Following the divestment of our cement group, our focus is on two fast growing businesses – construction and fertilizer production. Despite the volatility in global markets, we continue to see a host of investment opportunities where we can leverage our expertise and execution capabilities.
Orascom Construction Industries ended 2007 with a substantial transformation. In December, we divested our cement group to Lafarge SA in a deal with an enterprise value of LE 84.3 billion ($14.9 billion) which we strongly believe benefits our shareholders, employees and customers. The divestment will allow our management team to focus on two fast growing businesses – construction and fertilizer production.
As a result of the transaction, we recorded an extraordinary capital gain of LE 62.2 billion ($11 billion) and returned LE 305 ($55.85) per share for a total of LE 63.4 billion ($11.2 billion). We have entered 2008 with a record cash position, which we believe can be leveraged to access new growth and consolidation opportunities. In February, some of the cash was used for the acquisition of the Egyptian Fertilizers Company from Abraaj Capital, which through this transaction has become a strategic shareholder and partner in Orascom Construction Industries.
For the year, overall consolidated revenue from continuing operations was up 9.2% to LE 13.5 billion ($2.4 billion) and EBITDA from continuing operations rose by 6.4% to LE 1.9 billion ($349.8 million). The EBITDA margin was 14.7% for the year compared with 15.1% last year. Consolidated net income including discontinued cement operations was up 42.5% to LE 3.7 billion ($661.8 million) for the year compared with LE 2.7 billion ($464.4 million) last year.
Construction group
Our construction group continues to report unprecedented backlog growth. Consolidated backlog reached LE 26.1 billion ($4.7 billion), reflecting growth of 113.6% over last year. This growth was driven by an exceptional year of new awards and change orders totalling LE 27.2 billion ($4.8 billion), an 84.1% increase over 2006. During the year, our construction group received four contracts valued at LE 6.8 billion ($1.2 billion) to construct power plants delivering more than 1,962 mega watts of electricity, including a LE 604 million ($106 million) award to build Egypt’s first solar power plant.
This trend has continued into the first quarter of 2008 with awards for Orascom Construction including infrastructure work on the Al-Reem Island and the Saraya development in Abu Dhabi, which have a combined value of UAE Dhs 914 million ($251 million). These are our first contracts in this promising market. Contrack International was also awarded a contract in consortium with
We feel confident that 2008 will be another record year for construction awards as the group continues to build on its core competencies. New contracts should translate into healthy margins based on the marked improvement in the competitive landscape for construction services in 2007. While inflation continues to be a short-term concern, active steps have been taken to mitigate the impact of such inflation on our profitability margins.
We continue to bolster our construction capacity with more than LE 360 million ($64 million) of new construction equipment ordered. We have also significantly increased our annual steel fabrication capacity through the establishment of a
In October, we announced the sale of our 50% stake in the Egyptian Container Handling Company to Dubai P orts World for LE 2 billion ($372 million). T he company was established in 1998 to provide terminal handling and port management services. It is the controlling shareholder of the Sokhna P ort Development Company. The transaction represents an exceptional return on our investment and highlights the value created by our strategy of pursuing equity participation in the infrastructure projects we provide construction services for.
Fertilizer group
During the year, we expanded our investments in the fertilizer industry, which culminated with the acquisition of Egyptian Fertilizers Company. The plant has an annual production capacity of 1.3 million tonnes of urea. We are now focused on the imminent commissioning of the
The plant of Egypt Basic Industries Corporation will have an annual production capacity of 800,000 tonnes of ammonia and is scheduled to begin production in September 2008. Moreover, Notore Chemical Industries Ltd, which is now 20%c owned by us, expects to commission its urea production plant in
A winning team
We would like to thank all our employees for their hard work, determination and commitment. Over the years, we have assembled a team of talented and loyal mangers, engineers and employees. Our continued success depends on our ability to motivate and retain our winning team and to recruit new employees who share our enthusiasm for the future. Whether employed by our construction group, our fertilizer group or in a corporate function, we would like to reassure every employee that our strong entrepreneurial spirit has not faded and that there are exciting new opportunities and diverse challenges ahead for us all.
Future outlook
In construction, we continue to witness robust organic growth. We will continue to increase our execution capacity in response to record demand for our services especially in
Nassef Sawiris
Chief Executive Officer
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