA (68 percent). EBITDA margins remained high at 32 percent, which reflected the company's selective approach to bidding for contracts, its concentration on high margin projects and its move towards becoming a building materials conglomerate. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
