Orascom Construction PLC (EGS95001C011.CA) Earnings Call Transcript & Summary

Hello, and welcome to the Orascom Construction 9M 2023 results conference call. [Operator Instructions] I will now turn the conference over to Mr. Osama Bishai, CEO. Please go ahead.

Good afternoon, and good morning, everybody. My apologies. I have a slight sore throat, so my voice is not that clear. So far, the 9 months from 2023 has been extremely busy for us. We have been progressing in a very steady pace to develop value to our shareholders. On the corporate level, we have divested a couple of mature assets, creating a decent [indiscernible] on the balance sheet, and Reham after that will get you through the details. We have also the buyback 5.6% of our outstanding shares to provide value to the shareholders as far as the dividends are concerned. On top of that, we have announced the dividend distribution that was announced before September 30, but it was executed in October just last month. So basically, we have followed through our strategy to raise value for the shareholders, bring back dividends and, at the same time, realize the, let's say, unrealized profits or unrealized value within the group. On the concession side, we had 2 main concessions. The wind farm, 500 megawatts, achieved financial closed. The project is ongoing. Disbursements are ongoing. We are ahead of schedule. And we look forward that we can try to deliver power before the schedule with the client, plus the fact that we have been very successful to secure the concession for treatment plants in the Emirates to provide water for the injection of the oil wells for ADNOC. And again, we have achieved FC just before the quarter, 22nd of September, disbursements are in place and the EPC contract has started. That particular project added to our backlog $600 million to the realized numbers. On the construction level, we are achieving a record in our backlog. And actually, what we -- focus for us was not only the record value, but also the quality of contracts, where we have geographical diversification like the project with ADNOC. We have international funding like metro, the railways and stuff like that. And also, we're working with private sector. So we are only focused on projects where we are comfortable with this funding and at the same time, has a decent component of foreign currency. That's in a nutshell the 9 months. We will continue progressing in that manner. Again, the challenges we have next year is performance. We need to continue to perform the way we are performing right now. I think the other challenges in Egypt is a potential devaluation. We have certain protection there because of our dollar revenues. There are also protection against inflation through the project adjustment mechanism in most of our projects. We believe that will improve our margins vis-a-vis 2023. It is quite difficult to determine the exact number due to the fact that some of that is pertinent to [indiscernible] inflation in Egypt and the fact when a devaluation will take place, the timing of that. But we're quite excited about 2024. We think we're not under any pressure to accept any business that doesn't create value to us, whether it's strategic or from a profitability point of view. And we are also focusing on the pipeline where we will emphasize geographical diversification and maintain the high level of contracts at this time. That's I see from a general overlook on the business. I would invite Reham to walk you through the numbers, and then we go to the Q&A.

Thank you, Osama. Good morning to all. So just at a high level for our Q3 results. Our consolidated backlog reached the $7 billion record level with -- from awards in Egypt, UAE and USA. Year-on-year revenue figures remain the focus by the EGP devaluation against USDs that commenced in H2 of 2022 with an average exchange rate of 30.05 for the period compared to 17.77 same period last year. It's worth noting that while the EGP deval has impacted revenues and EBITDA, our delivered favorable foreign currency positions have significantly eliminated the impact of the net income net. Our investments and subsidiaries in building materials, equipment services, facility management and concessions continue to contribute in a positive manner and collectively contributed $17.6 million year-to-date September 2023, which is 23.6% of the net income for the period, excluding the divestments that took place earlier last quarter. Positive cash flow from operations for this quarter was $28.6 million, reducing the negative year-to-date cash flow from operation and moving positively towards better working capital month. I'm now moving on to -- on our Q3 results. Revenue decreased 29.6% year-on-year. This is mainly due to EGP deval, excluding EGP devaluation effect, MEA operations reported a steady performance year-on-year. We expect our large foreign currencies in the native projects to start towards the end of the year and the beginning of 2024. USA revenue had shown a 10.3% decrease compared to last year, impacted by the delayed statement of an award. That is expected to be recovered in quarter 4 of this year and onwards while maintaining higher margins. Group EBITDA of USD 53.1 million with a margin of 4.1%, impacted mainly by higher fixed cost as a percentage of revenue, excluding EGP devaluation impact, EBITDA would have stood at $50.7 million compared to $57.2 million and a margin at 4.8% compared to 5% in Q3 of last year. Consolidated net profit margin before minority dropped from 2.6% in Q3 last year to 2.2% in Q3 2023, impacted by higher finance costs as a result of higher overdraft balance to finance Egypt operations. Most of this debt is related to projects in Egypt nearing completion and most large projects are funded by international institutions and denominated in foreign currency. In Q3 2022 -- in Q3 2023, this has contributed $1 million to the group's profitability compared to a loss of $0.2 million same period last year, leading to a total contribution of $7.4 million year-to-date September 2023. On the balance sheet side, equity accounted investees amounted to $459.5 million, the majority of which is BESIX of $411.4 million. The group's total equity increased to $700.4 million as of September 2023, mainly driven by net profit for the period despite the reduction of reserves as a result of currency translation differences of the group subsidiaries in Egypt, dividends distributed to shareholders of 21.6 plus and the purchase of treasury sales shares for $19.5 million last June. For the group working capital, trade and other receivables stood at $1.5 billion, up from -- up by $245 million compared to December '22 level. This is triggered by stronger billing in MEA and USA in addition to advanced space to suppliers and subcontractors for newly awarded costs. Trade and other payable balance declined from $1.48 billion as of December 2022 to $1.39 billion for Q3 2023 closing. Gross debt stood at $275 million, closing [indiscernible] than December '22 level of $212 million while maintaining same level June closing of this year. The group is maintaining a healthy net cash position of $187 million compared to $113 million in September of 2022 and $163 million in last June. Thank you, and we now open the Q&A session.

[Operator Instructions] There are no questions at this time. Hesham, are there any online questions?