Strong Saudi public spending, buoyed by high oil prices and a desire to avoid public protests, continues to benefit Orascom Construction Industries, Egypt's biggest listed company.
Six Construct, owned by a joint-venture between Orascom and the Belgian contractor, Besix, was awarded a $552m contract to build a 60,000-seat sports stadium at the King Abdullah Sports City development in the Red Sea city of Jeddah, Reuters reported.
The award, along with a $450m contract won in July, means Orascom has picked up over $1bn of new work in Saudi Arabia so far this year. With oil prices now in their longest sustained period above $100 per barrel in history and the turmoil of the Arab spring still spooking Saudi leaders, the country's public spending programme -- a central pillar of efforts to tamp down domestic unrest -- shows no sign of abating.
The company is preparing to separate into two stand-alone businesses - construction and fertilisers - both owned by a listed holding company. While fertilisers accounted for about 70 per cent of EBITDA in 2010, Orascom expects that the MENA region is set to see sustained infrastructure investment in the coming decade, as the oil-rich Gulf continues its heavy spending programme, and North African states ramp up spending on roads, power and water systems to meet the demands of fast-growing populations.
Africa is a new growth market for the company, currently accounting for just 1 per cent of revenue. A $130m contract to build a new power plant in Rwanda, announced last week, hinted at future possibilities both in Rwanda and sub-Saharan Africa, the company said.
Orascom stock rose 1 per cent on Tuesday following the news, in line with a 1.2 per cent rise for the benchmark EGX30 index. It is down 18 per cent in 2011, compared to a 37 per cent fall for the EGX30.