East meets west

Annual report
2006
 Orascom Construction Industries
OCI is a leading cement producer and
construction contractor active in emerging
markets. We are based in Cairo, Egypt and
employ more than 40,000 people in
20 countries.

1 Highlights
2 A year of delivery
4 Letter to Shareholders
6 East meets west
8 Expanding into new markets
10 Business review Cement
24 Business review Construction
34 Corporate social responsibility
36 Board of Directors
39 Report of the Directors
40 Corporate governance
43 Management’s discussion and analysis of financial condition
and results of operations
49 Report of the Audit Committee of the Board of Directors
51 Auditor’s report, consolidated financial statements and
notes to the accounts
84 Selected financial data
88 Management and corporate information
 Highlights
2006

+
2006 2006 2005 2005

47 % LE US$ LE US$

Revenue 16,475 2,865 11,367 1,953

EBITDA 4,479 779 2,683 461
Net Income 2,671 465 1,700 292
Revenue growth Earnings Per Share 12.93 2.35 8.65 1.49
Construction Group Dividends Per Share 5.50 0.96 1.89 0.32
drives top line growth.
Capital Expenditures 7,869 1,369 2,854 490
Total Assets 28,616 5,003 17,610 3,057

+
Cash & Cash Equivalents 2,738 479 2,168 376

59 % Total Debt 9,250 1,617 6,862 1,191

Minority Interest 2,488 435 1,965 341
Shareholders’ Equity 8,672 1,516 4,264 740
Egyptian Pounds (LE) and US Dollars (US$) figures in millions except per share data.
Growth percentages calculated based on US Dollar figures.

Net income growth

Cement Group drives
bottom line growth.

• Cement Group contributed 25% of revenue

and 57% of net income.
+
16
Return on sales
% • Total cement sold grew by 38%, concrete by
217% and cement bags by 163%.
• Cement Group production capacity has now
Net margin up from
15% last year. reached 21 million tonnes.
• Cement Group to add 10 million tonnes of
capacity during 2007.
+
41
Return on equity
% • Construction Group revenue reached a record
US$ 2.3 billion.
• Backlog statistics: 46% industrial projects, only
Creating exceptional value
for shareholders. 10% in Egypt.
• 74% of consolidated revenue was generated
outside of Egypt.

Orascom Construction Industries Annual report 2006 1

 During the year, OCI successfully launched four new
greenfield cement plants in four countries significantly
increasing our total production capacity. We also
completed construction work on major projects in twenty
countries at the right time with the right quality for our
customers. We make promises and we deliver results.

A year of
delivery...
February
BESIX and its
consortium partners
are awarded a 27-year
BOT contract valued
January at EUR 429 million
OCI acquires a 20% for a new greenfield
stake in Baticim wastewater treatment
Cimento in plant by the Emirate
western Turkey for of Ajman in the UAE.
US$ 55 million. BESIX has a 50% stake
in the new venture.
Baticim together with its
subsidiary Bati Soke Cimento
have a combined annual cement February
capacity of 3 mpta and both are OCI and Sonatrach,
leading cement exporters. the Algerian state-
owned petrochemical
company, sign an initial
agreement to establish
January a urea and ammonia
OCI acquires the Van fertilizer plant with an
cement plant in investment cost of US$
eastern Turkey for 746 million.
US$ 54 million.
The partners later agreed to add
The plant has an annual clinker ammonia capacity to the plant
production capacity of 0.25 mtpa increasing the total investment
and will be upgraded to produce cost to US$ 1.6 billion. OCI has a
0.6 mtpa of cement. 51% stake in the new venture.

2 Orascom Construction Industries Annual report 2006


July
OCI completes
rehabilitation work
on the Tasluja cement
plant in northern Iraq
which has a production construction work and
capacity of 2.3 mtpa.
The total investment cost was
US$ 70 million. OCI and its
partner will operate the Tasluja
plant under a 12 year lease
agreement. OCI has a 60% stake
in the venture.
October
OCI increased its
presence in Spain
through the acquisition
of 50% of Grupo GLA,
one of the largest
independent aggregates
and ready-mix concrete
producers in the
country. OCI integrated
its 59% stake in the
Cementos La Parrilla
cement grinding plant
into Grupo GLA as part
of the transaction.
July
OCI completes
fires the kiln at Pakistan
Cement Company
which has a production
capacity of 2.2 mtpa.
Construction work was
completed in only 15 months
and the total investment cost
was US$ 231 million. OCI owns
62.75% of the company.

March
OCI announces the fast
track development of
a greenfield 2.5 mtpa
production line at its
CBA plant in northern
Algeria.
The grey cement production
line has an investment cost of
US$ 340 million and will be
ready by October 2007.

Orascom Construction Industries Annual report 2006 3

Letter to shareholders
A year of achievement
Our Cement Group will add 10 million tonnes
of new capacity during 2007 increasing our total
annual capacity up to 31 million tonnes and
ranking us among the top 10 global cement
producers.
4 Orascom Construction Industries Annual report 2006
Dear Shareholders,
Orascom Construction Industries had another
exceptional year propelled by strong demand
for both our cement products and construction
services. Consolidated revenue was up by 47%
to LE 16.5 billion and net income grew by 59%
to LE 2.7 billion. Our businesses continue to
generate increased cash flows and exceptional
returns for shareholders. EBITDA for the year
reached LE 4.5 billion and our return on
equity for the year was 41% after taking into
consideration our LE 2.3 billion rights issue.
Having reviewed the cash and credit resources
available to the company for both organic
growth and acquisitions, the Board of Directors
intends to recommend a LE 5.5 per share cash
dividend which represents an increase of 175%
over last year.
Operational performance
Our Cement Group now has an annual
production capacity of 21 million tonnes
having successfully added 7 million tonnes
of new capacity in Egypt, Pakistan, northern
Iraq and Turkey during the year. This new
capacity helped push revenue from our cement
operations up by 50% to LE 4.9 billion during
the year. Construction work was completed
on a fifth bypass line at Egyptian Cement
Company in June enabling them to benefit
from both rising local demand and higher
export prices. Algerian Cement Company in
only its first year of full operations surpassed
expectations operating at 80% capacity and
generating revenue of LE 1.5 billion. Having
completed renovation work in June, the Tasluja
cement plant in northern Iraq managed to
produce 657,000 tonnes during the year.
Despite difficulties, Pakistan Cement Company
also began operations in June and persevered
to capture a 9% share of the market.
Operations at the Van cement plant in Turkey
which was acquired in January also contributed
positive results. Construction work on our next
four greenfield projects in Algeria, northern
Iraq, and the United Arab Emirates which will
have a combined annual production capacity
of 10 million tonnes all remain on track for
start up during 2007. In October, we increased
our presence in Spain through the acquisition
of a 50% share of Grupo GLA, one of the
largest independent aggregates and ready-mix
producers in the country. Combined with our
investment in Cementos La Parrilla, Grupo
GLA will have a grinding and import capacity
of nearly 2 million tonnes giving us even
greater influence over cement trading in the
Mediterranean.
Revenue from our construction operations
grew by 45% to LE 13.1 billion during the
year. Our Construction Group secured LE 14.9
billion in new work and our consolidated
backlog at year end stood at LE 12.6 billion.
Our strategic build-up of assets and personnel
in a few core geographic markets has enable
us to attract new clients and undertake new
projects while the sector as a whole suffers
from a shortage in construction resources. Our
Construction Group secured several landmark
projects including a EUR 429 million BOT
contract for the construction of a wastewater
plant in the Emirate of Ajman in the UAE, a
US$ 110 million contract to provide operations
and maintenance services in Afghanistan, and
a US$ 91 million contract to construct the
ammonia fertilizer plant for Egyptian Basic
Industries Corporation (EBIC).
Business strategies
Since we expect cement consumption growth
rates across all emerging markets to outperform
developed markets for the foreseeable future,
the core business strategy of our Cement
Group continues to be the development of
large scale greenfield cement plants utilizing the
latest manufacturing technologies principally
in emerging markets which have large
populations, growing economies and abundant
energy sources. While our competitors have
focused on expensive acquisitions, we have
concentrated our efforts on building new
Cement
ECC added its fifth production line during the
year increasing their total annual production
capacity up to 10 million tonnes. The ECC plant
is now the second largest in the world. ECC is
the single largest cement producer in Egypt and
a leading regional cement exporter.
capacity to serve the current and future needs
of our customers. We have also worked
hard to develop trading relationships with
importers in the USA, Europe and Africa to
efficiently integrate our cement plants into
these international markets. As production and
environmental costs increase and existing plants
reach the end of their useful life, we believe
that cement demand in many developed
markets will increasingly be met by imports and
that we are well positioned in North Africa and
the Middle East to capitalize on this trend. We
may also invest in downstream assets such as
aggregates and ready-mix in selected developed
markets to secure a strategic off-take of
demand for our continued capacity expansion
in emerging markets.
Our Construction Group will continue to target
large, complex and demanding industrial,
commercial and infrastructure projects which
by their nature have fewer competitors and
higher margins. We believe our Construction
Group is well positioned in Egypt, Algeria
and the United Arab Emirates to capitalize
on a wide array of new projects currently
being tendered. Our Construction Group also
continues to play a key role in identifying new
high-return investment opportunities in both
natural gas-based industries and infrastructure
concessions. We have equity investments in
two greenfield fertilizer projects in Egypt and
Algeria which should generate substantial
returns in the years to come. Demand for
natural gas-based fertilizers is surging due to
not only global consumption growth but also
increased demand for agricultural commodity-
based fuels such as corn-based ethanol. Our
construction team is actively reviewing other
opportunities to invest in new projects that
leverage competitively priced natural gas in
the region. We aim to invest in greenfield
natural gas-based ventures which utilize our
construction capabilities to reduce the time
and cost of development, replicating the same
business model which has been a key driver in
Construction
Our investments in natural gas industries should
contribute significantly to net earnings beginning
in 2009 with the launch of the EBIC ammonia
plant and followed in 2011 by the launch of our
Algerian joint venture urea/ammonia plant.
the success of our Cement Group. We have
also instructed our construction team to pursue
select infrastructure concession opportunities
in the region that provide large construction
contracts and future steady cash flows.
Future outlook
Our Cement Group will add 10 million tonnes
of new capacity during 2007 increasing our
total annual production capacity up to 31
million tonnes and ranking us among the top
10 global cement producers. Our project in
Nigeria will add an additional 3 million tonnes
in 2008. Our Cement Group continues to
review new opportunities around the world.
We believe that current demographic and
economic trends in Turkey make that country
an attractive cement market at this time. We
also see value in greenfield cement projects in
Saudi Arabia and South Africa. While investing
in cement production capacity in developed
markets is not a priority, we will continue to
search for downstream cement businesses
in southern Europe such as grinding plants,
terminals, aggregates and ready-mix operations
which meet our investment criteria. Our strong
balance sheet ensures our ability to capitalize
on accretive acquisition opportunities and new
greenfield initiatives as they arise. Looking
ahead, we will continue to invest our free cash
flow in our proven growth strategy with a
clear view of delivering the highest returns to
shareholders.
Onsi Sawiris
Chairman
Nassef Sawiris
Chief Executive Officer
2.7
b
Net Income
Net income reached LE 2.7
billion, an increase of 59%
over last year.
5.5
Dividend per share (LE)
The Board has recommended a
dividend of LE 5.5 per share, an
increase of 175% over last year.
Orascom Construction Industries Annual report 2006 5
 Orascom Construction Industries has grown dramatically
over the past eight years. We have become a leading global
cement producer even though we launched our first production
line in 1999. We have also become one of the largest
construction contractors in world reaching out far and wide
from our home base in Egypt. With each new venture or project
came new risks, both operational and financial. Our success in
overcoming these risks was due to our special blend of global
vision with local insight, a merging of best practices from the
east and west.

East meets west...

6 Orascom Construction Industries Annual report 2006

Strategic partnerships
By working in partnership with global leaders
in our industries, we have been able to
expand rapidly, obtain access to advanced
technologies, improve the production
efficiency of our manufacturing plants, create
strong brand identities for our products,
develop our human resources and reduce our
financial risks. Our Cement Group has formed
partnerships with local leaders in Spain,
northern Iraq and the United Arab Emirates
helping us to navigate the maze of legal and
regulatory issues in these markets and quickly
establish long-term relationships with key
customers and suppliers. Our Construction
Group regularly partners with firms from the
USA, Europe and Asia to provide solutions
on large and complex projects. Our ability to
partner with leaders from both the east and
west has been a major factor in our success.
Modern technologies
We have achieved a competitive advantage
in our markets by investing in state-of-the-
art manufacturing equipment, construction
equipment and information technology
systems. All of our cement plants utilize the
latest dry process manufacturing technologies
and production control systems from
ThyssenKrupp Polysius and FL Smidth, the
two leading European equipment suppliers,
to ensure that they are among the most cost-
efficient and environmentally friendly plants in
the world. All of our construction businesses
maintain a large fleet of modern construction
equipment and operate information systems
for project engineering, planning, scheduling
and financial management which are essential
to undertake large, complex and demanding
projects in emerging markets. By investing
in the latest modern technologies and
information systems from the west, we have
been able to improve the level of service we
deliver to our customers in the east.
Commitment to quality and safety
Our customers around the world value quality
and safety when making their purchasing
decisions. We have implemented stringent
quality control programmes at each of
our businesses to ensure the consistent
delivery of high-quality products and
services in accordance with internationally
recognized quality standards. We have also
established guidelines and procedures at our
manufacturing plants and project sites to
protect the health and safety of our employees
and those around us. By matching the quality
and safety standards of our competitors in the
west, we have enhanced the reputation and
productivity of our businesses in the east.

Management practices and People

corporate governance
Companies have choices about how they
manage their business. Companies which
embrace proven management practices
of lean manufacturing, target setting and
performance management, and talent
management simply perform better, with
higher levels of productivity, profitability,
growth rates and stock market valuations,
irrespective of their country of operation,
size or sector. By adopting international best
practices for corporate governance, corporate
citizenship and sustainable development,
companies are also able to responsibly address
the concerns of not only their shareholders,
but also their employees, customers, business
partners, government and the communities
they serve. From the board room to the shop
floor, we have worked to implement the
best management and governance practices
from the west throughout our operations in
the east.
Our employees are the bedrock of our
business. Their professionalism, loyalty
and willingness to embrace change and
new ideas have been a key success factor
in our rapid growth. They have delivered
results, consistently, time and time again.
By partnering with global leaders, utilizing
modern equipment, being committed to
quality and safety, and adopting international
best practices for management and
governance, we continue to attract and retain
some of the best people in our industries
who share our enthusiasm for the future and
our determination to emerge as a regional
champion on a global scale.

Orascom Construction Industries Annual report 2006 7

 Many companies evolve over time. A few evolve overnight.
Change is an everyday occurrence at Orascom Construction
Industries. Our managers and employees know that where
we were yesterday is not where we will be tomorrow. In the
summer of 2002, OCI devised the “50-05” Action Plan, a
group wide strategic initiative which aimed to have 50% of
consolidated revenue generated from sources outside of Egypt
by 2005. At the end of 2004, revenue from sources outside
of Egypt had already reached 66% of total consolidated
revenue. At the end of 2006, international revenue exceeded
74% of total consolidated revenue. Over the last five years,
consolidated revenue has increased at an average rate of 78%
each year. Our managers and employees thrive in this fast paced,
entrepreneurial environment and continue to propose and
develop new opportunities to grow their businesses.

Expanding into
new markets...

8 Orascom Construction Industries Annual report 2006

 Cement Group
74 %
International revenue
Revenues from sources
The OCI Cement Group now operates plants
in Egypt, Algeria, Pakistan, northern Iraq,
Turkey and Spain with a combined annual
production capacity of 21 million tonnes.
Our new projects in Algeria, Spain, Turkey,
northern Iraq, the United Arab Emirates
outside of Egypt exceeded and Nigeria will increase annual production
74% in 2006. capacity to 34 million tonnes by early 2008.
Our project teams continue to explore several
+
new greenfield cement opportunities in
30
emerging markets and remain confident in
their ability to successfully launch new ventures
which meet our investment criteria.
Countries served Development of aggregates and
OCI serves customers ready mix operations
on 5 continents. Well-managed companies do not ignore the
actions of their competitors. Sometimes the
right course of action is to follow their lead.
+
59
A clear trend in our industry is the integration
%
of cement, aggregates and ready mix assets.
Many cement companies have taken steps to
acquire aggregates companies to protect their
position in developed markets and maintain
International their desired growth rates. We believe this
revenue growth
strategy can work for us too. During the year,
New projects abroad drives we became partners with Grupo GLA, the
revenue growth.
largest independent aggregates and ready
mix producer in Spain. Combined with our
Cementos La Parrilla operation, Grupo GLA
now has an annual cement grinding capacity
of 1.8 million tonnes ensuring their ongoing
competitiveness in the Spanish market. During
the year, we also invested in aggregates
resources in Egypt and Algeria and significantly
increased the capacity of our ready mix
operations in those markets as well. Looking
forward, we intend to expand our aggregates
resources and ready mix capabilities in
southern Europe which compliment our
cement production assets in the Middle East
and North Africa.
Construction Group
The OCI Construction Group provides
engineering, procurement and construction
services on large, complex and demanding
projects for public and private customers
principally in the Middle East, North Africa and
Central Asia. Our business development teams
continue to be selective in the projects we
undertake ensuring that we consistently meet
the demands of our customers with regard
to quality, safety and timely delivery, while at
the same time meeting the demands of our
shareholders to deliver above average returns
and sustainable growth.
Investments in natural gas-based
industries and infrastructure
concessions
In recent years, demand for natural gas has
soared. Natural gas has many residential
and commercial uses which include heating,
cooking and cooling. Industrial uses, however,
account for almost half of overall natural gas
consumption not only as an energy source
but also as a feedstock in the manufacturing
of many chemicals and products including
fertilizer and plastics. Demand for natural
gas-based fertilizers is surging as a result of
global consumption growth and increased
demand for agricultural commodity-based
fuels such as corn-based ethanol. As a
contractor, we are well positioned to identify
and develop investment opportunities in
greenfield industrial projects that leverage
competitively priced natural gas in the region.
By participating as an equity investor in these
greenfield industrial projects, we can deploy
our construction capabilities and resources in
a smarter way which we believe will ultimately
result in exceptional returns for shareholders.
We have also instructed our construction teams
to pursue select infrastructure concession
opportunities in the region that provide
large construction contracts and future steady
cash flows.
Orascom Construction Industries Annual report 2006 9
 Business review E GYP T
Page 12
ALGE R IA
Page 14
T UR KE Y
Page 19
S PAIN
Page 20

Cement...
PAKIS TAN AGGR E GAT ES, READY
Page 16 MIX AND PACKING
NORT HE R N IR AQ Page 21
Page 18

38 %
Increase in sales volume
OCI Cement Group sold 13.9
million tonnes of cement, an
increase of 38% over last year.
m m
13
New projects
34
Total production capacity
We have new projects in six The OCI Cement Group will
countries which will add 13 have an annual production
million tonnes of new capacity. capacity of 34 million tonnes
in early 2008.

10 Orascom Construction Industries Annual report 2006

The OCI Cement Group is the largest cement producer in the Middle
East and a leading regional cement exporter. Our cement subsidiaries
are widely recognized as efficient, low cost and environmentally friendly
producers of high quality cement. We now have operations in six
countries having successfully commissioned a new plant in Pakistan,
rehabilitated a plant in northern Iraq and acquired businesses in both
Spain and Turkey during the year. We are currently constructing
additional cement production capacity in Algeria, northern Iraq, Spain,
Turkey, the United Arab Emirates and Nigeria which will increase our
total annual production capacity to 34 million tonnes. We export cement
primarily from Egypt to customers in 30 countries including the USA.
We also produce and distribute aggregates, ready mixed concrete and
cement bags in Spain, Egypt and Algeria.

Orascom Construction Industries Annual report 2006 11

Egypt

12 Orascom Construction Industries Annual report 2006

ECC is the single largest cement producer in Egypt and
the second largest cement plant in the world. ECC is
a leading regional cement exporter and the largest
exporter of cement from Egypt.

Egyptian Cement Company (ECC) is the
single largest cement producer in Egypt
and the second largest cement plant in
the world. ECC operated at full capacity
throughout the year producing 8.2 million
tonnes, an 8% increase over last year. ECC
completed an ambitious de-bottlenecking
program during 2005 which increased
the annual production capacity of its
four main dry process production lines
up to 8.5 million tonnes. In June, ECC
completed the construction of its fifth
production line which increased the total
annual production capacity of the plant
by an additional 18% up to 10 million
tonnes. ECC signed a contract with OCI
and ThyssenKrupp Polyisus, the original
equipment manufacturer, in May 2005 to
engineer and supply its fifth production
line which would utilize an innovative
production process technology that takes
by-pass dust generated from the existing
four production lines and burns it at
high temperatures alongside surplus raw
material to make cement. The new by-pass
treatment production line aims to reduce
the plant’s overall dust emissions by up
to 60% while reducing the energy and
electricity consumption per tonne of cement
produced. The additional output from
the fifth production line was necessary to
enable ECC to continue to serve its existing
international customers while maintaining
its domestic market share. During the year,
ECC exported 2 million tonnes of cement,
an increase of 5% from last year, to 15
different countries including Yemen, Italy,
Spain, Turkey, and the USA.
During the summer, the Egyptian
government increased energy prices for
industrial users which raised the cost of
natural gas to LE 1.5 per million BTU. This
increase in the cost of natural gas resulted
in only a USD 1 per ton increase in the
cost of cement produced by ECC due to
the high energy efficiency at their modern
plant. At the same time, major producers
in the Egyptian market increased their
average selling prices by more than USD 2
per ton to partially offset their rise in energy
costs. In response to the rise of cement
prices following the increase in energy
prices, the Egyptian government issued
price guidelines for retail cement prices.
Throughout this period, ECC focused on
delivering long-term value to its customers
and shareholders by not altering its pricing
policies in response to either event.
During the year, total market cement
consumption in Egypt increased by 6% to
30.1 million tonnes, total clinker production
increased by 4% to 35.1 million tonnes,
and total cement and clinker exports
decreased by 11% to 8.1 million tonnes.
Egyptian cement producers continued to
operate at or near full production capacity
during the year. ECC sold 6.1 million tonnes
of cement locally, an increase of 7% from
last year, maintaining a 20% share of the
market. An increase in demand for cement
globally led to significant increases in the
price paid to local producers for exported
cement during the year. The increase in
export prices contributed to an increase
in local cement prices by 13% during the
year. According to the IMF World Economic
Outlook issued in September 2006,
Egyptian real GDP grew at a rate of 4.7%
during the year, up from 4.5% the year
before. Growth is expected to reach 5.2%
in 2007. Improving macroeconomic factors
and demographic trends in Egypt including
a relatively young population and persistent
shortage of housing indicate positive
growth in cement consumption in both the
short and long term.

m
21 24 10
Revenue growth
%
ECC revenue reached LE 2.5
%
Contribution to earnings
ECC contributed 42% of
Annual production capacity
ECC now has 5 production
billion, a 21% increase over Cement Group earnings and lines with a total annual
last year. 24% of OCI net income. capacity of 10 million tonnes.

Orascom Construction Industries Annual report 2006 13

Algeria
The OCI Cement Group is the only private sector
cement producer in Algeria. ACC is the single
largest cement producer and CBA will be the
only white cement producer in the country.

Algerian Cement Company (ACC) operated
at an average rate of 80% capacity in its
first full year of operations producing 3.9
million tonnes, an increase of 70% over last
year. ACC has two dry process production
lines supplied by FL Smidth which have an
annual production capacity of 5 million
tonnes. ACC began operations of its
first production line in March 2004 and
its second production line in June 2005.
ACC made a strategic decision to operate
at less than full capacity throughout the
year maintaining a 25% market share.
The new production lines operated as
expected without any problems. During
the year, ACC continued to expand its
network of local dealers and company
owned distribution centers to ensure the
timely and consistent availability of its
products throughout the country. ACC is
the only local cement producer to operate
distribution centers and provide delivery
services for its customers. Nearly 3% of
sales were made through the distribution
centers and 15% of sales were delivered
direct to customers. By providing delivery
services to key customers, ACC improved
the geographical distribution of its products
with the capital of Algiers, the largest
market, representing only 25% of sales.
The delivery services also enabled ACC to
achieve a 65% market share for sulphate
In August 2005, Ciment Blanc d’Algerie
(CBA) signed a contract with an FL Smidth/
OCI team to construct a greenfield white
cement plant with an annual production
capacity of 550 thousand tonnes. The
new plant will be one of the largest
white cement plants in the world and will
cater for both domestic and international
customers being strategically located 54km
south of Arzew Harbour and 60km east of
Oran Harbour, some 380km west of the
capital city Algiers. The total investment
cost for the white cement production
line is expected to be US$ 138 million.
Construction work is scheduled for
completion in July 2007.
In March, CBA announced that it had
signed a second contract with the FL
Smidth/OCI team to construct a grey
cement production line with an annual
production capacity of 2.5 million tonnes.
The total investment cost for the new
grey cement production line is expected
to be US$ 340 million. Construction work
is scheduled for completion in October
2007. Since it is difficult to predict cement
demand growth in emerging markets, CBA
intends to initially export the majority of its
production and gradually increase domestic
sales as local demand materializes. The
outlook for cement demand throughout the
Mediterranean remains strong and export
prices for cement should remain favourable.
During the year, total market cement
consumption in Algeria increased by
15% to 15.0 million tonnes, total cement
dispatches from local producers increased
by 16% to 14.8 million tonnes, and total
cement and clinker imports decreased
by 43% to 200 thousand tonnes. The
Algerian Government owns 12 plants
which produced 10.9 million tonnes during
the year. ACC is currently the only private
sector cement producer in Algeria although
a privatization programme is expected to
result in other foreign cement companies
acquiring minority stakes in several state-
controlled plants. According to the IMF
World Economic Outlook, Algerian real
GDP grew at a rate of 2.7% during the
year, down from 5.3% the year before.
Growth is expected to increase to 4.5%
in 2007. We continue to have a positive
growth outlook for cement consumption in
Algeria due to increasing foreign exchange
reserves from petrochemical exports as
well as encouraging demographic trends
including a relatively young population and
pent up demand for housing and public
infrastructure.

m
80 30 8 % %
resistant cement products.

Revenue growth Contribution to earnings Annual production capacity

ACC revenue reached ACC contributed 52% of ACC and CBA will have a
LE 1.5 billion, an 80% Cement Group earnings and total annual capacity of 8.05
increase over last year. 30% of OCI net income. million tonnes during 2007.

14 Orascom Construction Industries Annual report 2006

Orascom Construction Industries Annual report 2006 15
Pakistan

16 Orascom Construction Industries Annual report 2006

The OCI Cement Group is the first international cement
company to begin operations in Pakistan. PCC is among
the top 5 largest cement producers in the country.

Pakistan Cement Company (PCC) began
operations in July and produced a total
of 382,000 tonnes during the year. PCC
operates a single dry process production
line supplied by FL Smidth which has an
annual production capacity of 2.2 million
tonnes. The cement plant is located along
the Lahore-Islamabad highway in the
Punjab Province of northern Pakistan,
some 80 kilometers south of Islamabad.
Construction work on the PCC plant was
undertaken on a fast track schedule and
was completed in only 15 months. The
construction work was managed by an FL
Smidth/OCI team overseeing local Pakistani
contractors. During the year, production
was disrupted by seasonal shortages of
natural gas, intermittent electricity outages
and unexpected maintenance work on
some plant equipment. To overcome these
disruptions, PCC has begun construction
of a coal mill to allow the plant to operate
on natural gas, fuel oil or coal and has
pre-ordered essential spare parts which
have long lead times. PCC introduced its
products under the brand name “PAKCEM”
and has positioned the brand in the
market as a premium quality cement.
Supported by a wide dealer network and
strong in-house technical sales team, PCC
succeeded in capturing a 9% market share
despite severe price competition by the
existing producers. PCC expects to play
an important role in meeting the growing
demand for high quality cement in both
Pakistan and Afghanistan.
The OCI Cement Group acquired a
majority 51% stake in PCC, formerly
known as Chakwal Cement Company, in
March 2005 and has since increased its
stake in the company up to 62.75%. To
complete construction of the new plant,
PCC secured financing through a syndicate
of 11 Pakistani banks and the Eksport
Kredit-Fonden (EkF), the Demark-based
international export credit agency, for the
equivalent of US$ 130 million in limited
recourse project finance debt. The OCI
Cement Group has invested a total of US$
231 million in PCC as at year end. The OCI
Cement Group is the first international
cement company to begin operations in
Pakistan.
During the year, total market cement
consumption in Pakistan increased by
26% to 18.9 million tons, total cement
dispatches from local producers increased
by 20% to 20.7 million tonnes, and total
cement and clinker exports increased by
78% to 1.8 million tonnes. There are
currently 25 operating cement producers in
Pakistan which have a total annual cement
production capacity of 33.8 million tons,
an increase of 88% over last year. Despite
rising local demand, the substantial increase
in new production capacity pushed local
cement prices lower for most of the year.
According to the IMF World Economic
Outlook, Pakistan real GDP grew at a rate
of 6.2% during the year, down from 8.0%
the year before. Growth is expected to
be at 6.5% in 2007. We expect cement
demand in Pakistan to grow significantly
due to generally strong GDP growth,
increased housing construction and greater
public spending on infrastructure.

15 mths
Construction record
PCC completed construction
of its plant in only 15 months.
9 %
Market share
PCC has been able to capture
a 9% market share since
beginning operations in July.
m
2.2
Annual production capacity
PCC has a single production
line with a total annual
capacity of 2.2 million tonnes.

Orascom Construction Industries Annual report 2006 17

Northen Iraq
The OCI Cement Group believes strongly in the future
of Iraq and is proud to support the Iraqi people in
rebuilding their nation. Our Tasluja and Bazian plants
will be the two largest operating plants in the country.

In July, the OCI Cement Group completed
rehabilitation work on the second
production line at the Tasluja cement plant
located near the city of Suleimaniyah in
the Kurdistan region of Northern Iraq.
The Tasluja plant has two production lines
supplied by ThyssenKrupp Polysius which
have an annual production capacity 2.3
million tonnes. Rehabilitation work on
the first line was completed in July 2005.
During the year, the Tasluja plant was able
to produce a total of 657,000 tonnes.
Production continues to be disrupted by
intermittent outages of natural gas and
electricity. The OCI Cement Group and its
local partner, the Farouk Rasool Group,
were awarded a 12-year lease contract
to rehabilitate, operate and maintain the
Tasluja plant by the Kurdistan regional
government and have received a right of
first refusal on any potential privatization
of the plant. Together, the OCI Cement
Group and its partner have invested a
total of US$ 70 million in the rehabilitation
of the plant as at year end. The OCI
Tasluja management team has overcome
tremendous obstacles to restore production
operations at the Tasluja plant and their
achievement has provided a significant
economic and social benefit to the local
community.
In February 2005, the OCI Cement Group
and the Faruk Rasool Group obtained
regulatory approvals for the construction
of a new greenfield cement plant near
the city of Bazian in the Kurdistan region
of Northern Iraq. The new plant will
have a single production line supplied by
ThyssenKrupp Polysius which will have an
annual production capacity of 2.9 million
tonnes. Construction work on the plant
began in July 2006 and is scheduled to be
completed in 26 months during August
2007. At year end, overall construction
work on the plant was 65% complete. The
OCI Bazian management team has decided
to invest in a small power plant in order to
ensure a stable supply of electricity to the
plant.
Total market cement consumption in Iraq
is estimated to be 10 million tonnes, total
cement dispatches from local producers is
estimated to be 3 million tonnes, and total
cement and clinker imports are estimated
to be 7 million tonnes primarily from
Turkey, Jordan and Iran. There are 14 state-
owned cement plants in Iraq which have a
total designed annual cement production
capacity of 14 million tonnes. Local
market cement prices remain high due to
a shortage of local supply and the high
transportation cost of imported cement.
We expect cement demand in Iraq to either
remain at current levels or grow significantly
should the overall situation in the country
improve.

m
5.2
Annual production capacity
Tasluja and Bazian will have
a total annual capacity of 5.2
million tonnes during 2007.

18 Orascom Construction Industries Annual report 2006

Turkey
The Turkish cement market is large, but has many small
producers. During the year, we have taken our first steps
to enter the market with the acquisition of the Van
cement plant in southeastern Turkey and a minority stake
in Baticim Cimento.

In January, the OCI Cement Group

completed the acquisition of the Van
cement plant in southeastern Turkey for
a total investment cost of US$ 54 million.
The Van plant assets were sold to the
OCI Cement Group through a public
auction conducted by the Turkish Savings
& Deposits Fund. Although only having a
clinker capacity of 250 thousand tonnes
and a cement grinding capacity of 600
thousand tonnes, the Van plant has an
established market presence, a competent
management team and the potential for
expansion. Having gained control of the
plant, the OCI Cement Group signed a
contract with a ThyssenKrupp Polyisus/OCI
team to improve the efficiency and double
the clinker production capacity of the plant
to 500 thousand tonnes. The OCI Cement
Group expects the Van plant to expand its
export sales into northern Iraq until new
production capacity is brought on stream.

During the year, the OCI Cement Group

acquired additional shares in Baticim
Cimento to increase its equity stake to
23%. In December 2005, the OCI Cement
Group completed the acquisition of a
20% stake in Baticim Cimento in Turkey
which has a consolidated annual cement
production capacity of 3 million tonnes.
Baticim Cimento is the majority shareholder
(75%) of Bati Soke Cimento. Both
companies are listed on the Istanbul stock
exchange. Baticim Cimento is one of the
top five cement exporters in Turkey.
During the year, total market cement
consumption in Turkey increased by
20% to 39.8 million tons, total cement
dispatches from local producers increased of 5.0% during the year, down from 7.4%
by 17% to 41.6 million tons, and total the year before. Growth is expected to
cement and clinker exports decreased remain at 5.0% in 2007. We expect cement
by 32% to 7.2 million tons. There are demand in Turkey to grow significantly due
currently 42 operating cement producers in to generally strong GDP growth, increased
Turkey which have a total annual cement housing construction and greater public
production capacity of 47.4 million tons. spending on infrastructure.
Rising local demand and robust demand
for exports has helped pushed local
cement prices higher for most of the year.
According to the IMF World Economic
Outlook, Turkish real GDP grew at a rate

Orascom Construction Industries Annual report 2006 19

Spain
Cement consumption in Spain continues to grow and
environmental regulations are beginning to impact local
producers. We expect Spain will continue to be the largest
importer of cement in Europe and that Grupo GLA
will become a market leader in cement, aggregates
and ready mix.
In October, the OCI Cement Group
completed the acquisition of a 50% stake in
Grupo GLA (GLA), the largest independent
aggregates and ready mix concrete
producer in Spain. GLA was founded by the
prominent Monje Tunon family who will
continue to be partners in the business and
be responsible for oversight of day-to-day
operations. GLA has aggregates and ready
mix concrete operations throughout Spain
with market leading positions in Madrid
and Valencia. GLA has an annual quarrying
capacity of 5 million tonnes of aggregates
with more than 240 million tonnes of
reserves spread over 11 quarries throughout
Spain. GLA has an annual production
capacity of 3.5 million cubic meters of ready
mix concrete and is currently constructing
a grinding plant south of Madrid capable
of producing 600 thousand tonnes of
cement annually. GLA also has additional
mortar and pre-cast concrete production
operations. The OCI Cement Group
acquired GLA for a total cash consideration
of EUR 51.3 million and contributed its
59% stake in Cementos La Parrilla (CLP).
The OCI Cement Group acquired CLP in
September 2005. CLP operates a grinding
plant capable producing 600,000 tonnes
of cement annually located near the city
of Valladolid, northwest of the capital city
Madrid. CLP began construction work in
late 2005 to increase its grinding capacity
to 1.2 million tonnes of cement annually.
Together, GLA and CLP will have 1.8 million
tonnes of cement grinding capacity located
both north and south of Madrid.
Spain is the largest cement consumer in
Europe and continues to be one of the
world’s largest cement importers. During
the year, total market cement consumption
in Spain increased by 8.2% to 55.7 million
tonnes, total domestic cement production
increased by 7.2% to 53.9 million tonnes,
and total cement and imports increased by
114.7% to 7.5 million tonnes. There are
currently 50 operating cement producers
in Spain which have a total annual cement
production capacity of 52 million tonnes.
Strong cement demand and higher cement
import prices has enabled local cement
prices to increase moderately during the
year. According to the IMF World Economic
Outlook, Spanish real GDP grew at a rate
of 3.7% during the year, up from 3.5%
the year before. Growth is expected to be
3.6% in 2007. We expect cement demand
in Spain to continue to benefit from the
second home phenomena and increased
immigration creating a greater need for
housing and public infrastructure.

240 3.5
Aggregates reserves
m
GLA has 240 million tonnes
of aggregates reserves located
throughout the country.
Concrete capacity
m
GLA has an annual production
capacity of 3.5 million cubic
meters of concrete.
1.8m
Cement capacity
GLA and CLP has an annual
cement grinding capacity of
1.8 million tonnes.

20 Orascom Construction Industries Annual report 2006

Aggregates, ready mix
and packaging
343 0.5
Bags produced
m
NBC, ESC and ABC produced
343 million cement bags in
Egypt and Algeria.
Concrete produced
m
RME sold 0.5 million cubic
meters of concrete in Egypt.
1.5
Aggregates sold
m
RME and Besix sold 1.5
million tonnes of aggregates
in Europe and Egypt.

In October, the BESIX Group announced

the acquisition of Socogetra which has 60
years of experience in the road construction
industry and is a producer of aggregates,
ready mix concrete and asphalt. Socogetra
has an annual production capacity of 1.1
million tonnes of aggregates including a
limestone quarry capable of producing
700,000 tonnes annually which is owned
in joint venture with Lafarge. The BESIX
Group believes the acquisition will improve
their competitiveness when tendering
for infrastructure contracts and their
attractiveness as a partner in various private
sector infrastructure concessions.
Throughout the year, Ready Mix Egypt
(RME) invested to expand its aggregates and
ready mix assets. RME is now one of the
largest aggregates and ready mix companies
in Egypt. During the year, RME sold 0.5
million cubic meters of concrete and 0.5
million tonnes of aggregates. RME operates
3 sand and gravel quarries with ample In January, the OCI Cement Group acquired million cement bags annually and an
reserves and also operates 9 mobile batch 100% of Egypt Sack Company (ESC) for a assortment of 4-color specialty bags.
plants and 41 concrete truck mixers. total sum of LE 43 million (US$ 7.4 million). In October, the OCI Cement Group
ESC operates a single plant which has two bought out its local partner in Algeria to
In December, Ready Mix Algeria (RMA) production lines capable of making 60 acquire full ownership of Mehsas National
began operations working closely with the million cement bags annually. During the Bag Company. After gaining control,
ACC sales team to provide customers with year, ESC produced a total of 80.7 million OCI renamed the business Algerian Bag
high quality and timely ready mix products. bags. Company (ABC). ABC produced a total
During the year, RMA acquired rights to of 70.2 million bags during the year,
operate 5 aggregates quarries with ample During the year, National Bag Company an increase of 23% over last year. ABC
reserves and also purchased 30 concrete (NBC) produced 191 million bags. NBC operates a single plant in central Algeria
truck mixers, 6 mobile pumps, 4 concrete is the largest bag producer in Egypt and which has two production lines capable of
tracing booms, 2 stationary pumps and 8 operates a single plant which has six making 80 million bags annually.
batch plants. production lines capable of making 240

Orascom Construction Industries Annual report 2006 21

United Arab Emirates
Economic growth in the UAE continues to be
phenomenal. When completed in October 2007, the
EMCC plant will help provide the materials for their
ambitious development plan.

m
3
Annual Production Capacity
EMCC will have an annual
production capacity of 3
million tonnes in 2007.

In September 2005, the OCI Cement Group

in partnership with Dubai Industrial, an
affiliate of Dubai Holding, and the Emirate
of Fujairah announced the establishment
of Emirates Cement Company (EMCC).
The new plant is located in the Emirate of
Fujairah and will have a single dry process
production line with an annual capacity
of 3 million tonnes. EMCC signed an EPC
contract with an FL Smidth/OCI consortium
to construct the plant in just 27 months
with completion scheduled in October
2007. As at year end, construction was
65% complete. The total investment cost
of the plant is expected to reach US$ 432
million.

During the year, total market consumption

in the UAE increased by 26% to reach 16.5
million tonnes. Total cement dispatches
from local producers is estimated to have
reached 14.1 million tonnes. The balance
was serviced through imports primarily
from India and China. GDP growth during
2006 reached 11%. Cement demand
continues to be driven by investments in
commercial and housing projects and public
infrastructure spending necessary to support
a vibrant tourism industry and growing
immigrant population.

22 Orascom Construction Industries Annual report 2006

Nigeria
UNICEM will be one of three cement producers
in Nigeria when it begins operations in early
2008. Nigeria continues to be the largest
importer of cement in Africa.

In February 2006, Egyptian Cement

Company (ECC) agreed to acquire a 70%
stake in United Cement Company of
Nigeria (UNICEM), a well established cement
importer and distributor, from both Holcim
and Flour Mills of Nigeria. Following the
acquisition, UNICEM began construction
of new greenfield cement plant with an
annual production capacity of 2.5 million
tonnes. The new plant will be located near
the port of Calabar in Cross River State in
southeastern Nigeria. Construction work is
scheduled for completion in early 2008.

Total market cement consumption in Nigeria

is estimated to be 12 million tonnes, total
cement dispatches from local producers is
estimated to be 3 million tonnes, and total
cement and clinker imports are estimated
to be 9 million tonnes primarily from China.
There is only one current producer in
Nigeria. Local market cement prices remain
high due to a shortage of local supply and
the high transportation cost of imported
cement. As the most populous country
in Africa with a low per capita cement
consumption level, we expect demand
in Nigeria to grow significantly over the
coming years.

2.5 m
Annual Production Capacity
UNICEM will have an annual
production capacity of 2.5
million tonnes in 2008.

Orascom Construction Industries Annual report 2006 23

Business review B E S IX GR OUP
Page 26
C ONT R AC K INT E R NAT IONAL
Page 28
OR AS C OM C ONS T R UC T ION INDUS T R IE S

Construction...
Page 30
NAT UR AL GAS INDUS T R IE S
Page 32

2.3 11.2 2.6bn bn

Record revenues (US$) Net income margin
%
Construction revenue Construction net income
grew by 47% to a record jumped to US$ 255 million as
US$ 2.3 billion. net margin increased to 11.2%.
New work booked (US$)
Besix, Contrack and OCI
received US$ 2.6 billion of
new work in 2006.

24 Orascom Construction Industries Annual report 2006

The OCI Construction Group provides engineering, procurement and construction services
on large, complex and demanding projects for public and private customers primarily in the
Middle East, North Africa and Central Asia. The OCI Construction Group ranks among the
top 150 largest global contractors and is one of the leading contractors in the Middle East.
The OCI Construction Group operates under three separate business units each of which have
established an exceptional track record with their customers, have leading positions in their
geographical markets served, and have developed core technical competencies in specialized
areas of construction. The OCI Construction Group also provides steel fabrication services in
Egypt and Algeria and participates as an equity investor in natural gas based industrial projects
and infrastructure concessions.

Orascom Construction Industries Annual report 2006 25

BESIX Group

Aspire Tower

Burj Dubai

26 Orascom Construction Industries Annual report 2006

The BESIX Group has been active in the UAE
since 1967 and has grown to become one
of the largest construction contractors in the
Middle East.
The BESIX Group is based in Belgium and
is active in engineering and construction,
electro-mechanical services and real
estate development. The BESIX Group
was established in 1909 and provides
engineering, procurement and construction
services on large commercial, infrastructure
and marine projects for public and private
customers worldwide. In addition to its
activities in the European Union, the BESIX
Group is also active in central and Eastern
Europe, Egypt, Libya, Central Africa and in
the United Arab Emirate and Qatar through
Six Construct. The BESIX Group employs
more than 12,000 personnel, is the largest
construction contractor in Belgium and is
ranked by the Engineering News Record as
the 49th largest international contractor
and the 98th largest general contractor in
the world.
During the year, the BESIX Group secured
a record US$ 1.7 billion in new work
principally in Belgium and the UAE. At year
end, the Besix Group was involved in 81
projects located in 19 countries and the
value of unbilled work in backlog was US$
1.1 billion. Contracts being undertaken in
the UAE, Qatar and Bahrain represented
52% of backlog at year end.
The BESIX Group is a member of the
consortium constructing the Burj Dubai
which will be the world’s tallest building
upon completion standing more than
725 meters high. By year end, the Burj
Dubai stood 110 stories tall reaching a
height of 380 meters making it the tallest
building in the Middle East, the ninth
tallest building in the world and tied with
the Sears Tower in Chicago for the highest
number of floors. BESIX has more than
2,000 workers mobilized on the project
which will use more than 230,000 cubic
meters of concrete, 31,400 tonnes of rebar
and have curtain walling measuring 27.5
acres enough to cover 17 soccer fields.
BESIX is currently completing a floor every
three days and expects the project to be
completed in late 2008.
In November, the BESIX Group completed
work on the first part of the Aspire Tower
in Doha, Qatar. Designed by renowned
architect Hadi Simaan, the tower stands
300 meters high and served as a focal point
for the 15th Asian Games hosted by Qatar
in December 2006. Work on the interior of
the tower is expected to be fully completed
by August 2007. Upon completion, the
Aspire Tower will include a five-star 136
room hotel with atrium, conference rooms,
business centre, restaurant, gymnasium,
salons, sports museum, suites, and at the
top of the building, a revolving restaurant,
a bar and an observation deck providing
panoramic views of Doha.
In February, the BESIX Group was awarded
a 27-year build-operate-transfer (BOT)
contract for a greenfield wastewater
treatment plant in the Emirate of Ajman in
the United Arab Emirates. BESIX will have a
50% stake in the venture alongside Veolia
Water, Black & Veatch and the Ajman
Government. The scope of the BOT contract
includes the engineering, procurement
and construction of the water treatment
plant as well as ongoing operations and
maintenance. The plant will have a capacity
to serve 250,000 people and will involve
the construction of 22 pumping stations, a
225 km gravity pipeline, 30 km of pressure
mains and connections to more than
45,000 households. Total revenues from
the BOT contract are expected to reach
EUR 297 million during the concession
period in addition to the EUR 132 million
construction cost for the new facilities.
Construction work is expected to be
completed in just 30 months. BESIX aims
to participate in similar infrastructure
concessions as a contractor and equity
investor both in Europe and the Middle
East.
During the year, the BESIX Group
acquired five companies: Van Britsom,
Verheye, GRWestkust (50%), Cobelba
and Socogetra. Van Britsom is active in
construction works for waterways and
harbours in Belgium, and Verheye is active
in civil engineering, earthworks, sewage
systems and concrete products also in
Belgium. GRWestkust is active globally
in wastewater treatment and water
production systems and technologies.
Cobelba is a reputable general contractor
established in 1994 with operations in
Belgium and Luxembourg. Socogetra has
around 60 years of experience in the road
construction industry and is a producer of
aggregates, ready mix concrete and asphalt.
Orascom Construction Industries Annual report 2006 27
Contrack International
Contrack International (CII) is based in the
USA and provides engineering, procurement
and construction services primarily on
institutional and infrastructure projects
financed by the US Government in the
Middle East and Central Asia. CII has been
ranked among the Top 400 US Contractors
by Engineering News Record for 16
consecutive years. CII was ranked 140th in
overall revenue for 2006, up from 148th in
2005 and 294th in 2003. CII was ranked
13th in international revenue among all US
contractors and 77th among all international
contractors globally.
During the year, CII secured US$ 150 million
in new work principally in Afghanistan. At
year end, CII was involved in 26 projects
located in 5 countries worth a total value of
US$ 839 million and the value of unbilled
work in backlog was US$ 318 million.
Contracts being undertaken in Qatar
represented 65% of backlog at year end.
CII has been active in Afghanistan since
January 2003 and has undertaken work
orders for a variety of projects including
institutional buildings, wastewater treatment
plants, water supply pumping stations, roads,
hospitals, and other humanitarian projects.
CII was awarded US$ 141 million of work
orders in Afghanistan during the year and
was also awarded a three year US$ 110
million contract to provide operations and
maintenance services at Afghan National
Army bases throughout Afghanistan. CII is
currently one of the largest international
contractors operating in the country and
has a local workforce of more than 4,000
personnel.
28 Orascom Construction Industries Annual report 2006
Contrack International is a leading US international
contractor and the largest construction contractor
operating in Afghanistan.
The CII/Darwish joint venture made
substantial progress on the Science and
Technology Park project valued at US$
355 million which is part of the Education
City development in Qatar, the ambitious
flagship project being undertaken by the
Qatar Foundation for Education, Science
and Community Development, a charitable
foundation established by Sheikh Hamad
bin Khalifa Al-Thani, Qatar’s Emir and
head of state. The Science and Technology
Park will consist of three main buildings,
a podium and parking garage in addition
to utilities infrastructure and landscaping
works. A major feature of the project is
the Veil, a giant sun shade towering above
the three main buildings with massive
steel quad-columns supporting a wave-
shaped Veil built of structural steel space
trusses with perforated stainless steel panel
cladding covering both the top and bottom.
Construction work on the project was 36%
complete at year end and is scheduled
to finish in late 2007. The Education City
campus will cover some 2,500 acres and
is envisioned to be a totally integrated
education environment offering world
class educational, commercial, recreational,
cultural, health and housing facilities. The
master plan for Education City was created
by renowned Japanese architect Arata
Isozaki. CII intends to pursue additional
construction opportunities on the Education
City development including the central
library, student center, auditorium/conference
center, college of engineering and Al Shaqab
equestrian center.
In May, CII established a full-fledged branch
office in Bahrain to pursue more than US$
250 million worth of private sector projects.
CII has been active in Bahrain since 2001
primarily providing construction services for
US Government financed projects. Having
established an excellent reputation in the
local market, CII hopes to secure private
sector work following the successful business
model adopted by the CII team in Qatar.
CII currently has a local workforce of nearly
1,000 in Bahrain.
In 2005, CII formed a joint venture in Egypt
with Stanley Consultants, a respected
American engineering firm, to provide design
support for CII projects which require a
design-build contracting approach favored
by US government agencies. The Contrack
Stanley Group provides CII and other
clients with a competitive cost advantage in
tendering for design-build and EPC contracts.
The joint venture employed close to 100
engineers and draftsmen at the close of
2006.
Contrack FM was formed in 2004 to provide
facilities management services for public
and private clients in Egypt leveraging on
the operations and maintenance experience
CII has gained over the years working on
various contracts for the US government in
the region. Contrack FM provides facilities
operations and maintenance services to more
than 21 clients in Egypt including the Nile
City Complex, two 34-floor towers housing
international companies in 200,000 square
meters of office space, and Smart Village,
a 300-acre site containing offices for high
tech industries in 14 buildings with 140,000
square meters of office space. Annual
revenue and personnel at Contrack FM has
more than doubled in each of its three years
of operation.
Science and Technology Park, Qatar

Orascom Construction Industries Annual report 2006 29

Orascom Construction Industries

30 Orascom Construction Industries Annual report 2006

OCI Construction continues to manage its
growth by positioning resources and personnel
in only a few key geographical markets.
OCI Construction provides engineering,
procurement and construction services
on industrial, commercial, infrastructure
and railway projects for public and private
customers primarily in the Middle East and
North Africa. OCI selectively targets large,
complex and demanding projects which
require internationally accepted quality and
safety standards.
During the year, OCI continued to receive
repeat orders from satisfied customers
and secure large contracts working in
partnership with other leading regional and
multinational contractors. OCI posted record
revenue of LE 5.5 billion and secured LE 2
billion in new work most notably in Egypt
and Algeria. At year end, OCI was involved
in 59 projects located in 9 countries worth
a total value of LE 15.9 billion and the
value of unbilled work in backlog was LE
4.7 billion, a 32% decrease over last year.
During 2005, OCI secured a record LE 7.5
billion in new work and at year end had a
backlog of LE 6.9 billion. The value of work
in backlog can vary considerably throughout
the year due to the size and timing of
contract awards. During the second half of
the year, OCI made the strategic decision
to hold construction resources in reserve for
contracts expected to be awarded and for
projects to be tendered in early 2007.
During the year, OCI substantially
completed work on several major industrial
projects including the AstraZeneca
pharmaceutical plant, the Egyptian Fertilizer
Company second urea/ammonia production
line, and the Helwan Fertilizer Company
urea/ammonia production line in Egypt.
Construction work progressed smoothly
on all major projects in Egypt including
the 750MW Talkha power plant, the 25
story Fairmont Hotel at Nile City, the Pfizer
pharmaceutical plant, the warehouse and
production facilities for Eastern Tobacco,
and the Nagaa Hammadi dam and power
station. Construction work on the Proctor
& Gamble detergents plant in Nigeria was
also on schedule. During the year, OCI
was awarded a US$ 91 million contract to
construct the ammonia fertilizer plant for
Egyptian Basic Industries Corporation, an LE
88 million contract to build the new Maadi
City Center building, and a LE 79 million
contract to build the new Embassy of Oman
in Egypt.
Algeria is a key construction market for
OCI. Over the past several years, OCI has
invested heavily in both equipment and
human resources to enhance our capability
and capacity to undertake more work in
Algeria. During the year, construction work
on the Hammam sea-water desalination
plant progressed on schedule. The project
valued at US$ 189 million was awarded to
an OCI/BESIX joint venture by GE Ionics in
April 2005. The sea-water desalination plant
is located near the port of Algiers and will
be the largest of its kind in North Africa,
supplying a quarter of the population of
Algiers with drinking water. Also during the
year, OCI continued to construct railway
infrastructure for the Algerian Railway
Authority working in partnership with
TSO of France. OCI has a scope of work
currently valued at US$ 73 million of which
22% was completed at year end.
During the year, OCI and Cementech
worked together with FL Smidth to provide
engineering, procurement and construction
services on the new cement production
lines being constructed by the OCI Cement
Group in Pakistan, Nigeria, Algeria, Turkey
and the UAE as well as the new cement
production line being constructed by AUCC
in Libya. OCI and Cementech worked
together with ThyssenKrupp Polysius on
cement projects in Egypt and northern Iraq.
OCI is one of the most experienced cement
plant contractors in the world.
National Steel Fabrication Company (NSF)
operates a single plant in 6th of October
City which provides a complete range of
steel fabrication services including cutting,
drilling, bending, welding, sand blasting
and painting primarily for customers in
the petroleum and construction industries.
NSF is a joint venture between OCI and
Consolidated Contractors (CCC). During
the year, NSF produced 20,006 tons of
fabricated steel products.
Orascom Construction Industries Annual report 2006 31
Natural gas industries

32 Orascom Construction Industries Annual report 2006

OCI intends to participate in natural gas based
industrial projects in the region as both a
contractor and an equity investor.
OCI aims to invest in greenfield industrial
projects which leverage competitively priced
natural gas in the region and which utilize
our construction capabilities to reduce the
time and cost of development, replicating
the same business model that has been
a key driver in the success of the OCI
Cement Group. Working together with
our technology partners, ThyssenKrupp
Udhe and KBR, OCI intends to actively
pursue urea/ammonia fertilizer projects in
the region as both a contractor and equity
investor. Should opportunities arise, OCI
may also acquire existing natural gas-based
businesses, consolidate its activities with
existing industry leaders or expand its
activities to include trading operations.
In February, OCI signed an initial agreement
with the Algerian state-owned oil & gas
company Sonatrach to establish a greenfield
ammonia/urea fertilizer plant in Algeria with
an annual capacity of 1.1 million tonnes
of granular urea and 0.7 million tonnes of
ammonia. OCI initiated the project with a
detailed proposal and feasibility study that
was presented to Sonatrach and will act as
the lead project developer. Based on the
economics of the project and the improved
outlook for global fertilizer demand, a
strategic decision in August was taken to
build an additional ammonia plant on the
same site in order to double the annual
production capacity of ammonia to 1.3
million tonnes. It is expected that all of
the ammonia produced by the plant will
be exported. The total investment cost
of the project has increased from US$
746 million initially up to US$ 1.6 billion.
Societe Generale has been appointed as
the financial advisor and White & Case
(London) has been appointed as the legal
advisor for the new venture. OCI will have
a 51% stake in the new venture with
Sonatrach owning the remaining 49%. In
November, the Algerian National Investment
Council approved the increased investment
in the project. The plants are expected to
be built in the industrial zone at Arzew
near the Mediterranean Sea shoreline. The
proximity of the plants to the two major
ports of Arzew and Bethioua will help
facilitate the export of their production.
The new venture will be financed through
long-term project finance debt in a limited
recourse structure from a combination of
local Algerian and international banks.
Sonatrach will enter into a 20-year gas
supply agreement with the new venture.
Construction work is scheduled to begin in
early 2007 and OCI targets to commission
the production lines in 2011.
In October 2005, OCI became a significant
shareholder in Egyptian Basic Industries
Corporation (EBIC) which is currently
constructing a greenfield 2,000 ton per
day ammonia production plant. The plant
will be the largest of its kind in Egypt. The
total investment cost is expected to be US$
540 million of which US$ 225 million has
been secured through a facility agreement
with the US Export Import bank and
US$ 126 million of commercial debt has
been secured through a syndicate of local
Egyptian and international banks. By the
end of January, OCI and its partners had
contributed US$ 189 million of equity. The
project reached financial close on 30 March
2006 and at year end, US$ 137 million of
debt had been drawn down. A KBR/OCI
consortium is undertaking the construction
work which is scheduled for completion
in late 2008. At year end, the project was
65% complete. OCI made the strategic
decision to invest in EBIC after better
understanding the economics of the project
which capitalizes on the lower cost of
natural gas in the region. In addition to the
construction work being performed, OCI
will realize benefits from the sale of land to
the plant by Suez Industrial Development
Company and the ongoing export of the
ammonia produced which will be loaded at
the nearby Sokhna Port.
Orascom Construction Industries Annual report 2006 33
Corporate social responsibility
Understanding our impact
We believe strongly in protecting and supporting
the local communities in which we operate.
Through our activities, we contribute to
the economic and social well-being of our
stakeholders.
34 Orascom Construction Industries Annual report 2006
Orascom Construction Industries is a
publicly listed corporation owned by
thousands of shareholders. We employ
thousands of people and provide goods
and services to thousands of customers in
many countries. What we do and how we
do it can have an impact on the lives of
every one of our shareholders, employees,
customers, business partners and those in
the communities where we operate.
We recognize that we have a social
responsibility to our stakeholders and are
committed to acting in accordance with
international best practices for corporate
governance, corporate citizenship
and sustainable development. OCI, its
subsidiaries and affiliates demand that all
their employees conduct themselves in
accordance with the highest standard of
professional conduct and ethics.
OCI has adopted corporate governance
guidelines which comply with all applicable
laws and stock exchange regulations.
We have adopted strict employee health,
safety and environmental policies, have
formed a charitable foundation to provide
educational opportunities for young people
and have joined the UN Global Compact to
promote human rights, labour standards,
environmental protection and anti-
corruption efforts.
Working together with our employees, our
international partners and our customers,
we are helping to build a brighter future in
developing countries around the world.
Corporate citizenship
Companies have choices about how they
manage their business. Being a good
corporate citizen balances acting responsibly
with the right to trade freely. In the long
term, companies are more successful when
they responsibly address the concerns of
not only their shareholders, but also their
employees, customers, business partners,
government and the community as a
whole.
We believe that good corporate citizenship
can provide business benefits and improve
business performance by enhancing our
corporate reputation, lowering our risk
profile, increasing our attractiveness as an
employer, improving our relations with
potential investors and our access to capital,
encouraging creativity and innovation
inside our company, differentiating our
company from our competitors, increasing
our operational efficiency, and ensuring
our ability to operate uninterrupted in the
communities we serve.
Working together with
our employees, our
international partners and
our customers, we are
helping to build a brighter
future in developing
countries around the
world.
The OCI Foundation was formed in 2000
to invest company resources in educational
programs that improve the communities
in which we operate. Through the Onsi
Sawiris Scholarship Program, the OCI
Foundation has provided scholarships to
32 extraordinary Egyptian graduate and
undergraduate students for studying at
prestigious international universities in fields
that will enhance the economic prosperity
of Egypt. To date, 8 students have attended
Harvard University, 5 have attended the
University of Pennsylvania and 4 have
attended Stanford University. The OCI
Foundation will be sending 4 more students
to university this fall.
As part of our corporate citizenship
activities, all of our cement companies have
launched various educational and training
programs to improve their relations with
the local communities surrounding their
plants. Our construction companies also
provide training to improve the construction
skills of their local labor force. Contrack
International (CII) built a two story training
center complete with classrooms and
workshop areas in Kabul in 2004 which has
since trained more than 1,800 local people
in a variety of construction trades such as
masonry and plumbing.
During the year, OCI itself made charitable
donations in Egypt totalling LE 7.8 million
primarily to public sector institutions
for building schools and qualified non-
governmental organizations for social
development projects.
Sustainable development
Sustainable development is about improving
the quality of life for everyone, now and
for generations to come. OCI believes
that the way we operate, the goods we
Training Programmes
OCI continues to make charitable
donations to public sector institutions
for building schools and qualified non-
governmental organizations for social
development projects.
produce and the services we provide are
helping to improve the quality of life and
build a brighter future for people in the
communities where we operate.
OCI has operations in 20 countries
throughout the developing world.
We believe strongly in supporting and
protecting the local communities in which
we live and work. Through our activities,
we contribute to the economic and social
well-being of a range of stakeholders
including our employees, customers,
business partners, governments and the
community as a whole. We also seek to
minimize the environmental impact of
our activities and to promote sustainable
development by conserving energy,
materials and resources through minimizing
consumption, maximising efficiency and
effectively managing waste.
As part of our sustainable development
activities, all of our cement companies have
launched de-bottlenecking and efficiency
initiatives which have resulted in lower
consumption of energy, materials and
resources and have reduced waste and
emissions at their plants. The new bypass
treatment production line at ECC is another
example of our commitment to sustainable
manufacturing. Overall, our environmental
track record is one of the best in our
industry due to several factors including our
reliance on natural gas as our primary fuel
source and our state-of-the-art production
plants which have an average age of only
2 years. All of our construction companies
continue to source materials from reputable
suppliers, avoid the use of potentially
dangerous chemicals, provide a healthy and
safe work environment for our employees
and subcontractors, and minimize, recycle
and properly dispose of waste.
Scholarship Programme
Noura Selim graduated from the University
of Pennsylvania with a BS and MS in
Biotechnology. She has accepted a position
with the consulting firm McKinsey &
Company in New York
Orascom Construction Industries Annual report 2006 35
Board of Directors 1 Onsi Sawiris
Chairman
Eng. Onsi Sawiris was the founder and
Direction and leadership president of Orascom, the original family
partnership involved in trading and
contracting which was later to be named
“Orascom Construction Industries” after its
incorporation in 1998. Eng. Sawiris has been
the Chairman of the Board of OCI since its
incorporation and also serves as a director
of Orascom Telecom Holding. Eng. Sawiris
was born in 1930, is an Egyptian citizen
and holds a Bachelor of Science degree in
Engineering from Cairo University.

2 Nassef Sawiris
Chief Executive Officer
Mr. Nassef Sawiris has been a Director and
the Chief Executive Officer of OCI since its
incorporation in 1998. Mr. Sawiris oversaw
the construction activities of Orascom since
1990. He is a member of the Business
Secretariat of the National Democratic Party,
the German-Arab Chamber of Industry &
Commerce and the Young President’s Club.
Mr. Sawiris was born in 1961, is an Egyptian
citizen and holds a Bachelor of Arts degree in
Economics from the University of Chicago.

1 2

3 4 5

6 7

36 Orascom Construction Industries Annual report 2006

3 Osama Bishai
Director
Eng. Osama Bishai has been a Director of
OCI since its incorporation in 1998. Eng.
Bishai began working for Orascom in 1985
and currently serves as the Managing
Director of the OCI Construction Group.
Eng. Bishai was born 1962, is a dual
Egyptian/US citizen and holds a Bachelor
of Science degree in Civil Engineering
from Cairo University and a Construction
Management Diploma from the American
University of Cairo.
4 Karim Camel-Toueg
Director
Mr. Karim Camel-Toueg currently serves
as the President of Contrack International.
Mr. Camel-Toueg joined Contrack
International in 1989, became a Vice
President in 1990 and was appointed
President in 1998. Mr. Camel-Toueg was
born in 1960, is a dual Egyptian/US citizen
and holds a Bachelor of Arts degree in
International Business Administration from
the American University in Washington D.C.
5 Alaa Sabaa
Senior Non-executive Director
Mr. Alaa Saba is currently the Chairman
and Managing Director of Beltone Asset
Management. Mr. Saba co-founded
Hermes Financial which later merged with
the Egyptian Financial Group to form
EFG-Hermes in 1996. Mr. Saba was
previously a Vice President of Kidder Peabody
in New York and established its Middle East
regional office in Cairo. He is the founder
and a board member of the Egyptian
Investment Management Association and
the Egyptian Capital Markets Association,
and was a board member of the Egyptian
Stock Exchange. Mr. Saba was born in 1960,
is an Egyptian citizen and holds a Bachelor
of Science degree from Cairo University, a
Master of Science degree from the University
of Pennsylvania and a Master of Business
Administration degree from the Wharton
School at the University of Pennsylvania.
6 Mohamed Farouk Abdel Moneim
Non-executive Director
Eng. Mohamed Farouk Abdel Moneim is
currently the Vice Chairman and CEO of
Mobica, a diversified Egyptian company
with activities in furniture manufacturing.
Eng. Abdel Moneim served as the
Commercial Manager of Mobica from 1989
until 1994. Eng. Abdel Moneim was born
in 1967, is an Egyptian citizen and holds a
Bachelor of Science degree in Engineering
from Cairo University.
7 Tarek Hatem
Non-executive Director
Dr. Tarek Hatem is currently a professor of
strategic management, international business
and entrepreneurship at the American
University in Cairo. Dr. Hatem is a Certified
Management Consultant from the Institute
of Management Consultancy in the UK
and is the Chairman of the Management
Consultants Association in Egypt. Dr. Hatem
is also a member of the Research and Policy
Advisory Committee of the Ministry of
Foreign Trade and SME Policy Development
Project in Egypt, a member of the Executive
Committee of the Management Education
Division of the Academy of Management in
the USA, and a member of the Academy of
International Business in the USA.
Dr. Hatem was born in 1957, is an Egyptian
citizen and holds a Master of Arts degree
in Public Administration from the University
of Colorado and a PhD in Strategic
Management from the University
of Colorado.
Orascom Construction Industries Annual report 2006 37
Report of the Directors,
Corporate Governance and
Management’s discussion and analysis of financial
condition and results of operations
Orascom Construction Industries SAE is committed to
the principles of good corporate governance and has
adopted corporate governance guidelines in compliance
with applicable laws and stock exchange regulations. The
Board of Directors (“Board”) believes that good corporate
governance practices align the interests of management
and shareholders thereby maximizing the profitability and
long-term value of the company for shareholders.

38 Orascom Construction Industries Annual report 2006

Report of the Directors
The Directors of Orascom Construction Industries (OCI) present their
annual report, together with the audited consolidated financial
statements for the year ended 31 December 2006.
Principal activities and business review
OCI is a leading cement producer and construction contractor
active in emerging markets. As a cement producer, OCI owns and
operates cement plants in Egypt, Algeria, Turkey, Pakistan, northern
Iraq and Spain which have a combined annual production capacity
of 21 million tonnes. As a contractor, OCI provides engineering,
procurement and construction services on industrial, commercial
and infrastructure projects for private and public customers.
The Company also invests in natural gas-based industries and
infrastructure concessions.
OCI shares are listed on the Cairo & Alexandria Stock Exchange and
on the London Stock Exchange through a Global Depository Receipts
Program.
A review of the businesses, financial performance and future outlook
of the Company is contained in the Letter to Shareholders by the
Chairman and the Chief Executive Officer, and in Management’s
Discussion and Analysis on pages 43-48.
Analyses of revenue, results and net assets by business segment
and geographical location are given in note 4 to the consolidated
financial statements on page 66.
Profits and dividends
The consolidated income statement is shown on page 53. The net
income was LE 2,670.7 million (2005, LE 1,700.2 million).
In August 2006, the Company paid dividends totaling LE 404.1
million (LE 1.89 per share) based on 2005 results. The Board of
Directors proposed payment of a dividend for 2006 amounting to LE
1,111.0 million (LE 5.50 per share).
The dividend policy of the Company is to distribute profits, after
deducting the legal reserve and legally mandated employees share, in
accordance with the following criteria:
• There should be a dividend distribution every year, and periodical
dividends may be considered.
• There should be sufficient earnings to be retained for future
operating purposes.
• There should be sufficient cash to discharge liabilities before
dividend payments.
Corporate governance
The Company endeavors to conduct its affairs in accordance with
good corporate governance practices. A summary of the Company’s
corporate governance guidelines and practices is shown on pages
40-42.
Directors
The Directors of the Company who served during 2006 are shown on
page 91. Messrs Alaa Saba, Tarek Hatem, Mohamed Abdel Moneim
were elected as non-Executive Directors on 29 April 2003. These
Directors will hold office until the Annual General Meeting at which,
being eligible, they offer themselves for re-election. Biographical
details for each director are given on page 36-37.
Employees
In respect of the parent Company itself, the number of permanent
employees as of 31 December 2006 was 9,000. The Company aims
to attract highly qualified personnel with specific expertise and to
retain and reward employees with proven skills and performance. In
support of its commitment to quality and equality in employment,
the Company continues to develop and implement a comprehensive
compensation and benefits system based on equal pay for equal
work. In addition to the basic competitive pay scheme, the Company
has the following employee benefits:
• A training and development program. In addition to the on-the-job
training, the cost of the structured portion of the training program
amounted to LE 1.6 million in 2006.
• A medical insurance plan. All employees inside Egypt are covered
by medical insurance. The Company contributes 75% and the
employee contributes 25%. The employees’ monthly contribution
is calculated according to their grades and gender. The medical
insurance cost in 2006 amounted to LE 0.4 million.
• Social insurance government-sponsored program. In 2006, the
Company’s share of the cost was LE 1.7 million.
• Life insurance scheme. All permanent employees under 65 are
provided with life insurance protection against financial loss
resulting from death or disability. The coverage is calculated as 36
times the gross salary in case of normal death, and 72 times the
gross salary in case of accidental death or total disability. In 2006,
the cost to the Company amounted to LE 0.3 million.
• Profit sharing scheme. Employees are entitled to a share of the
Company’s profit in accordance with legislation. The profit share in
2006, based on 2005 profits, amounted to LE 44.9 million.
• Share-based incentive program. The OCI stock option plan
provides key employees of the Company and its subsidiaries with
incentive for continuity and high performance. The cost to the
Company up to 31 December 2006 amounted to LE 55.4 million.
Shareholders
The shareholding structure of the Company as at 31 December 2006
was: Sawiris family 60% and public ownership 40%.
The Company is authorized to issue shares of up to 1% of the issued
and paid in capital to implement its employee share-based incentive
program. Information on this program is shown in note 26 to the
consolidated financial statements on page 79.
Charitable donations
Payments for charitable purposes made by the Company during
the year ended 31 December 2006 amounted to LE 7.8 million
(2005, LE 1.6 million). The primary beneficiaries of these charitable
donations were public sector institutions and qualified non-
governmental organizations for social development projects.
Annual General Meeting
The Annual General Meeting will be held at noon on Sunday, 6 May
2007 at Nile City Towers, 2005A Corniche El Nil, Cairo, Egypt.
Auditor
A resolution to reappoint KPMG (Hazem Hassan) as auditor and
to authorize the Directors to determine their remuneration will be
proposed at the Annual General Meeting.
Approved by the Board
Adel Bishai, Corporate Governance Director
April 2007
Orascom Construction Industries Annual report 2006 39
Corporate governance
Orascom Construction Industries SAE is committed to the principles
of good corporate governance and has adopted corporate
governance guidelines in compliance with applicable laws and stock
exchange regulations. The Board of Directors (“Board”) believes
that good corporate governance practices align the interests of
management and shareholders thereby maximizing the profitability
and long-term value of the company for shareholders.
The Company is subject to the disclosure rules and the new listing
rules set by the Cairo and Alexandria Stock Exchanges (“CASE”)
and approved by the Egyptian Capital Markets Authority on 18 June
2002. The Company has been in compliance with the corporate
governance, financial reporting and disclosure provisions of the CASE
listing rules throughout the year ended 31 December 2006. The US
Securities and Exchange Commission (“SEC”) approved CASE as
“designated offshore securities markets” within the meaning of rule
902(b) under Regulation S of the US Securities Act of 1933 on 16
April 2003.
The Global Depositary Receipts of the Company are listed on the
London Stock Exchange (“LSE”) and the Company is therefore
subject to the rules of the LSE as well as the rules of the United
Kingdom Listing Authority (“UKLA”) and the Financial Services
Authority (“FSA”). The Company has been in compliance with its
continuing obligations under the UKLA Listing Rules throughout the
year ended 31 December 2006.
In July 2003, the revised Combined Code on Corporate Governance
(“Combined Code”) was issued and the FSA and the UKLA have
determined that the revised Combined Code will apply for reporting
years beginning on or after 1 November 2003. UKLA listing rules
require that companies incorporated in the United Kingdom
include in their annual report and accounts an additional disclosure
statement in relation to how the company applies the principles in
Section 1 of the Combined Code and an explanation of any non-
compliance. As an overseas company with a secondary listing by
the UKLA, the Company is not required to present this additional
disclosure statement.
The shares and global depositary receipts of the Company are not
registered under the US Securities Act of 1933 and the Company is
not subject to US securities laws or the rules and listing standards of
the SEC or the New York Stock Exchange (“NYSE”). In July 2002, the
US Government passed the Sarbanes-Oxley Act which has introduced
a number of changes to the corporate governance, disclosure and
reporting requirements of US domestic and non-US registered issuers.
The Sarbanes-Oxley Act codifies the view that company management
should be aware of material information that is filed with regulatory
authorities and released to investors, and should be held accountable
for the fairness, thoroughness and accuracy of that information. In
November 2003, the NYSE issued new corporate governance rules
for listed companies which were approved by the SEC. The corporate
governance rules issued by the NYSE allow certain exemptions for
foreign private issuers and controlled companies. The Company is not
required to comply with the provisions of the Sarbanes-Oxley Act or
the NYSE corporate governance rules.
40 Orascom Construction Industries Annual report 2006
The Board continues to monitor developments in corporate
governance and the actions taken by regulators worldwide to
improve financial reporting and disclosure. The Board has reviewed
the recent changes in applicable securities laws and stock exchange
regulations and has concluded that the Company is in compliance
with all those provisions which are currently in force. In addition,
the Board has chosen to make the following voluntary disclosure to
assist shareholders in their evaluation of the corporate governance
practices of the Company.
Board of Directors
At the Annual General Meeting held on 29 April 2003, shareholders
approved the appointment of four new directors and accepted the
resignation of two existing directors. Naguib Sawiris and Samih
Sawiris resigned as non-executive directors. Karim Camel-Toueg,
President of Contrack International, was appointed as an executive
director, and Alaa Saba, Tarek Hatem and Mohamed Abdel Moneim
were appointed as non-executive directors. The Board consists of
nine directors. Three of the directors are non-executive.
The Board maintains an orientation program for new directors. New
directors attend an orientation program which includes briefings by
senior management to familiarize them with the Company’s strategic
plans, financial statements and key policies and practices. The Board
maintains a continuing education program for all directors to assist
them in carrying out their duties and responsibilities.
The Board has reviewed the status of all the non-executive directors
and has determined that they are to be regarded as independent.
The Board has adopted a definition of “independent” which
complies with the provisions set out in the Combined Code and
Section 303A.02 of the NYSE listing rules. The process and criteria
used by the Board to determine the independence of each director
is detailed in the Corporate Governance Guidelines of the Company.
The non-executive directors are encouraged to meet privately in
regular executive sessions without management participation during
the year. The non-executive directors have elected Alaa Saba to
serve as the senior independent director and lead non-management
director.
The Board met six times during the year. The Board has a formal
schedule of matters reserved to them for decision which includes
approval of the long-term strategic objectives and business plans
of management, major corporate transactions including significant
capital allocations and expenditures, and compensation of the chief
executive officer and executive officers of Company. Most board
meetings during the year were attended by the full board. The
directors were given appropriate documentation in advance of each
board meeting. All directors have had access to the services of the
company secretary and have been empowered to seek independent
professional advice at the Company’s expense.
Corporate governance
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines
(“Guidelines”) to provide a framework for the effective governance
of the Company in an effort to enhance long-term shareholder
value. The Guidelines address several key governance issues and
principles including board responsibilities, director qualifications,
director responsibilities, board structure and operations, board
committees, executive sessions, access to management and
independent advisors, director compensation, director orientation
and continuing education, management evaluation and succession,
board performance evaluation, and relations with shareholders. The
Guidelines are publicly available from the Company’s website www.
orascomci.com and a copy may be requested by shareholders from
the Company’s investor relations officers. The Board believes the
Guidelines adopted generally comply with the provisions set out in
the Combined Code and Section 303A of the NYSE listing rules.
Board Committees
The Board has established three committees to assist it in discharging
its oversight responsibilities: Audit, Compensation, and Nominating
and Corporate Governance. The purpose and responsibilities of each
committee are described in their respective charters. Members of the
committees meet the independence and experience requirements
to the extent required under applicable securities laws and stock
exchange regulations. Committee members have access to the
services of the company secretary and have been empowered to seek
independent professional advice at the Company’s expense.
The Audit Committee consists of three independent non-executive
directors and is chaired by Alaa Saba. The Board has determined
that Alaa Saba has recent and relevant financial experience and
shall be regarded as the audit committee financial expert. The Audit
Committee met five times during the year. The primary purpose
of the Audit Committee is to (a) to assist the Board in its oversight
of (i) the integrity of the Company’s financial statements, (ii) the
Company’s compliance with legal and regulatory requirements, (iii)
the independent auditor’s qualifications and independence, and
(iv) the performance of the Company’s internal audit function and
independent auditors, and (b) to prepare and publish an annual
Committee report and such other reports to the extent required
under any applicable securities laws and stock exchange regulations.
The role and responsibilities of the Audit Committee are set out
in written terms of reference, the Audit Committee Charter, and
includes the appointment, compensation and retention of the
independent auditor, review of the Company’s interim and annual
financial statements with management and the independent auditor,
and review of the Company’s internal control and risk management
systems.
The Compensation Committee consists of three directors and is
chaired by Onsi Sawiris. The Compensation Committee met three
times during the year. The primary purpose of the Compensation
Committee is (a) to assist the Board in its oversight of all matters
relating to director and executive officer compensation and (b) to
prepare and publish an annual Committee report on director and
executive compensation and such other reports to the extent required
under any applicable securities laws and stock exchange regulations.
The role and responsibilities of the Compensation Committee are
set out in written terms of reference, the Compensation Committee
Charter, and includes the review, evaluation and approval of director
and executive officer compensation, incentive-compensation plans
and equity-based plans. In determining the compensation of the
directors and executive officers of the Company, the Compensation
Committee considers the Company’s performance and relative
shareholder return, the compensation level of directors and executive
officers at comparable companies, and the compensation of the
directors and executive officers in past years. No director is solely
involved in deciding their own compensation. Executive officers do
not receive additional compensation for their service as an executive
director. Non-executive directors receive an annual stipend and may
participate in the share-based incentive program of the Company.
The Nominating and Corporate Governance Committee consists of
three directors and is chaired by Onsi Sawiris. The Nominating and
Corporate Governance Committee met three times during the year.
The primary purpose of the Nominating and Corporate Governance
Committee is to assist the Board in (a) identifying individuals qualified
to become Board members and recommending to the Board the
director nominees for the next annual meeting of shareholders, (b)
recommending to the Board director nominees for each committee
of the Board, (c) developing and recommending to the Board a set
of corporate governance guidelines applicable to the Company, (d)
overseeing the evaluation of the Board and management, and (e)
preparing and publishing an annual Committee report on corporate
governance and such other reports to the extent required under any
applicable securities laws and stock exchange regulations. The role
and responsibilities of the Nominating and Corporate Governance
Committee are set out in written terms of reference, the Nominating
and Corporate Governance Committee Charter, and includes
determining on an annual basis the independence of each director
as may be required under any applicable securities laws and stock
exchange regulations, the compliance of each director and executive
officer with the Company’s code of business conduct and ethics, and
such other activities as the Board may assign to the committee from
time to time.
Internal Control and Risk Management
The Board confirms that there is an ongoing process for identifying,
evaluating and managing the significant risks faced by the Company,
that the process has been in place for the year under review and
up to the date of approval of the annual report and accounts, that
the process is regularly reviewed by the Board and accords with the
Turnbell Guidance on internal control contained in the Combined
Code.
The Company maintains a sound system of internal controls and
risk management which is embedded in its operations, is capable
of responding quickly to evolving risks to the business arising
from factors with the company and to changes in the business
environment, and includes procedures for reporting immediately to
appropriate levels of management any significant control weaknesses
that are identified together with corrective action being undertaken.
The Company’s system is designed to manage rather than eliminate
the risk of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement
or loss.
Orascom Construction Industries Annual report 2006 41
Corporate governance continued
The business of the Company is conducted by its employees,
managers and executive officers, under the direction of the Chief
Executive Officer and the oversight of the Board, to enhance the
long-term value of the Company for its shareholders. The Board is
elected by shareholders to oversee and counsel management. The
Board acknowledges that it is responsible for the Company’s system
of internal controls and for reviewing its effectiveness to safeguard
shareholders’ investment and the Company’s assets.
The Audit Committee of the Board reviews the Company’s internal
control and risk management systems, monitors the effectiveness of
the Company’s internal audit function, identifies matters in respect
of which it considers that action or improvement is needed, and
makes recommendations to the Board as to the steps to be taken.
The Audit Committee relies on periodic reports from the Company’s
executive officers, senior financial managers, internal audit staff, and
external auditors to obtain reasonable assurance that appropriate
controls are in place and functioning effectively.
The Chief Executive Officer and Chief Financial Officer are responsible
for the day-to-day control of the Company’s operations and for
the design of internal control and risk management systems. These
executive officers are held responsible for the disclosure of all
significant deficiencies and materials weaknesses in the internal
control over financial reporting and any fraud, whether or not
material, which involves management to the Audit Committee and
external auditors. These executive officers also are held responsible
for the preparation and integrity of the Company’s published
financial statements which shall fairly present in all materials respects
the financial condition and results of operations of the Company.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics which
contains the policies that relate to the legal and ethical standards of
conduct that the directors, executive officers and employees of the
Company are expected to comply with while carrying out their duties
and responsibilities on behalf of the Company.
This Code is intended to focus the Board and management on areas
of ethical risk, provide guidance to personnel to help them recognize
and deal with ethical issues, provide mechanisms to report unethical
conduct, and help to foster a culture of honesty and accountability.
No code or policy can anticipate every situation that may arise. The
Company expects each director, executive officer and employee to
act with honesty and integrity, to exercise independent professional
judgement and to deter wrongdoing in the conduct of all duties and
responsibilities on behalf of the Company.
42 Orascom Construction Industries Annual report 2006
Relations with Shareholders
The Board believes that communication with shareholders,
institutional investors, the financial community, the media, and
other third parties is best handled by the Chief Executive Officer
and designated management representatives of the Company. The
Company operates a structured program of investor relations, based
on formal announcements and publications relating to significant
events and financial results, in compliance with applicable securities
laws and stock exchange regulations. To ensure fair disclosure to all
stakeholders at the same time, the Company refrains from disclosing
any information specifically designated to financial analysts, financial
institutions or other parties before disclosing the information to the
market as a whole. Directors, executive officers and employees are
required to maintain the confidentiality of information entrusted to
them by the Company or its customers, except when disclosure is
authorized or legally mandated.
The Company has appointed Hassan Badrawi as its main Investor
Relations Officer whose responsibility is to provide information
and answer queries of stock exchange officials, shareholders and
institutional investors. Information about the Company including
interim and full year financial results and other major announcements
is also published on the Company’s website www.orascomci.com.
The Chairman of the Board, Chief Executive Officer, senior
independent director and other authorized directors and investor
relations personnel do maintain a dialogue with representatives of
institutional and other shareholders regarding long-term business
strategies, financial performance and corporate governance in order
to establish a mutual understanding of objectives. The annual general
meeting also provides an opportunity for individual shareholders
to meet and communicate with the Board to develop a better
understanding of the Company’s operations and prospects. All
directors are expected to attend the annual general meeting absent
exceptional cause. Shareholders who wish to communicate with
the Board may correspond in writing with the senior independent
director at the principal office of the Company. The senior
independent director will notify the Board or the chairperson of the
relevant committee of the Board regarding those matters that are
appropriate for further action or discussion.
Going Concern
After making enquires, the Directors have formed a judgment,
at the time of approving the accounts, that there is a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. For this reason, the
Directors continue to adopt the going concern basis in preparing the
accounts.
Management’s discussion and analysis of
financial condition and results of operations
The following discussion and analysis should be read in
conjunction with the audited consolidated financial statements of
Orascom Construction Industries S.A.E (OCI) for the years ended
31 December 2006, 2005 and 2004. These consolidated financial
statements have been prepared in accordance with Egyptian
Accounting Standards (EAS), which are not materially different
from International Financial Reporting Standards (IFRS), except as
indicated.
Overview
Orascom Construction Industries (OCI) ranks among Egypt’s largest
private-sector businesses and its primary segments of operations
are cement and construction. International operations have grown
significantly in recent years as both cement and construction activities
expanded into Africa, Asia and Europe.
The Company generates revenue primarily from the sale of cement
and construction services. The primary expenses of the Company
include direct materials used in construction, raw materials, power
and fuel consumed in cement production, and labor costs. The major
factors which have had, and are expected to continue to have, a
significant impact on the results of operations and financial condition
of the Company are:
• The quantities of cement produced and sold, and the local and
international cement prices,
• the demand for construction services on large commercial,
industrial and infrastructure projects in the geographical markets
served,
• foreign currency exchange rates, and
• the amount of taxes payable.
The expansion of the Cement Group continues to have important
implications for the operations of the Company. During 2006,
the investment by the Cement Group in the cement industry in
Turkey and the ready mix and aggregate industry in Spain, and the
expansion of production capacity in Algeria, are expected to have
a positive impact on future operations. Furthermore, the Cement
Group completed rehabilitation and began operating the Tasluja
cement plant in northern Iraq, and continued the construction of
new cement plans in northern Iraq, Pakistan and Nigeria. These
locations are in countries that are affected by civil strife, political
instability and volatile economies which could have a materially
adverse effect on the Company’s financial condition, results of
operations and business.
Cement is essentially a commodity product with variable market
prices affected by local changes in consumption and production
levels as well as the degree of competitive rivalry among producers.
Since the Company has and expects to continue to derive a
substantial portion of its revenues and earnings from the sale of
cement, higher market prices will significantly improve the financial
performance of the Company.
Demand for construction services on large projects is affected by
changes in the general state of economic activity, foreign direct
investment flows, foreign aid flows and government investment
incentives. The timing of awards of major construction projects can
result in significant fluctuations in the Company’s revenues and
earnings between periods.
During 2006, the Construction Group had significant growth in the
number and total value of projects undertaken solely by the Group
or with other partners in the form of joint ventures. The backlog
continues to grow, especially in the Middle East.
A substantial proportion of the Company’s consolidated revenue,
operating expenses and long term debt is denominated in foreign
currencies. Significant decreases in the exchange rate of the Egyptian
Pound against other currencies therefore can have a materially
positive effect on the reported and actual financial performance of
the Company. The Company manages its foreign exchange cash
flow risk on a consolidated basis by matching its foreign currency-
denominated liabilities with continuing sources of foreign currencies.
The Company’s taxable income in Egypt has been substantially
altered in 2005 with the introduction of a new tax law. The new
tax rate is 20% instead of 40%, and higher allowable depreciation
rates will allow the Company to defer taxes. However, the Company
is no longer entitled to receive the following tax benefits: (1) a tax
deduction equivalent to the average discount rate of the Central
Bank of Egypt (CBE) in a given year multiplied by its paid-in capital.
(2) deductions from taxable income of 90% of interest income on
Egyptian Pound deposits, and 90% of investment income received
from a taxable entity. Nevertheless, substantially all of the Company’s
subsidiaries in Egypt continue to receive a tax holiday ranging from
five to ten years, most notably the ten-year tax holiday received by
ECC.
Principal Accounting Policies
Revenue Recognition
Revenue from construction contracts is recognized in the statement
of income under the percentage of completion method of
accounting. In applying the percentage of completion method,
the Company does not recognize the value of contract change
orders until these have been formally agreed to in writing with the
customer, even if the actual work requested is commenced prior to
the execution of such written change order.
Revenues from non-construction activities are recorded using the
accrual basis of accounting.
Construction Costs
Construction project costs include all direct material, equipment,
labor, subcontract and indirect costs related to contract performance,
such as indirect labor, maintenance, and applicable administrative
costs. Materials, labor and equipment provided by subcontractors or
joint ventures are included in revenues and costs when management
believes that the Company is responsible for the ultimate
acceptability of the project.
Changes in job performance, conditions, estimated profitability
and final contract settlements may result in revisions to costs and
revenue and are recognized in the period in which the facts requiring
such revisions become known. Provisions for estimated losses on
incomplete contracts are made in the period in which such losses are
determined. Claims for additional contract revenue are recognized
when realization is assured and the amount can reasonably be
determined. Costs and estimated earnings in excess of billings
on incomplete contracts are presented as construction projects in
progress in the consolidated balance sheet.
Construction Joint Ventures
Construction projects, which are performed by joint ventures, are
accounted for under the proportionate consolidation method. Under
this method, the Company’s separate financial statements include
the Company’s pro rata interest in the assets, liabilities, revenues and
expenses of joint ventures through consolidation of these items on
an item-by-item basis in the financial statements of the Company.
Agreements concluded between the Company and the other partner
Orascom Construction Industries Annual report 2006 43
Management’s discussion and analysis of
financial condition and results of operations continued
in every joint venture stipulate that each party should be jointly
responsible for the activities of that venture.
Acquisition of Subsidiaries
The Company accounts for its investments in subsidiaries and
associated companies in accordance with the purchase method of
accounting.
Elimination of Profit on Intra-group Construction
The Company and its subsidiaries provide construction services for
other subsidiaries within the Group. In accordance with EAS and
IFRS, the unrealized profit in constructing the fixed assets of the
subsidiaries is deducted from income and from gross fixed assets
upon consolidation in the financial statements of the Company. The
cumulative profit deduction is added back to income in the form of a
reduction in depreciation expense over the useful life of these assets
as determined by their depreciation rates.
Impact of Inflation and Interest Rate Fluctuations
During the years under review, the consolidated results of operations
and financial position of the Company have not been materially
affected by inflation or interest rate fluctuations.
Seasonality
The Cement Groups’ activity levels are driven by seasonal demand
fluctuations in the general construction and residential housing
sectors. Normally, the Groups’ sales are higher in the second and
third quarter of each year.
The Construction Group’s activities consist principally of major
construction projects, which are not generally affected by seasonal
demand fluctuations. In addition, because of the generally warm and
dry climate in the areas of operations, the Group’s activity levels are
not significantly affected by weather conditions.
Differences Between EAS and IFRS
“EAS 20” requires that, with some exceptions, all leases should
be accounted for as operating leases, and therefore annual lease
payments by the lessee are charged to the income statement as rent
expense. “IFRS 17” requires that leases which transfer substantially
the benefits and risks of ownership related to the leased properties
from the lessor to the lessee should be accounted for as finance
leases and therefore recorded as assets of the lessee, with the lease
obligations included as a liability in the balance sheet. The Company’s
cement subsidiaries apply IFRS 17 instead of EAS 20, the impact on
results, however, is immaterial.
Another difference between EAS and IFRS relates to accounting
for employees share of profits. Egyptian law requires that 10% of
distributable profits are set aside for distribution to the employees,
with a maximum of one year’s total salaries. While EAS treats this as
a charge to equity, IFRS requires that such employee benefits are to
be expensed as charges in the income statement.
44 Orascom Construction Industries Annual report 2006
Accounting for New Investments
A summary of the investment in controlled and jointly-controlled
companies is presented in note 15 to the consolidated financial
statements.
(a) The investment in 50% of Group GLA in Spain in October
2006, at a cost of Euro 99.8 million (LE 725.9 million), resulted
in recording goodwill in the amount of Euro 21.0 million (LE
131.4 million). The consolidated balance sheet includes a 50%
proportionate consolidation of the assets and liabilities of Group
GLA as of 31 December 2006.
(b) The investment in OCI Cimento (Turkey) on 26 January 2006, at a
cost of US$ 54.6 million (LE 313.6 million), resulted in recording a
goodwill of US$ 22.3 million (LE 118.2 million).
(c) The investment in 60% of United Cement (Iraq) in 2006, which
owns and operates a cement plant in Tasluja in Northern Iraq, at
a cost of US$ 63.8 million (LE 366.3 million), resulted in recording
a goodwill of US$ 16.3 million (LE 93.5 million).
(d) The investment in Egypt Sack Company in January 2006, at a
cost of acquisition was LE 43.0 million, resulted in recording
goodwill of LE 17.3 million. The consolidated financial statements
include the full consolidation of the assets and liabilities as of 31
December 2006 of ESC.
(e) The investment in 62.752% of Pakistan Cement Company in
September 2005, at a cost of US$ 49.0 million (LE 284.6 million),
resulted in recording a negative goodwill of US$ 27.5 million (LE
159.5 million), which has been credited to year 2005 income. The
consolidated financial statements include the full consolidation of
the assets and liabilities as of 31 December 2006 of PCC.
(f) The investment in Algerian Bags Company (formerly Mehsas
National Bags Company) in December 2006, at a cost of LE 38.7
million, resulted in recording goodwill of LE 18.4 million. The
consolidated financial statements include the full consolidation of
the assets and liabilities as of 31 December 2006 of ABC.
(g) The investment in 50% of the Belgian construction company
Besix Group in July 2004, at cost of Euro 68.4 million (LE 519.7
million), resulted in a negative goodwill of Euro 29.2 million
(equivalent to LE 222.0 million), which has been credited to
income statement in the years 2004 and 2005. The consolidated
balance sheet includes a 50% proportionate consolidation of
the assets and liabilities of Besix Group, and their revenues and
expenses for each year.
(h) Corporation in Egyptian Basic Industries Corporation in 2005,
through the jointly–controlled corporation (Middle East
Petrochemical Corporation (MEPCO) on a 50/50 basis, amounted
to US$ 64.1 million (LE 366.7 million). The consolidated financial
statements include the proportionate consolidation of the assets,
liabilities and expenses of EBIC.
(i) The investment in 50% in Emirates Cement Company in 2005
amounted to US$ 64.7 million (LE 372.2 million). The consolidated
financial statements include the proportionate consolidation of
the assets, liabilities and expenses of EMCC.
Years Ended 31 December 2006 and 2005
Revenue
In 2006, the consolidated operating revenue increased by 44.9% to
LE 16,475.2 million, as compared to LE 11,366.6 million in 2005.
Year ended Year ended
31 Dec 2006 31 Dec 2005 2006 vs.
LE millions % LE millions % 2005(%)
Revenue
Construction 12,426.3 75.4% 8,554.0 75.3% 45.3%
Cement 4,048.9 24.6% 2,812.6 24.7% 44.0%
Total 16,475.2 100% 11,366.6 100% 44.9%
Revenue from the Construction Group increased by 45.3% to LE
12,426.3 million in 2006, as compared to LE 8,554.0 million in 2005.
This growth in revenue is attributable to the increased revenue in
Egypt, but more importantly due to the expansion of international
activities by Besix Group, Contrack International, OCI Algeria, OCI
Nigeria and Cementech. Revenue during the year was primarily from
the following major contracts: construction projects in Egypt, ACC
cement plants, Contrack projects in Afghanistan and the Gulf area,
Cementech projects in Algeria, Pakistan and Northern Iraq, and
Besix projects in Europe, Gulf area and Africa. In 2006, OCI itself
contributed LE 2,297.5 million to total consolidated revenue, as
compared to LE 1,691.8 million in 2005, representing 18.5% of the
Group’s revenue as compared to 19.8% in 2005.
Revenue from the Cement Group increased by 44.0% to LE 4,048.9
million in 2006, as compared to LE 2,812.6 million in 2005. This
increase was attributable to sales growth at ECC to LE 2,459.0
million (60.7%), reflecting the result of higher prices and export
sales, and growth in cement sales at ACC to LE 1,541.7 million
(38.1%) reflecting the start of operations of line II and higher prices.
Gross Profit
In 2006, the Company’s consolidated gross profit increased by 67.5%
to LE 4,966.1 million, as compared to LE 2,965.3 million in 2005.
The gross profit percentage of revenue increased to 30.1% in 2006,
as compared to 26.1% in 2005, reflecting the type of construction
contracts undertaken during the year. Depreciation and amortization
expenses are a significant component of the cost of services and
goods sold. In 2006, depreciation and amortization expenses
increased by 51.2% to LE 662.0 million, as compared to LE 437.8
million in 2005.
Selling, General and Administrative Expenses
In 2006, the selling, general and administrative expenses, and
provisions for claims, increased by 59.7% to LE 1,149.5 million,
as compared to LE 719.7 million in 2005. The increase is due
primarily to the expansion of the Company internationally, especially
in Algeria, Asia and Europe. Selling, general and administrative
expenses as a percentage of revenue increased to 7.0% in 2006, as
compared to 6.3% in 2005.
Income from Operations
In 2006, the Company’s consolidated income from operations
increased by 70.0% to LE 3,816.6 million, as compared to LE 2,245.6
million in 2005. The Company’s operating margin increased to
23.2% in 2005, as compared to 19.8% in 2005.
Year ended Year ended
31 Dec 2006 31 Dec 2005 2006 vs.
LE millions % LE millions % 2005(%)
Income from
Operations
Construction 1,503.7 39.4% 702.8 31.3% 114.0%
-Operating margin 12.1% 8.2%
Cement 2,312.9 60.6% 1,542.8 68.7% 49.9%
-Operating margin 57.1% 54.9%
Total 3,816.6 100% 2,245.6 100% 70.0%
The income from operations of the Construction Group increased
by 114.0% to LE 1,503.7 million in 2006, as compared to LE 702.8
million in 2005. The operating margin increased to 12.1% for the
year, as compared to 8.2% during 2005. The increase was due
principally to the type of contracts executed during the year. In
2006, depreciation and amortization expenses increased to LE 341.5
million, as compared to LE204.5 million in 2005.
The income from operations of the Cement Group increased by
49.9% to LE 2,312.9 million in 2006, as compared to LE 1,542.8
million in 2005. The operating margin increased to 57.1% for
the year, as compared to 54.9% during 2004. This increase was
attributable principally to higher sales prices and volumes at ECC and
ACC on cement products sold during the year In 2006, depreciation
and amortization expenses increased to LE 320.5 million, as
compared to LE 233.2 million in 2005. The increase was attributable
principally to the start of depreciation on ACC’s line II.
Other Income and Expenses
The Company’s consolidated net other income and expenses consists
of income from investments, interest income, gain or loss on
foreign exchange, interest expense, eliminated profit on intra-group
construction, negative goodwill, and other income and expenses. In
2006, consolidated net other expense amounted to LE 266.6 million,
compared to net other income of LE 58.3 million. Income from
investments decreased to LE 86.7 million (2005, LE 122.3 million) due
to lower profits of companies accounted for by the equity method
and the revaluation to market value of the investment in Baticim
in Turkey. Interest income increased by 71.6% to LE 106.4 million
(2005, LE 62.0 million). Interest expense increased by 44.6% to LE
567.1 million (2005, LE 392.3 million). In 2005, the excess of the
fair values over the cost of acquisitions of 50% of Besix Group and
62.75% of Pakistan Cement Company resulted in negative goodwill,
which was credited to income in the amount of LE 313.0 million in
2005. In 2006, the gain on foreign currency exchange amounted to
LE 210.1 million (2005, loss LE 73.1 million) primarily as a result of
stabilization of the Egyptian pound, the decline of the US dollar, and
the increase in the Euro, as these currencies constitute a significant
part of construction contract revenues. The exchange rates of LE 5.72
and LE 7.55 were used to value the monetary assets and liabilities
denominated in US dollars and Euro respectively as at 31 December
2006, as compared to LE 5.76 and LE 6.81 in 2005. In accordance
with EAS and IAS, deductions totaling LE 181.1 million have been
made from income for the year to eliminate profit from construction
services rendered to the cement companies by the construction
companies (2005, LE 29.3 million).
Orascom Construction Industries Annual report 2006 45
Management’s discussion and analysis of
financial condition and results of operations continued

Income Taxes Gross Profit

The Company’s consolidated income tax expense in 2006 amounted In 2005, the Company’s consolidated gross profit increased by 25.9%
to LE 136.4 million, as compared to LE114.4 million in 2005. These to LE 2,965.3 million, as compared to LE 2,354.9 million in 2004.
taxes, which include current and deferred liabilities, are attributable The gross profit percentage of revenue decreased to 26.1% in 2005,
primarily to the construction activities.The effective tax rate in 2006 as compared to 27.5% in 2004, reflecting the type of construction
was 3.8%, as compared to 5.0% in 2005. The low effective rates contracts undertaken during the year. Depreciation and amortization
are due primarily to the exemptions granted to the Company’s expenses are a significant component of the cost of services and
subsidiaries. goods sold. In 2005, depreciation and amortization expenses
increased by 12.6% to LE 437.8 million, as compared to LE 388.9
Minority Interests million in 2004.
In 2006, net income allocated to minority interests amounted to LE
742.9 million, as compared to LE 489.2 million in 2005. The minority Selling, General and Administrative Expenses
interest in profits of the subsidiaries is attributable principally to the In 2005, the selling, general and administrative expenses, and
financial performance of ECC. provisions for claims, increased by 37.7% to LE 719.7 million, as
compared to LE 522.7 million in 2004. The increase is due primarily
Net Income to the expansion of the Company internationally, especially in
As a result of the foregoing, the Company’s consolidated net Algeria, Asia and Europe. Selling, general and administrative
income increased by 57.1% to LE 2,670.7 million in 2006 (16.2% expenses as a percentage of revenue increased marginally to 6.3% in
of revenue), as compared to LE 1,700.2 million in 2005 (15.0% of 2005, as compared to 6.1% in 2004.
revenue).
Income from Operations
Years Ended 31 December 2005 and 2004 In 2005, the Company’s consolidated income from operations
increased by 22.6% to LE 2,245.6 million, as compared to LE 1,832.2
Revenue million in 2004. The Company’s operating margin decreased to
In 2005, the consolidated operating revenue increased by 32.9% to 19.8% in 2005, as compared to 21.4% in 2004.
LE 11,366.6 million, as compared to LE 8,555.8 million in 2004.
Year ended Year ended
Year ended Year ended 31 Dec 2005 31 Dec 2004 2005 vs.
31 Dec 2005 31 Dec 2004 2005 vs. LE millions % LE millions % 2004(%)
LE millions % LE millions % 2004(%)
Income from
Revenue Operations
Construction 8,554.0 75.3% 6,387.0 74.7% 33.9% Construction 702.8 31.3% 796.3 43.5% (11.7%)
Cement 2,812.6 24.7% 2,168.8 25.3% 29.7% -Operating margin 8.2% 12.5%
Cement 1,542.8 68.7% 1,035.9 56.5% 48.9%
Total 11,366.6 100% 8,555.8 100% 32.9% -Operating margin 54.9% 47.8%

Total 2,245.6 100% 1,832.2 100% 22.6%

Revenue from the Construction Group increased by 33.9% to LE
8,554.0 million in 2005, as compared to LE 6,387.0 million in 2004.
This growth in revenue is attributable to the increased revenue in
Egypt, but more importantly due to the expansion of international
activities by Besix Group, Contrack International, OCI Asia, OCI
Algeria, OCI Nigeria and Cementech. Revenue during the year was
primarily from the following major construction contracts: Eastern
Tobacco project, Nagaa Hammadi dam, SEGAS LNG project, ACC
cement plants, Contrack projects in Afghanistan and the Gulf area,
Cementech projects in Algeria, Pakistan and Northern Iraq, and
Besix projects in Europe, Gulf area and Africa. In 2005, OCI itself
contributed LE 1,691.8 million to total consolidated revenue, as
compared to LE 1,058.6 million in 2004, representing 19.8% of the
Group’s revenue as compared to 16.6% in 2004.
Revenue from the Cement Group increased by 29.7% to LE 2,812.6
million in 2005, as compared to LE 2,168.8 million in 2004. This
increase was attributable to sales growth at ECC to LE 2,034.3
million (26.5%), reflecting the result of higher prices and export
sales, and growth in cement sales at ACC to LE 854.6 million
(40.9%) reflecting the start of operations of line II.
The income from operations of the Construction Group decreased
by 11.7% to LE 702.8 million in 2005, as compared to LE 796.3
million in 2004. The operating margin decreased to 8.2% for the
year, as compared to 12.5% during 2004. The decrease was due
principally to the type of contracts executed during the year. In
2005, depreciation and amortization expenses increased to LE 204.5
million, as compared to LE167.7 million in 2004.
The income from operations of the Cement Group increased by
48.9% to LE 1,542.8 million in 2005, as compared to LE 1,035.9
million in 2004. The operating margin increased to 54.9% for
the year, as compared to 47.8% during 2004. This increase was
attributable principally to higher sales prices and volumes at ECC and
ACC on cement products sold during the year. In 2005, depreciation
and amortization expenses increased to LE 233.2 million, as
compared to LE 221.2 million in 2004. The increase was attributable
principally to the start of depreciation on ACC’s line II.

46 Orascom Construction Industries Annual report 2006

Other Income and Expenses Cash is used to meet operating obligations, investing activities,
The Company’s consolidated net other income and expenses consists payment of long and short-term debt, and for distribution of profit
of income from investments, interest income, gain or loss on to shareholders. The following table sets forth certain consolidated
foreign exchange, interest expense, eliminated profit on intra-group financial data concerning the liquidity and capital resources as at and
construction, negative goodwill, and other income and expenses. for the periods indicated.
In 2005, consolidated net other income was LE 58.3 million, as
compared to net other expenses of LE 250.9 million in 2004. Interest At and for the Year ended 31 December
income increased by 416.1% to LE 62.0 million (2004, LE 14.9 2006 2005 2004
million). Interest expense increased by 19.0% to LE 392.3 million LE millions LE millions LE millions
(2004, LE 329.6 million). Income from investments increased to
LE 127.8 million (2004, LE 19.7 million) due to higher profits of
Cash and Cash Equivalents
companies accounted for by the equity method and the revaluation
to market value of the investment in Baticim in Turkey. Beginning of year 2,168.3 1,576.4 917.4
End of year 2,738.1 2,168.3 1,576.4
The excess of the fair values over the cost of acquisitions of 50% of
Besix Group and 62.75% of Pakistan Cement Company resulted in Net increase 569.8 592.0 658.9
negative goodwill, which was credited to income in the amount of
LE 313.0 million in 2005 and LE 76.8 in 2004. The loss on foreign
Net Cash Provided by (Used in)
currency exchange increased to LE 73.1 million (2004, LE 1.5 million)
primarily as a result of stabilization of the Egyptian pound and Operating activities 3,831.0 2,034.2 1,092.3
decline of the US dollar and the Euro, as these currencies constitute Investing activities (7,917.5) (3,891.3) (1,634.4)
a significant part of construction contract revenues. The exchange Financing activities 4,656.2 2,449.1 1,201.0
rates of LE 5.76 and LE 6.81 were used to value the monetary assets
and liabilities denominated in US dollars and Euro respectively as at
31 December 2005, as compared to LE 6.06 and LE 8.22 in 2004. Net provided 569.8 592.0 658.9
In accordance with EAS and IAS, deductions totaling LE 29.3 million
have been made from income for the year to eliminate profit from
construction services rendered to the cement companies by the Cash provided by operating activities in 2006 was LE 3,831.0 million,
construction companies in Egypt and Algeria (2004, LE 59.7 million). as compared to LE 2,034.2 million in 2005 and LE 1,092.3 million in
2004. Cash provided by operating activities was principally generated
Provision for Income Taxes from income from operations and from increases in receivables,
The Company’s consolidated provision for income taxes in 2005 inventories and construction in progress, which were reduced by
amounted to LE 114.4 million, as compared to LE 77.2 million in increases in payables and in billings in excess of costs and estimated
2004. These taxes, which include current and deferred liabilities, profits on incomplete contracts.
are attributable primarily to the construction activities. The effective
tax rate in 2005 was 5.0%, as compared to 4.9% in 2004. The low Cash used in investing activities in 2006 was LE 7,917.5 million, as
effective rates are due primarily to the exemptions granted to the compared to LE 3,891.3 million in 2005 and LE 1,634.4 in 2004.
Company’s subsidiaries. Investing activity was attributable principally to the investment in
plants and equipment in Algeria, Northern Iraq, and Nigeria, and
Minority Interests the investment in the share capital of Pakistan Cement Company,
In 2005, net income allocated to minority interests amounted to Group GLA in Spain, Sudacem in Sudan, and Baticim Cimento in
LE 489.2 million, as compared to LE 402.8 million in 2004. The Turkey.
minority interest in profits of the subsidiaries is attributable principally
to the financial performance of ECC. Cash provided by financing activities in 2006 was LE 4,656.2 million,
as compared to LE 2,449.1 million in 2005 and LE 1,201.0 million
Net Income in 2004. Financing activity consisted principally of increased share
As a result of the foregoing, the Company’s consolidated net income capital and bank borrowings to finance the capital expenditures and
increased by 54.4% to LE 1,700.2 million in 2005 (15% of revenue), business acquisitions.
as compared to LE 1,101.3 million in 2004 (12.9% of revenue).
The long-term and short-term debt are disclosed in Note 19 to the
Financial Liquidity and Condition consolidated financial statements.
The Company and its subsidiaries have three principal sources of
short-term liquidity: (i) existing cash and cash equivalents which In June 2005, the credit rating of OCI was raised from A+ to AA-.
at 31 December 2006 totaled LE 2,738.1 million, as compared to
LE 2,168.3 million at 31 December 2004; (ii) cash generated by
operations; and (iii) short-term borrowings under credit facilities.

For long-term investments, the Group has access to long-term

financing from international financial institutions. The Company also
increased its share capital during 2006.

Orascom Construction Industries Annual report 2006 47

Management’s discussion and analysis of
financial condition and results of operations continued

Share Capital
The Shareholders approved the increase of the issued share capital by
issuing 11.4 million shares, which were allocated to the shareholders
of record on 16 February 2006, and the increase in the capital was
registered on 17 May 2006.
Dividends
The declaration or payment of dividends by OCI is dependant in
part on OCI’s financial condition, results of operations, prospects,
cash flow, capital requirements and reserves, the level of dividends
received from the subsidiaries, and the effect of any such dividend
on OCI’s tax position. In August 2006, the Company paid dividends
totaling LE 404.1 million (LE 1.89 per share) based on 2005 results.
The Board of Directors proposed payment of a dividend for 2006
amounting to LE 1,111.0 million (LE 5.50 per share).
Construction Backlog
The Company considers as “backlog” the revenues that the
Company expects to receive under contracts that have been awarded
and signed. Backlog consists of uncompleted portions of engineering
and construction contracts, including the Company’s proportionate
share of construction joint-venture contracts.
2006 2005
LE billions % LE billions % LE billions
Future Outlook
Management believes that the Company’s financial results for
the year ended 31 December 2006 continue to demonstrate the
OCI Group’s ability to achieve sustainable growth in a challenging
market environment. Management believes it is better placed than
most of its competitors to capitalize on growth opportunities in
the region and that it will continue to outperform its peers. By
continuing to forge strategic partnerships with industry leaders,
investing in modern technologies, and developing the Company’s
human resources, management believes the Company will be able
to maintain its competitive advantage in its core businesses and
continue to record positive financial results.
Cement market trends contributing to a positive outlook include:
• Favourable prices in Algeria with excellent consumption outlook.
• Stable prices in Egypt with steady growth in consumption.
• Continued double digit growth in Pakistan, potential over-supply
but rebounding prices.
• Replacement of imports in Northern Iraq with stable prices based
driven by high import parity.
• Double digit consumption growth in the UAE coupled with stable
prices.
2004
• Continued tight supply in emerging and international export
markets during 2007.
%

Factors contributing to positive Construction Group outlook include:

Egypt 1.3 10% 1.7 11% 1.4 13% • Rise in opportunities in infrastructure concessions in the region,
Middle East 5.7 45% 6.0 38% 3.7 34% especially in the Gulf area.
Africa 2.6 21% 3.6 23% 1.1 10% • Lack of contractor capacity in the region positively affecting
margins.
Europe 2.5 20% 2.4 15% 3.1 28%
• Robust macroeconomic growth across the region.
Asia 0.5 4% 4.0 13% 1.6 15%
• Governments are initiating infrastructure spending, specifically in
Saudi Arabia and Algeria.
Total 12.6 100% 15.7 100% 10.9 100%
• Continuing to encourage organic growth to tackle pressure on
human resources and construction equipment.
As at 31 December 2006, the Construction Group had unbilled work
in its consolidated backlog worth LE 12.6 billion. The Construction
Group added a record LE 15.2 billion in new work during the year
due in part to additional work added by OCI Algeria, Cementech
and the Besix Group. Construction work in backlog, which will be
undertaken outside of Egypt, reached 89% at the end of the year.
Industrial construction work represents 46% of total backlog at
year end, with commercial construction work representing 39%,
infrastructure work representing 10%, and government construction
work representing 5%.

48 Orascom Construction Industries Annual report 2006

Report of the Audit Committee
of the Board of Directors

The Audit Committee assists the Board in fulfilling its responsibilities

for general oversight of the integrity of the Company’s consolidated
financial statements, compliance with legal and regulatory
requirements, the independent auditors’ qualifications and
independence, the performance of the Company’s internal audit
function and independent auditors, and risk assessment and
management. The Audit Committee manages the Company’s
relationship with its independent auditors (who report directly to the
Audit Committee). The Audit Committee acts under a written charter
adopted and approved by the Board, and has authority to obtain
advice and assistance from outside legal, accounting or other advisors
as the Audit Committee deems necessary to carry out its duties.

The Company’s management has responsibility for preparing the

consolidated financial statements and financial reporting process,
including the system of internal control. The Company’s independent
auditors, KPMG (Hazem Hassan), are responsible for expressing an
opinion as to whether those financial statements present fairly, in
all material respects, the financial position, results of operations and
cash flows of the Company in accordance with Egyptian Accounting
Standards, which are not materially different from International
Financial Reporting Standards.

In this context, the Audit Committee hereby reports as follows:

1. The Audit Committee has reviewed and discussed the audited

consolidated financial statements for the year ended 31 December
2006 with the Company’s management.
2. The Audit Committee discussed with the independent auditors
the conduct of their audit in accordance with Egyptian Auditing
Standards, and compliance with legal and regulatory requirements.
3. The Audit Committee has received written confirmation of the
Independent Auditors’ independence.
4. Based on the review and discussions referred to above, the Audit
Committee recommended to the Board, and the Board has
approved, that the audited consolidated financial statements be
included in the 2006 Annual Report for filing with the Capital
Market Authority.

Audit Committee
Mr. Alaa Saba
Dr. Tarek Hatem
Mr. Mohamed Abdel Moneim

Orascom Construction Industries Annual report 2006 49

Auditor’s report,
consolidated financial statements
and notes to the accounts

50
50 Orascom Construction Industries Annual report 2006
Auditor’s report

To the Shareholders of
Orascom Construction Industries Company (OCI)
We have audited the accompanying consolidated Balance Sheets of
Orascom Construction Industries Company (OCI) as of 31 December
2006, and the related consolidated Statements of Income, Changes
in Shareholders’ Equity, and Cash Flows for the year then ended.
These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We
did not audit the financial statements of some of the company’s
subsidiaries, which statements reflect total assets amounted to
approximately L.E 11.2 billion and total revenues amounted to
approximately L.E 7.4 billion, of the related consolidated totals. Those
statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts
included for the said subsidiaries, is based solely on the reports of
those auditors.
In our opinion, based on our audit and the reports of the other
auditors, the consolidated financial statements referred to above
together with the notes attached thereto present fairly, in all material
respects, the consolidated financial position of Orascom Construction
Industries Company as of 31 December 2006 and the consolidated
results of its operations and its cash flows for the year then ended
in conformity with Egyptian accounting standards and comply with
applicable Egyptian laws and regulations.
Without qualifying our opinion, we draw attention to note No.
(17) of the notes to the financial statements, certain subsidiaries
of the company apply International Accounting Standard No. (17)
– Accounting for Capital Leases – to record their capital leases
transactions, which concluded during the years 2004, 2005 and
2006 for some fixed assets, instead of applying the Egyptian
Accounting Standard No. (20) to record such transactions.

We conducted our audit in accordance with Egyptian Auditing

Standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits and the reports
of the other auditors provide a reasonable basis for our opinion. KPMG Hazem Hassan Cairo, 15 April 2007

Orascom Construction Industries Annual report 2006 51

Directors’ statement in respect of
responsibility for financial reporting

The Directors are responsible for the preparation and integrity of the
annual report and the consolidated financial statements of Orascom
Construction Industries, in accordance with applicable law and
regulations.
Company law requires the Directors to prepare consolidated and
company financial statements for each year. The consolidated
financial statements and notes have been prepared in accordance
with Egyptian Accounting Standards, which are not materially
different from International Financial Reporting Standards. These
consolidated financial statements present fairly the financial position
and results of operations of the Group. As such, the consolidated
financial statements include certain amounts that are estimates based
upon currently available information and management’s judgment of
current conditions and circumstances. The Directors are responsible
also for the other information included in the annual and interim
reports and for their accuracy and consistency with the consolidated
financial statements.
The annual consolidated financial statements have been audited by
the independent accounting firm, KPMG (Hazem Hassan), which was
given unrestricted access to all financial records and recorded data,
including minutes of all the meetings of the Board of Directors and
committees of the Board.
The Audit Committee, which is composed of independent directors,
meets periodically with management, the internal auditors and the
independent auditors to review the manner in which these groups
are performing their responsibilities and to carry out the Audit
Committee’s oversight role with respect to auditing, internal controls
and financial reporting matters.
There are inherent limitations in the effectiveness of any system of
internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective
internal control system can provide only reasonable assurance
with respect to financial statement preparation. Furthermore, the
effectiveness of an internal control system may change over time.
Management assessed the Company’s internal control system
in relation to criteria for effective internal control over financial
statement preparation. Based upon that assessment, the Directors
believe that, as of 31 December 2006, the system of internal control
over financial statement preparation met those criteria.

The Company maintains a system of internal control over financial

reporting, which is intended to provide reasonable assurance to
the Company’s management and Board of Directors regarding the
preparation of the consolidated financial statements. The system
includes a documented organizational structure and division of
responsibility, established policies and procedures, and the careful
selection and development of staff. Internal auditors monitor the
operation of the internal control system and report findings and
recommendations to management and the Audit Committee of the
Board of Directors. Corrective actions are taken to control deficiencies
and other opportunities for improving the system as they are
identified.

52 Orascom Construction Industries Annual report 2006

Consolidated income statement
years ended 31 December

Notes 2006 2005 2004

LE’000 LE’000 LE’000

Revenue
Construction revenue 13,147,511 9,070,808 7,011,155
Cement revenue 4,948,099 3,295,247 2,254,847

18,095,610 12,366,055 9,266,002

Elimination of inter-company revenue (1,620,411) (999,461) (710,208)

Total revenue (4) 16,475,199 11,366,594 8,555,794

Cost
Construction cost 10,836,670 7,836,426 5,821,237
Cement cost 2,288,961 1,585,456 1,106,026

13,125,631 9,421,882 6,927,263

Elimination of inter-company cost (1,616,518) (1,020,566) (726,331)

Total Cost of Construction and Goods Sold 11,509,113 8,401,316 6,200,932

Gross profit 4,966,086 2,965,278 2,354,862

Expenses
Selling, general and administrative expenses 1,031,818 639,993 486,700
Provision for claims and doubtful debts 117,640 79,730 35,981

Income from operations 3,816,628 2,245,555 1,832,181

Other income (expenses)

Interest income 106,356 61,983 14,889
Foreign exchange gain (loss) 210,085 (73,089) (1,482)
Gain ( loss ) on sale of investments 13,762 (5,414) (117)
Income from investments 51,846 27,678 19,721
Net change in the market value of trading investments 21,050 100,082
Other income 72,991 20,366 28,139
Interest expense (567,080) (392,285) (329,583)
Gain on sale of property and equipment 5,475 35,279 507
Negative goodwill amortization 312,968 76,755
Unrealized profit on intra-group construction (181,126) (29,283) (59,720)

Net other income (expenses) (266,641) 58,285 (250,891)

Income before taxes and minority interest 3,549,987 2,303,840 1,581,290

Income taxes (25) (136,378) (114,443) (77,212)

Income before Minority Interest 3,413,609 2,189,397 1,504,078

Minority interest (742,891) (489,167) (402,790)

Net income 2,670,718 1,700,230 1,101,288

Earnings per share LE (29) 12.93 8.65 5.63

The accompanying notes form an integral part of the financial statements and are to be read therewith.

Orascom Construction Industries Annual report 2006 53

Consolidated balance sheet
as of 31 December

Notes 2006 2005 2004

LE’000 LE’000 LE’000

Assets
Current assets
Cash and cash equivalents (5) 2,738,067 2,168,316 1,576,363
Marketable securities (6) 473,139 841,064 10,315
Accounts receivable – customers current accounts (net) (7) 3,196,684 1,678,902 1,653,045
– customers retention (net) 589,343 375,172 364,133
– other (net) (8) 1,498,040 1,252,340 726,206
– due from affiliated companies (33.1) 23,114 98,591 62,525
Construction contracts in progress (9) 682,021 640,986 425,328
Inventories (10) 1,512,048 923,564 651,595
Property held for resale 295,884 203,844 197,044

Total current assets 11,008,340 8,182,779 5,666,554

Long-term assets
Long-term receivables 93,747 35,366 22,449
Deferred income taxes (12) 93,348 35,333 4,718
Investments available for sale 20,354 5,992 6,231
Investment in associated companies (13) 168,037 124,302 114,968
Payments for purchase of investments (14) 738,681 253,821
Other assets (net) (16) 948,529 165,431 20,422
Property, plant and equipment ( net) (18) 9,104,053 6,672,420 5,518,146
Assets under construction 6,441,241 2,134,916 1,177,638

Total long-term assets 17,607,990 9,427,581 6,864,572

Total assets 28,616,330 17,610,360 12,531,126

The accompanying notes form an integral part of the financial statements and are to be read therewith.

54 Orascom Construction Industries Annual report 2006

Consolidated balance sheet continued
years ended 31 December

Notes 2006 2005 2004

LE’000 LE’000 LE’000

Liabilities
Current liabilities
Bank overdraft and current portion of long-term loans (19) 2,987,693 1,343,855 982,983
Accounts payable – suppliers and sub-contractors 3,167,149 1,254,781 1,329,672
– creditors, accrued liabilities and provisions (20) 1,726,402 1,289,206 1,304,692
– advances from customers 931,070 790,539 482,300
– due to related parties (33.2) 21,954 18,970 15,428
Billings in excess of cost and estimated earnings on incomplete contracts (9) 886,344 479,487 232,025
Income taxes payable (25) 144,457 68,342 83,362

Total current liabilities 9,865,069 5,245,180 4,430,462

Long-term liabilities
Long-term loans (19) 6,261,949 5,705,589 3,274,010
Deferred income taxes (12) 337,913 123,916 58,792
Other long-term liabilities (21) 991,291 493,441 236,598

Total long-term liabilities 7,591,153 6,135,671 3,569,400

Total liabilities 17,456,222 11,380,851 7,999,862

Equity

Shareholders’ equity
Share capital (22) 1,009,979 952,875 952,875
Legal reserve (22) 504,989 56,186 47,084
Other reserves 1,804,271
Retained earnings 5,336,413 3,267,439 1,901,285
Cumulative translation adjustment 152,605 21,546 166,557
Treasury stock (24) (136,529) (33,822) (23,454)

Total shareholders’ equity 8,671,728 4,264,224 3,044,347

Minority interest in subsidiary companies 2,488,380 1,965,285 1,486,917

Total Equity 11,160,108 6,229,509 4,531,264

Total liabilities and equity 28,616,330 17,610,360 12,531,126

The accompanying notes form an integral part of the financial statements and are to be read therewith.

Chairman Chief Executive Officer Chief Financial Officer

Orascom Construction Industries Annual report 2006 55

Consolidated statement of changes in equity
years ended 31 December 2006

Notes Share Capital Legal Reserve

LE’000 LE’000

Balance at 31/12/2003 952,875 38,737

Net income for the year 2004
Transfer to legal reserve 8,347
Distribution of cash dividends
Employees’ share of profits 2003
Employees’ share of subsidiaries profit distribution
Minorities’ share of subsidiaries profit distribution
Transactions of treasury stock by OCI ESOP limited
Loss on translation of foreign companies

Balance at 31/12/2004 952,875 47,084

Net income for the year 2005
Transfer to legal reserve 9,102
Distribution of cash dividends
Employees’ share of profits 2004
Employees’ share of subsidiaries profit distribution
Minorities’ share of subsidiaries profit distribution
Adjustments to retained earnings - subsidiary acquision
Transactions of treasury stock by OCI ESOP limited
Loss on translation of foreign companies

Balance at 31/12/2005 952,875 56,186

Net income for the year 2006
Transfer to legal reserve (22) 25,707
Issue of share capital (22) 57,104 423,096
Hedge reserve
Distribution of cash dividends
Employees’ share of subsidiaries profit distribution
Minorities’ share of subsidiaries profit distribution
Employees’ share of profits 2005
Adjustments (23)
Transactions of treasury stock by OCI ESOP limited
Gain on translation of foreign companies

Balance at 31/12/2006 1,009,979 504,989

The accompanying notes form an integral part of the financial statements and are to be read therewith.

56 Orascom Construction Industries Annual report 2006

Other Reserve Retained Earnings Cumulative Adjustment Treasury Stock Total
on Translation of Foreign
Companies
LE’000 LE’000 LE’000 LE’000 LE’000

981,344 195,564 (10,291) 2,158,229

1,101,288 1,101,288
(8,347)
(142,931) (142,931)
(15,881) (15,881)
(26,919) (26,919)
11,576 11,576
1,155 (13,163) (12,008)
(29,007) (29,007)

1,901,285 166,557 (23,454) 3,044,347

1,700,230 1,700,230
(9,102)
(171,517) (171,517)
(19,058) (19,058)
(31,902) (31,902)
13,086 13,086
(115,583) (115,583)
(10,368) (10,368)
(145,011) (145,011)

3,267,439 21,546 (33,822) 4,264,224

2,670,718 2,670,718

1,815,388 2,295,588
( 11,117) (11,117)
(403,992) (403,992)
(57,676) (57,676)
24,358 24,358
(44,888) (44,888)
(93,839) (93,839)
(102,707) (102,707)
131,059 138,521

1,804,271 5,336,413 152,605 (136,529) 8,671,728

Orascom Construction Industries Annual report 2006 57

Consolidated cash flow statement
years ended 31 December

Notes 2006 2005 2004

LE’000 LE’000 LE’000

Cash Flows From Operating Activities

Net income for the year 2,670,718 1,700,230 1,101,288
Adjustments to reconcile net income to net cash provided by operating activities
Income tax expense 136,378 114,443 77,212
Depreciation and amortisation 624,805 432,377 388,901
Provisions for claims and impairment of debts 117,640 79,730 35,981
Loss (gain) on sale of investments (13,762) 5,414 117
Net change in the value of marktable securities (21,050) 100,082
Gain on sale of property and equipment (5,475) (35,279) (507)
Company share in associates results (51,846) (127,760) 8,399
Foreign exchange difference (106,537) 150,273 14,342
Minority interest 742,891 489,167 402,790
Negative goodwill amortization (312,968) (74,195)
Interest expense incurred 567,080 392,285 329,583
Interest income earned (106,356) (61,983) (57,925)

Income from operating activities before changes in working capital 4,554,486 2,931,408 2,225,986

Changes in Working Capital

Increase in accounts receivable (2,411,289) (719,417) (1,604,128)
Decrease (increase) in due from related parties 75,477 (36,066) (113,110)
Increase in inventories (588,484) (228,651) (167,463)
Increase in cost of construction in progress (41,035) (245,011) (236,071)
Increase in property held for resale (92,040) (6,800) (186,984)
Increase in accounts payable 2,276,674 363,238 1,560,140
Increase (decrease) in due to related parties 2,984 3,542 (17,587)
Increase in billings in excess of cost and estimated earnings 406,857 259,718 39,171
Interest expense paid (458,518) (349,455) (305,779)
Interest income collected 105,935 61,686 57,143

Net cash provided by operating activities 3,831,047 2,034,192 1,092,318

The accompanying notes form an integral part of the financial statements and are to be read therewith.

58 Orascom Construction Industries Annual report 2006

Consolidated cash flow statement continued
years ended 31 December

Notes 2006 2005 2004

LE’000 LE’000 LE’000

Cash Flows From Investing Activities

Payments for the purchase of property, equipment and assets under construction (7,467,577) (2,920,679) (1,615,562)
Payments for purchase of investments and securities, net of cash acquired (1,474,969) (1,143,488) (45,611)
Proceeds from sale of fixed assets 216,828 136,224 26,408
Proceeds from sale of long term investments 808,211 36,601 404

Net cash used in investing activities (7,917,507) (3,891,342) (1,634,361)

Cash Flows From Financing Activities

Increase in bank over draft and current portion of long-term loans 1,643,838 360,872 268,541
Increase in long-term loans 743,635 2,072,065 930,143
Increase in other long-term liabilities 479,850 198,051 157,240
Changes in treasury stock (102,707) (10,368) (12,008)
Proceeds from issued capital increase 2,295,587
Cash dividends to shareholders (403,992) (171,517) (142,931)

Net cash provided by financing activities 4,656,211 2,449,103 1,200,985

Net increase in cash and cash equivalents 569,751 591,953 658,942

Cash and cash equivalents at beginning of the year 2,168,316 1,576,363 917,421

Cash and Cash Equivalents at End of The Year 2,738,067 2,168,316 1,576,363

The accompanying notes form an integral part of the financial statements and are to be read therewith.

Orascom Construction Industries Annual report 2006 59

Notes to the consolidated financial statements
years ended 31 December

1 General
Orascom Construction Industries Company has been recorded in the commercial register as an Egyptian Joint Stock company on 30
March 1998. The company’s formation and its articles of association were published in the companies Gazette issue No.658 in April
1998.

The Company’s purpose is contracting, manufacturing, supply and installation of machinery, equipment, tools, materials and supplies
required for construction activities, the undertaking of infrastructure works and the engineering and technical consultation required for
projects being implemented by the Company as well as importing necessary equipment and instruments. The Company’s purpose also
includes the import and export activities, and leasing equipment.

Orascom Construction Industries Company – hereunder referred to as the “Company” or “OCI”-consolidated financial statements as
at and for the year ended 31 December 2006 comprise the Company and its subsidiaries (together referred to as the “Group”) and
the Group’s interest in associates and jointly controlled entities. The Group is involved primarily in the construction industry and the
manufacture and sale of cement.

OCI owns directly the following consolidated subsidiaries:

Subsidiary 31/12/2006 31/12/2005 31/12/2004

% of ownership % of ownership % of ownership

OCI International Cyprus (OCIIC)* 100.00 % 100.00 %

OCI Finance Limited (OCIF) 100.00 % 100.00 %
OCI International Netherland (OCIIBV) 100.00 %
Orascom Building Materials Holding Company (OBMH)** 99.9 % 99.9 % 99.9 %
Orascom Construction Industries Nigeria (OCIN) 99.9 % 99.9 %
Egypt Sack Company (ESC) 99.9 %
Orascom Construction Industries Algeria (OCIA) 99.4 % 99.4 % 99.4 %
Suez Industrial Development Company (SIDC) 60.5 % 60.5 % 59.0 %
Egyptian Cement Company (ECC)** 53.7 % 53.7 % 53.7 %
Egyptian Containers Handling Company (ECHCO) 50.0 % 50.0 % 50.0 %
OCI Besix 50.0 % 50.0 %

* During 2005, Contrack International Inc. (CII) was acquired (100 %) by OCIIC. Before 2005 OCI owned directly 45 % of CII.
** During 2004, ECC was owned indirectly by OBMH.

2 Basis of preparation
(a) Statement of compliance
The consolidated financial statements include the financial statements for all subsidiaries that are controlled by Orascom Construction
Industries Company (“the Group”). The financial statements of the parent and its subsidiaries are prepared in accordance with Egyptian
Accounting Standards and applicable Egyptian laws and regulations.
The financial statements were approved by the Board of Directors on 15 April 2007.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following:

• Derivative financial statements are measured at fair value

• Financial instruments at fair value through profit and loss are measured at fair value
• Available for sale financial assets are measured at fair value
• The methods used to measure fair values are discussed further in the notes below

60 Orascom Construction Industries Annual report 2006

 (c) Use of estimates and judgments

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect
reported amounts of assets and liabilities, income and expenses during the financial periods. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of
estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount
recognized in the financial statements are described in the following notes:

Note 9 - contract revenue

Note 12 - deferred tax
Note 15 - business combinations
Note 16 - intangible assets
Note 17 - accounting for an arrangement containing a lease
Note 20 - provisions
Note 26 - measurement of share-based payments
Note 30 - contingent liabilities
Note 32 - valuation of financial instruments

3 Significant accounting policies

3.1 Basis of consolidation

Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable
are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that
control commences until the date that control ceases.

Associates and joint ventures

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.
Joint ventures are those entities over whose activities the Group has joint control, established by the contractual agreement and
requiring unanimous consent for strategic financial and operating decisions. Associates are accounted for using the equity method.
Joint venture are accounted for using proportionate consolidation method The consolidated financial statements include the Group’s
share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of
the Group, from the date that the significant influence or joint control commences until the date that significant influence or control
ceases.

Transactions eliminated on consolidation

Intra-group balances, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the
investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains,
but only to the extent there is no evidence of impairment.

3.2 Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business
segment), or in providing products or services within a particular economic environment (geographical segment), which is subject
to risks and rewards that are different from those of other segments. The group primary format for segment reporting is based on
business segment.

3.3 Foreign currency

Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the average exchange
rates during the year. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at that date. Foreign currency differences arising on retranslation are recognized in profit or
loss.

Foreign operations
The assets and liabilities of foreign operations are translated to Egyptian pound at exchange rates at the reporting date, and the equity
accounts are translated at the historical exchange rates. The income and expenses of foreign operations are translated to Egyptian
pound at exchange rates at the dates of the transactions. Foreign currency differences are recognized directly in equity.

Orascom Construction Industries Annual report 2006 61

Notes to the consolidated financial statements continued

3 Significant accounting policies continued

3.4 Financial instruments

Non derivative financial instruments

Non derivative financial instruments comprise cash and cash equivalents, investments in equity, trade and other receivables, loans and
borrowings, and trade and other payables. These financial assets and liabilities are recognized in the balance sheet when the Group
becomes a party to the contractual provisions of the financial instruments.

Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through profit or loss, any
directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments
are measured as described below.

Derivative financial instruments

The Group holds derivative financial instruments to hedge foreign currency and interest rate risk exposure. Derivatives are recognized
initially at fair value, subsequent to initial recognition derivatives are measured at fair value, and changes in the hedging instruments
are recognized directly in equity to the extent that the hedge is effective.

Financial assets are derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group
transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset.

3.5 Cash and cash equivalents

Cash and cash equivalents comprise cash balances, balances of banks current accounts, and time deposits with banks. Bank overdrafts
that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash flows.

3.6 Investments at fair value through profit and loss

An instrument is classified at fair value through profit and loss if it is held for trading or is designated as such upon initial recognition.
Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase
and sale decisions based on their fair value. Upon initial recognition transaction costs are recognized in profit or loss when incurred.
Financial instruments fair values through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

3.7 Accounts receivable and other debit balances

Customer accounts receivable and other debit balances are recorded at their nominal value less appropriate allowances for estimated
irrecoverable amounts.

3.8 Construction contracts

Construction project costs include all direct costs, such as materials, supplies, equipment depreciation and labor, as well as indirect
costs such as indirect labor and maintenance. Construction project costs also include general and administrative expenses directly
related to these projects. Provisions for estimated losses on incomplete contracts are made in the period in which such losses are
determined. The excess of construction project costs and estimated profits over billings is recognized as construction contacts in
progress. Billings in excess of cost of estimated earnings on incomplete contracts are recognized as a current liability.

3.9 Inventories
Inventories are measured at the lower of cost and net realizable value. An inventory of raw materials, spare parts and supplies cost are
based on weighted average principle and the first-in-first-out method, and includes expenditure incurred in acquiring the inventories
and bringing them to their existing location and condition. In case of manufactured inventories and work in progress, cost includes an
appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and selling expenses.

3.10 Property held for resale

Property held for resale that are expected primarily to be recovered through the sale rather than through the continuing use are
classified as held for sale. Immediately before classification as held for sale, the assets are re-measured in accordance with the Group
accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount and fair value less cost to sell.
Impairment loss on initial recognition as held for sale and subsequent gains on re-measurement are recognized in profit or loss.

62 Orascom Construction Industries Annual report 2006

 3 Significant accounting policies continued
3.11 Investment in associated companies
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.
Associates are accounted for using the equity method (equity accounted investees). The consolidated financial statements include
the Group’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies
with those of the Group, from the date that significant influence commences until the date that significant influence ceases. In case
of impairment, the carrying amount of the investment is reduced and the impairment loss is charged to the consolidated income
statement. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest
(including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that
the Group has an obligation or has made payments on behalf of the investee.

3.12 Investments available-for-sale

The Group’s investments in equity securities, other than investment in associated companies, are classified as available-for-sale financial
assets. Subsequent to initial recognition they are measured at fair values and changes therein, other than impairment losses are
recognized directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to profit or loss.

3.13 Property, plant and equipment

Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment loss. Cost includes
expenditure that is directly attributable to the acquisition of the asset. When part of an item of property, plant and equipment have
different useful lives they are accounted for as separate items of property, plant and equipment.

Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of
day to day servicing of property, plant and equipment are recognized in profit or loss as incurred.

Depreciation
Depreciation is recognized in profit or loss on a straight line basis over the estimated useful lives of each part of property plant and
equipment. Lease assets are depreciated over the shorter of the lease term and their useful lives.
The estimated useful lives are as follows:

Type of Asset Years

Buildings 2.0 - 50.0

Machinery and equipment 3.0 - 35.0
Vehicles 4.0 - 14.2
Tools and supplies 1.5 - 16.6
Furniture and office equipment 3.0 - 16.0
Information systems 3.0 - 7.0

Leases
Leases entered into by the Company or its subsidiaries are accounted for as operating leases in-accordance with Egyptian Accounting
Standards and laws and regulations, except for some subsidiaries which adopted the International Financial Reporting Standard for
finance leases. Rent payable is charged to income on a straight-line basis over the term of the lease.

3.14 Assets under construction

The amounts spent on the construction of fixed assets are initially recorded in assets under construction and measured at cost less
impairment, if any. When these assets are completed and become ready for use, the related costs are transferred to fixed assets.

Orascom Construction Industries Annual report 2006 63

Notes to the consolidated financial statements continued

3 Significant accounting policies continued

3.15 Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures. Goodwill represents the excess of the cost of
acquisition over the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the entity acquired.
Goodwill is recorded at cost less any accumulated impairment losses. In respect of equity accounting investee the carrying amount of
goodwill is included in the carrying amount of the investment. Recognized goodwill impairment losses are not subsequently reversed.

Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized in profit and loss on a straight line basis over the
estimated useful lives from the date they are available for use. The estimated useful lives for the current and comparative periods are as
follows:

Type of Asset Years

Mineral reserves 10 - 18
Brands 10 - 15

Other intangible assets with indefinite lives are subject to impairment tests.

3.16 Impairment of assets

The carrying amounts except for inventories, assets held for sale and deferred tax assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.
A cash generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets
and groups. Impairment losses are recognized in profit or loss. Impairment losses are recognized in respect of cash- generating units are
allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of other
assets in the unit on a pro rata basis.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less cost to sell. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the assets.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no
longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortization, if no impairment loss had been recognized.

3.17 Share-based payment transactions

The grant fair value of options granted to employees is recognized as an employee expense, over a period in which the employees
become unconditionally entitled to the options. The amount recognized as expense is adjusted to reflect the actual number of share
options that vest.

3.18 Provisions
A provision is recognized if as a result of past event the Group has a present legal or constructive obligation that can be estimated
reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre- tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability.

3.19 Treasury stock

Repurchased shares are classified as treasury shares and are presented as a deduction from shareholders’ equity at their acquisition
cost. Gain or loss from transactions relating to the treasury stock are reflected in shareholders’ equity.

64 Orascom Construction Industries Annual report 2006

 3 Significant accounting policies continued
3.20 Revenue
Construction contracts
As soon as the outcome of the construction contract is estimated reliably, contract revenues and expenses are recognized in profit or
loss in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed in the contract plus
any variations in contract work, claims and incentive payments to the extent that is probable that they will result in revenue and can be
measured reliably.

The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction contract can not
be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An
expected loss on contract is recognized immediately in profit or loss.

Goods sold
Revenue from sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances,
trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred
to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
and there is no continuing management involvement with the goods. Transfers usually occur when the products are received by the
customer; however for some international shipments transfer occurs upon loading the goods onto the relevant carrier.

Rental income
Rental income is recognized in the profit or loss on a straight line basis over the term of the lease.

3.21 Expenses
Operating expenses, selling and distribution, general administrative expenses and other expenses are recognized using the accrual basis
of accounting and as such are recognized in the income statement as incurred.

3.22 Post employment benefits

Payments to defined contribution schemes are expensed as they become due. For defined benefit pension plans adopted the benefit
obligation is determined using the projected unit credit method, with actuarial valuations being carried out at each consolidated
balance sheet date. Actuarial gains and losses are recognized in full in the period in which they occur.

3.23 Borrowing costs

All borrowing costs that do not meet the capitalization criteria are recognized in profit or loss under the effective interest method.

3.24 Income tax

Income tax comprises current and deferred tax payable on taxable income. Income tax expense is recognized in profit or loss to the
extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax expense is the expected tax payable on taxable income for the period, using the prevailing tax rates or substantively
enacted at the reporting date, and any adjustment in tax payable in respect of previous years.

Deferred tax expense is recognized using the balance sheet method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized
for the following temporary differences: the initial recognition of goodwill and differences relating to investments in subsidiaries and
jointly controlled entities to the extent that they probably will not reserve in the foreseeable future. Deferred tax is measured at the tax
rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted at the reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which
temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.

3.25 Earnings per share

The Group presents basic earnings per share (EPS), which is calculated by dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary shares outstanding during the period.

Orascom Construction Industries Annual report 2006 65

Notes to the consolidated financial statements continued

4 Segmental information
The Group’s primary format for segment reporting is business segment and the secondary format is geographical segments. The risk
and returns of the Group’s operations are primarily determined by different products and services that the group produces or provides
rather than the geographical location of the Group’s operations. This is reflected by the Group organizational structure and the Group’s
financial reporting system.

The Group has two segments of operations, cement and construction. Certain corporate activities that cannot be reasonably allocated
to both reportable segments, such as the cost of corporate headquarters, are included in the construction segment. The Group’s
geographical segments are determined by the geographical location and similarity of economic environments. Transfers prices between
segments are set at an arm’s length basis.

Operating Segment Construction Cement Elimination Consolidated

LE’000 LE’000 LE’000 LE’000

Revenue
2006 External revenue 12,426,314 4,048,885 16,475,199
2006 Intra-group revenue 721,197 899,214 (1,620,411)
Total 2006 13,147,511 4,948,099 (1,620,411) 16,475,199
2005 External revenue 8,553,974 2,812,620 11,366,594
2005 Intra-group revenue 516,834 482,627 (999,461)
Total 2005 9,070,808 3,925,247 (999,461) 11,366,594
2004 External revenue 6,386,982 2,168,812 8,555,794
2004 Intra-group revenue 624,173 86,035 (710,208)
Total 2004 7,011,155 2,254,847 (710,208) 8,555,794
Operating profit
2006 2,000,926 1,815,702 3,816,628
2005 978,041 1,267,514 2,245,555
2004 796,288 1,035,893 1,832,181
Depreciation and amortization
2006 341,507 320,479 661,986
2005 204,542 233,232 437,774
2004 186,501 202,400 388,901
Capital expenditure
2006 1,890,680 5,977,964 7,868,644
2005 459,990 2,393,702 2,853,692
2004 611,054 1,235,323 1,846,377
Total assets
2006 11,493,830 17,122,500 28,616,330
2005 7,607,515 10,002,845 17,610,360
2004 6,234,363 6,296,763 12,531,126
Total liabilities
2006 10,049,800 7,406,422 17,456,222
2005 7,089,290 4,291,561 11,380,851
2004 5,089,442 2,910,420 7,999,862

66 Orascom Construction Industries Annual report 2006

4 Segmental information continued
Geographic Segment Egypt Africa Asia Europe and Elimination Consolidated
Other
LE’000 LE’000 LE’000 LE’000

Revenue
2006 5,875,162 2,140,371 4,542,628 5,537,449 (1,620,411) 16,475,199
2005 4,080,798 1,731,248 3,957,138 2,596,871 (999,461) 11,366,594
2004 3,562,342 1,196,093 2,597,350 1,910,217 (710,208) 8,555,794
Total assets
2006 9,534,135 5,887,687 6,221,560 6,972,948 28,616,330
2005 7,648,729 4,201,527 1,426,699 4,333,405 17,610,360
2004 6,070,147 4,792,689 640,468 1,027,822 12,531,126
Capital expenditure
2006 1,037,522 1,845,831 3,817,824 1,167 7,868,644
2005 605,090 383,814 1,542,206 322,582 2,853,692
2004 542,060 1,116,458 5,597 182,262 1,846,377

5 Cash and cash equivalents

Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Cash on hand 17,587 2,919 12,647

Banks – current accounts * 1,561,053 1,664,439 539,077
Banks – time deposits ** 1,159,427 500,958 1,024,639

Total 2,738,067 2,168,316 1,576,363

* Banks – current accounts include blocked amounts of LE 119.2 million (2005, LE 39.8 million) (2004, LE 42.8 million) held as collateral against letters of credit and letters of guarantee
related to subsidiary companies.
** Banks – time deposits include blocked deposits of LE 42.9 million held as collateral against letters of guarantee, letter of credit and short-term loans of OCI and its subsidiaries
(2005, LE 157.2 million) (2004, LE 279 million).

6 Marketable securities
Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Shares in Baticim Cimento, Turkey 448,503 413,850

Investment securities, cumulative interest bearing certificates 24.636 427,214 10,315

Total 473,139 841,064 10,315

7 Accounts receivable- customers current accounts (net)

Accounts receivable- customers current accounts and notes receivable are shown net of impairment losses amounting to LE 44.2
million, (2005 , LE 38.1 million) (2004, LE 55.9 million).

Orascom Construction Industries Annual report 2006 67

Notes to the consolidated financial statements continued

8 Accounts receivable- other (net)

Accounts receivable other are shown net of impairment losses amounting to LE 32.8 million (2005, LE 19.2 million) (2004, LE 11.9
million) and consist of the following:

Description 31/12/2006 31/12/2005 31/12/2004

LE’000 LE’000 LE’000

Joint Ventures receivables and other debit balances 680,293 354,091 255,890
Suppliers and subcontractor debit balances 207,308 530,639 164,088
Deposits with others 73,889 26,312 24,258
Withholding taxes 171,504 84,725 86,329
Prepaid expenses 140,219 95,592 73,851
Accrued revenue 9,825 40,219 21,712
Letters of guarantee margin 72,530 72,427 56,760
Letters of credit for supplies 142,472 48,335 43,318

Total 1,498,040 1,252,340 726,206

9 Construction contracts in progress

The billing status of construction contracts in progress at 31 December is as follows:

Description 2006 2005 2004

LE’000 LE’000 LE’000

Costs incurred on incomplete contracts 18,653,102 13,683,252 11,699,535

Estimated earnings 2,728,743 1,794,908 1,652,148
21,381,845 15,478,160 13,351,683
Less billings to date (21,586,168) (15,316,661) (13,158,380)

(204,323) 161,499 193,303

Presented in the balance sheet as follows:

Construction contracts in progress 682,021 640,986 425,328
Billings in excess of cost and estimated earnings on incomplete contracts (886,344) (479,487) (232,025)

(204,323) 161,499 193,303

In determining the revenue and costs to be recognized each year for work to be carried out on construction contracts, estimates are
made to the final outcome on each contract. Management continually reviews these estimates and makes adjustments and provisions
where necessary.

10 Inventories
Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Raw materials 549,797 394,897 283,479

Spare parts and fuel 459,710 233,391 195,367
Packing materials 40,502 38,489 21,927
Work in progress 306,124 162,802 72,359
Finished goods 80,393 19,280 22,878
Developed land for sale 75,522 74,705 55,585

Total 1,512,048 923,564 651,595

68 Orascom Construction Industries Annual report 2006

11 Joint Ventures
A summary of the Group’s share in the assets, liabilities, revenues, and expenses in the Joint Ventures relating to the construction
activities are as follows:

Description 31/12/2006 31/12/2005 31/12/2005

LE’000 LE’000 LE’000

Share in Net Assets

Assets 951,155 765,297 692,570
Liabilities (651,466) (610,278) (520,397)

Company’s Share in Net Assets 299,689 155,019 172,173

2006 2005 2005

Share in Operating Net Results
Revenue 1,251,777 1,142,863 1,512,616
Cost (1,172,307) (1,071,900) (1,342,587)

Company’s Share in Net Profit 79,470 70,963 170,029

12 Deferred tax assets and liabilities

As at 31 December, the recognized deferred tax assets (liabilities) that are attributable to temporary timing differences related to the
following:

Description 31/12/2006 31/12/2005 31/12/2005

LE’000 LE’000 LE’000

Deferred Tax Assets:

Property, plant and equipment 22,599 8,554
Working capital 70,749 26,779 4,718

Total Assets 93,348 35,333 4,718

Deferred Tax Liabilities:

Property, plant and equipment (111,370) (40,795) (5,387)
Working capital (226,543) (83,121) (53,405)

Total Liabilities (337,913) (123,916) (58,792)

Net (244,565) (88,583) (54,074)

13 Investment in associated companies

Description Ownership Country 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Nile Valley Gas Company Egypt 12,935 13,787

National Pipes Company 40% Egypt 11,713 8,964 7,350
United Company for Paints and Chemicals 50% Egypt 44,014 39,109 48,414
Mehsas National Bag Algeria 3,875 6,251
Besix Group investments (various) Belgium 67,090 25,884 36,942
Sudacem Investments Company 49% Sudan 32,081 27,185
El Yamama Orascom United 50% Saudi Arabia 1,499 1,764
Others 11,640 4,586 2,224

Total 168,037 124,302 114,968

Orascom Construction Industries Annual report 2006 69

Notes to the consolidated financial statements continued

14 Payments for purchase of investments

As of 31 December 2006, payments for purchase of investments amounting to LE 738.7 million represents the payments for the
purchase of shares of United Nigeria Cement Company -UNICEM (currently under establishment) by the Egyptian Cement Company
and Egyptian Cement Holding Netherland. This investment will be fully consolidated when control is established.

15 Investment in controlled and jointly-controlled companies

During the three years ended 31 December 2006, OCI acquired control and joint-control of companies in Spain, Iraq, Turkey, Egypt,
Pakistan, Algeria and Belgium. The Company’s share in the fair values of the assets and liabilities of these companies at the dates of
acquisition has been recorded as follows:

LE million GLA OCI United Egypt Pakistan Algerian Besix Total

Group Cimento Cement Sack Cement Bags Group
(Spain) (Turkey) (Iraq) Company Company Company (Belgium)
50% 100% 60% 100% 62.75% 100% 50%

Assets
Cash and cash equivalents 57.3 17.8 3.1 0.1 0.2 500.6 579.1
Accounts receivable 362.7 38.4 5.8 22.5 2.2 1,006.1 1,437.7
Investments 27.2 4.2 79.8 111.2
Long-term receivable 6.4 6.4
Inventories 58.2 6.5 70.8 7.8 2.9 62.1 208.3
Property held for sale 152.2 152.2
Property, plant and equipment 263.5 190.4 395.1 12.7 43.9 28.6 387.7 1,321.9
Assts under construction 122.6 509.7 98.2 730.5
Other assets 474.3 0.1 11.5 485.9

Total assets 1,365.8 196.9 522.1 33.6 582.6 34.0 2,298.2 5,033.2

Liabilities
Bank overdraft and current portion of long-term debt 122.9 0.1 47.6 9.0 71.5 251.1
Accounts payable and accrued liabilities 284.3 1.5 249.3 7.3 42.8 1.8 1,226.4 1,813.4
Long-term liabilities 336.1 0.5 48.1 2.9 256.1 643.7
Minority interest 28.0 2.5 30.5

Total liabilities 771.2 1.5 249.3 7.9 138.5 13.7 1,556.5 2,738.6

Net assets acquired 594.6 195.4 272.8 25.7 444.1 20.3 741.7 2,294.6

Cost of acquisition 725.9 313.6 366.3 43.0 284.6 38.7 519.6 2,291.7
Goodwill * 131.3 118.2 93.5 17.3 18.4 378.7
Negative goodwill (159.5) (222.1) (381.6)

* Determining whether goodwill is impaired requires an estimation of the future cash flows expected to arise from the cash-generating units to which the goodwill is attached. Management
has established that there is no impairment to the goodwill recognized in the balance sheet as of 31 December 2006.

Investment in 50% of GLA Group

In October 2006, OCI acquired 50% of GLA Group (a Spanish limited liability company). The total cost of acquisition was Euro 99.8
million (LE 725.9 million). The purchase price was paid partly in cash and the balance by surrender of OCI’s 59.4% share in Cementos
La Parrilla, S.A. (a Spanish limited liability Company) at the fair value of Euro 28.5 million (LE 213.7 million).

OCI’s 50% share of the fair value of GLA’s net assets acquired, amounted to Euro 78.8 million (LE 594.5 million). The fair value of the
net assets acquired was determined by an independent appraiser. The excess of the cost of acquisition over the fair value of the net
assets acquired at the date of acquisition has been recorded as at 31 December 2006 as goodwill in the amount of Euro 21.0 million
(LE 131.4 million).

70 Orascom Construction Industries Annual report 2006

15 Investment in controlled and jointly-controlled companies continued

Investment in OCI Cimento (Turkey)

On 26 January 2006, OCI indirectly acquired all the assets of Van Cimento Sanayi ve Ticaret AS (VC) (a Turkish limited liability
company). The total cost of acquisition was US$ 54.6 million (LE 313.6 million). The fair value of the net assets acquired, as determined
by independent appraisers, amounted to US$ 32.3 million (LE 195.4 million). The excess of the cost of acquisition over the fair value of
the net assets acquired at the date of acquisition represents goodwill of US$ 22.3 million (LE 118.2 million).

Investment in United Cement (Iraq)

In 2006, OCI increased its investment in the shares of United Cement Holding Company (UCH)by 9% to reach 60%. UCH owns and
operates a cement plant in Tasluja in Northern Iraq. The cost of the additional acquisition was US$16.0 million (LE 92.0 million). The
excess of the total cost of acquisition over the fair value of the net assets acquired at the date of acquisition represents goodwill of
US$ 16.3 million (LE 93.5 million).

Investment in Egypt Sack Company

In January 2006, OCI acquired 100% ownership of Egypt Sack Company (ESC) which was incorporated on 20 November 1997.
The total cost of acquisition was LE 43.0 million. The fair value of the net assets of ESC, as determined by independent appraisers,
amounted to LE 25.7 million. The excess of the cost of acquisition over the fair value of the net assets acquired at the date of
acquisition represents goodwill of LE 17.3 million.

Investment in Pakistan Cement Company

In September 2005, OCI increased its indirect ownership to 62.752% of Pakistan Cement Company (PCC) which was incorporated
on 23 May 1993. The total cost of acquisition was US$ 49.0 million (LE 284.6 million). The fair value of the net assets of PCC, as
determined by independent appraisers, amounted to US$ 121.9 million (LE 707.7 million), and OCI’s 62.752% share of the fair value
of the net assets acquired amounted to US$ 76.5 million (LE 444.1 million). The excess of the fair value of the net assets acquired over
the cost of acquisition at the date of acquisition represents a negative goodwill of US$ 27.5 million (LE 159.5 million), and has been
credited to year 2005 income.

Investment in Algerian Bags Company

In December 2006, OCI acquired the remaining 50% ownership of Mehsas National Bags Company (an Algerian limited liability
company) which was incorporated on 19 May 1999, and renamed it Algerian Bags Company (ABC). The total cost of acquisition of
100% of the shares of ABC was LE 38.7 million. The fair value of the net assets of ABC amounted to LE 20.3 million. The excess of the
cost of acquisition over the fair value of the net assets acquired at the date of acquisition represents goodwill of LE 18.4 million.

Investment in 50% of Besix Group

MANOCI (a Belgian Company) was incorporated in March 2004 with a share capital of Euro 37.5 million (LE 285 million) owned equally
by OCI Luxembourg (ultimately owned by OCI) and MANCO Investments (a Belgian partnership). On 4 April 2004, MANOCI acquired
control (100% by July 2004) of SBB-BBM (a Belgian construction Company, which consists primarily of Besix group of companies and
subsequently renamed Besix Group).

The cost of acquisition was Euro 136.8 million financed by an international bank loan of Euro 99.3 million. OCI’s 50% share of the
total consideration amounted to Euro 68.4 million (LE 519.7 million). The fair value of the net assets acquired, as determined by
independent appraisers, amounted to Euro 195.3 million. OCI’s 50% share of the fair value of the net assets acquired amounted to
Euro 97.7 million (LE 741.7 million). The excess of the fair value of the net assets acquired over the cost of acquisition represent a
negative goodwill of Euro 58.5 million (equivalent to LE 444.1 million of which OCI owns 50%), and has been credited to income
statement in the years 2004 and 2005.

Investment in Egyptian Basic Industries Corporation

In 2005, OCI invested in a jointly–controlled corporation Middle East Petrochemical Corporation (MEPCO) on a 50/50 basis. MEPCO
acquired 60% of the share capital of Egyptian Basic Industries Company (EBIC), which was established on 12 February 2002 in a free
zone area to manufacture and sell ammonia. As of 31 December 2006, the total investment in EBIC amounted to US$ 64.1 million
(LE 366.7 million).

Investment in Emirates Cement Company

In 2005, OCI invested in a jointly–controlled corporation (Emirates Cement Company) (EMCC), which was established in 2005 in the
United Arab Emirates to manufacture and sell cement. As of 31 December 2006, the total investment in EMCC amounted to US$ 64.7
million (LE 372.2 million).

Orascom Construction Industries Annual report 2006 71

Notes to the consolidated financial statements continued

16 Other assets
Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Goodwill 502,451 124,794 12,021

Mineral reserves 212,510
Brands 19,872
Cement mill license 85,390
Other deferred expenses 128,306 40,637 8,401

Total 948,529 165,431 20,422

During 2005 and 2004, goodwill amortization expense amounted to LE 2.6 million in each year.

17 Leases
17.1 Finance Leases
Some of the Company’s subsidiaries had leased some buildings, machinery, equipment, trucks and information systems equipment
from finance leasing companies. The terms of these lease contracts were as follows:

Purchase price (LE Million) 263.8

Total lease payments (LE Million) 303.3
Lease period (years) 3 - 15
Selling price at the end of the lease terms (LE Million) 2.5

As the leases substantially transfer all of the benefits and risks of ownership related to the leased assets from the lessors to these
subsidiaries they have been accounted for as finance leases in accordance with International Financial Reporting Standards (IAS 17).

The total amounts of the leased assets are included in property, plant and equipment in the balance sheet. The lease obligations are
included in long-term liabilities in the balance sheet, with the current portion shown under current liabilities.

Egyptian Accounting Standards (EAS 20) require that all leases should be accounted for as operating leases.

Accordingly, the effect of applying IAS 17 instead of EAS 20 is overstating consolidated net income by LE 13.2 million.

17.2 Operating Leases

During 2002, 2003 and 2004 OCI and other subsidiaries leased some equipment under the following conditions:

Total lease payments payable LE (108 million) over 48 to 108 months at annual rent of LE 21.4 million
Lease term (months) 48-108
Estimated useful life of leased equipment (years) 5 - 10
Selling price at end of lease term (LE million) 2
Payments during the period to the lessor amounted to LE 10.7 million. 21.4

72 Orascom Construction Industries Annual report 2006

18 Property, plant and equipment
Description Land Buildings Machinery Furniture Vehicles Information Tools and Total
and and and office supplies
construction equipment equipment
LE ‘000 LE ‘000 LE ‘000 LE ‘000 LE ‘000 LE ‘000 LE ‘000 LE ‘000

Cost
Balance at 1/1/2006 141,813 1,271,907 6,359,922 136,033 328,139 116,938 66,585 8,421,337
Additions 76,327 562,817 1,803,696 107,954 181,671 56,001 21,797 2,810,263
Subsidiary cost at acquisition 41,449 71,427 205,950 3,014 15,115 1,978 12,056 350,989
Transfers/Adjustments 4,545 1,303,125 (1,015,711) 4,595 10,806 (28,242) (5,743) 273,375
Disposals (62,743) (179,855) (8,331) (17,828) (7,445) (6,937) (283,139)

Balance at 31/12/2006 264,134 3,146,533 7,174,002 243,265 517,903 139,230 87,760 11,572,827

Accumulated depreciation
Balance at 1/1/2006 145,256 1,349,068 63,050 121,307 44,828 25,408 1,748,917
Depreciation 70,707 441,137 20,531 57,640 20,724 14,066 624,805
Subsidiary accumulated 9,126 70,441 1,431 13,002 1,191 4,670 99,861
depreciation at acquisition
Transfers/Adjustments 3,613 283,369 (226,627) 2,761 7,143 3,790 508 66,977
Disposals accumulated 50 (62,609) (3,841) (2,588) (2,760) (38) (71,786)
depreciation

Balance at 31/12/2006 3,613 508,508 1,571,410 83,932 196,504 60,193 44,614 2,468,774

Net book value at 31/12/2006 260,521 2,638,025 5,602,592 159,333 321,399 79,037 43,146 9,104,053

Net book value at 31/12/2005 141,813 1,126,651 5,010,854 72,983 206,832 72,110 41,177 6,672,420

Net book value at 31/12/2004 82,218 1,107,142 4,003,865 83,999 152,251 50,352 38,319 5,518,146

The adjustments in the cost and accumulated depreciation represent translation differences which arise from the Groups’ share in the
joint ventures’ fixed assets held in foreign currencies translated at the closing rates of exchange and their values at the beginning of the
year.

There is capitalized interest amounted to LE 0 million ( LE 16.7 million in 2005, LE 23.0 million in 2004 ).

There is change in the estimated useful lives of buildings in the current year that reduced the depreciation charge during the year by
LE 19.9 million.

Property,plant and equipment include the following assets which have been acquired and accounted for under finance lease
transactions:

Description Cost Accumulated Net

Depreciation
31/12/2006 31/12/2006 31/12/2006
LE ‘000 LE ‘000 LE ‘000

Machinery and equipment 134,247 (36,056) 98,191

Vehicles 176,002 (51,905) 124,097
Building 20,774 (3,943) 16,831
Information systems 959 (608) 351

Total 331,982 (92,512) 239,470

Orascom Construction Industries Annual report 2006 73

Notes to the consolidated financial statements continued

19 Loans
Company responsible for loan Lending institution Interest rate

Orascom Construction Industries
Company
Besix Group
Orascom Construction Industries
Algeria
Egyptian Container Handling
Company
Egyptian Cement Company
Algerian Cement Company
GLA Group
Contrack International Inc.
Ciment Blanc Algerien
OCI Mepco
Emirates Cement Company
Pakistan Cement Company
Other Subsidiaries
3rd Bond (Due 29 June 2012) 11.75% fixed on 2.5 million bonds, 1.5% over
Central Bank Rate on LE 2.5 million bonds and
1.5% over LIBOR 6 months on 1.5 million US$
bonds
European Investment Bank (EIB) Variable
Different banks - overdraft and bank facilities Variable for the LE portion and 1%-1.25%
overLIBOR for the US$ portion
Different banks - loans First tranche 10.75% second tranche 1.25%
+ central bank rate third tranch 1% + libor 6
months
Different banks - overdraft and bank facilities Variable
Different banks - overdraft Average 7%
CIB loan (Due 31 December 2006) 1.85% over LIBOR 6 months and 1.4% + 1.6%
over LIBOR 6 months
CIB overdraft Variable
Export-Import Bank of the United States 0.45% over LIBOR 6 months
IFC 3% over LIBOR 6 months
Different banks loans Tranche (A)9.75% Tranche (B)0.75% over LIBOR
Different banks - overdraft and bank facilities 10%
International Finance Corporation (IFC) 8.08%
European Investment Bank (EIB) Loan - Part A 3.98%
European Investment Bank (EIB) Loan - Part B 3.44%
Citibank N.A., Algeria 6.63%
Caisse National D’ epargne Et De Prevoyance Banque 6.63%
DEG - Deutsche Investitions- 5.69%
undEntwicklungsgesellschaft mbHf
International Finance Corporation (IFC) 7.55%
European Investment Bank (EIB) 4.44%
DEG - Deutsche Investitions- 5.58%
undEntwicklungsgesellschaft mbHf
Citibank International PLC 5.46%
Caisse National D’epargne Et De Prevoyance Banque 6.27%
Citibank N.A., Algeria 6.25%
Borrowing Cost
Commercial facility - different banks - loans Variable
Different banks - overdraft Variable
Different banks Variable
Citibank Algiers 5.65% and 2% + CBA Interest rate
Commercial facilities Variable
Different banks- loans 1.5% over LIBOR per annum
Different banks- loans KIBOR + 2.25%
EKF -loans KIBOR + 1%
Diffrent bank-facilities KIBOR 0.7% to 1.3% + KIBOR
Different banks 12% - 13%

Bank overdraft and bank facilities Variable

Total 31/12/2005
Total 31/12/2004
Total 31/12/2003

74 Orascom Construction Industries Annual report 2006

Outstanding amount Long-term portion Bank overdraft and Collateral /Support given
31/12/2006 31/12/2006 current portion
31/12/2006
LE ‘000 LE ‘000 LE ‘000

1,312,506 1,176,743 135,763

45,283 45,283
1,110,219 2,891 1,107,328 LE 1.11 billion promissory notes

1,644,620 1,644,620

521,818 171,094 350,724 Commercial lien on the company’s assets

76,288 76,288 DZD 826 million and US$ 12 Million promissory notes equals to
LE 67.3 and 68.6 respectively
166,249 143,449 22,800 Commercial lien on the company’s assets

4,775 4,775 Commercial lien on the company’s assets

37,880 33,418 4,462 Commercial lien on the company’s assets
100,369 90,073 10,296 Commercial lien on the company’s assets
957,400 957,400 Promissory notes equals full loan amount
116,514 116,514 LE 116 million promissory notes
149,566 119,653 29,913 Pledge of shares and assets and company’s business undertaking
227,714 197,352 30,362 Pledge of shares and assets and company’s business undertaking
43,656 35,719 7,937 Pledge of shares and assets and company’s business undertaking
35,608 17,804 17,804 Pledge of shares and assets and company’s business undertaking
139,194 69,597 69,597 Pledge of shares and assets and company’s business undertaking
51,830 39,635 12,195 Pledge of shares and assets and company’s business undertaking

50,375 43,427 6,948 Pledge of shares and assets and company’s business undertaking
75,557 65,135 10,422 Pledge of shares and assets and company’s business undertaking
51,129 41,390 9,739 Pledge of shares and assets and company’s business undertaking

151,119 130,275 20,844 Pledge of shares and assets and company’s business undertaking
184,637 123,091 61,546 Pledge of shares and assets and company’s business undertaking
21,931 14,621 7,310 Pledge of shares and assets and company’s business undertaking
(99,164) (99,164)
177,508 137,364 40,144 Promissory notes full amount
82,712 82,712 Promissory notes full amount
74,395 74,395 Promissory notes full amount
198,306 198,306 Full amount promissory notes
391,863 391,863 Promissory notes full amount
238,131 238,131 Promissory notes full amount
405,907 405,907 Sale and purchase of company stock
252,188 252,188 Pledge of the Company’s sponsor shares
172,399 172,399
11,121 11,121 Promissory not full amount+ Commercial lien on Alico and
Mehsas assets
68,039 68,039 Promissory notes full amount
9,249,642 6,261,949 2,987,693
6,862,169 5,518,314 1,343,855
4,256,993 3,274,010 982,983

Orascom Construction Industries Annual report 2006 75

Notes to the consolidated financial statements continued

20 Creditors, accrued liabilities and provisions

Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Joint Ventures payables and other credit balances 285,798 131,871 184,501
Creditors for purchase of fixed assets 38,267 44,196 422
Deposits from others 234,119 132,642 169,403
Employees’ share in profit 65,349 19,543 21,792
Deferred revenue 19,192 12,761 16,874
Taxes withheld 201,682 170,537 167,001
Sundry creditors 102,438 184,166 303,705
Accrued expenses and interest 429,767 321,205 250,834
Provisions for claims 349,790 272,285 190,160

Total 1,726,402 1,289,206 1,304,692

Movement in provisions for claims 2006 2005 2004

LE’000 LE’000 LE’000

Balance at 1 January 272,285 190,160 128,417

Additions during the year 83,416 85,872 61,855
Used during the year (6,181) (1,416) (1,271)
Foreign exchange difference 270 (2,331) 1,159

Balance at 31 December 349,790 272,285 190,160

21 Other long-term liabilities

Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Loans to subsidiaries from non-Group shareholders 537,099 237,807 36,744

Liability under capital leases 45,255 34,160 34,330
Liability for purchase of fixed assets 1,229 885
Sales tax installments on imported machinery 116,277 10,235 16,536
Liability for post employment benefits 3,083 19,479 24,603
Provisions for claims and contract performance 160,443 104,500 121,146
Others 127,905 86,375 3,239

Total 991,291 493,441 236,598

76 Orascom Construction Industries Annual report 2006

22 Capital
Authorized Capital
The Company’s authorized capital is LE 5 billion.

Issued and paid in capital

On 18 August 2004, the shareholders approved reducing the share par value from LE 10 to LE 5 per share and increasing the total
number of outstanding shares from 95,287,500 to 190,575,000. OCI Global Depository Receipts holders also received one additional
GDR for every GDR held.

On 6 February 2006, the Company’s Board of Directors decided to increase the share capital by issuing 11.5 million common shares
at the fair value of LE 201.0 per share as of that date. This increase has been approved to the shareholders as of 16 February 2006.
The total subscribed shares were 11,420,837 shares with a fair value amounting to LE 2,295,588 thousand. The fair value of the
shares subscribed represents the share par value of the increased capital, with an aggregate amount of LE 57,104 thousand, and the
remaining balance amounting to LE 2,238,484 thousand represents an additional paid-in capital. An amount of LE 423,096 thousand
was added to legal reserve, which reached the maximum limit of 50% of issued capital, and the excess of LE 1,815,388 thousand
credited to special reserve.

On May 2006, the Capital Market Authority approved issuing the shares of the increase in capital, and the increase was recorded in the
commercial register on 17 May 2006.

The Company’s issued and fully-paid capital, after the increase on 17 May 2006, is LE 1,009,979 thousand divided into 201,995,837
common shares at a par value of LE 5 each.

OCI’s shares have been listed on the Cairo and Alexandria Stock Exchange since March 1999. In September 2004, the Company listed
part of its shares on the London Stock Exchange in the form of Global Depository Receipts (GDRs), each represents two shares. The
Bank of New York was appointed to act as the depository bank.

Reserves

Legal Reserve
According to the Company’s articles of incorporation, 5% of annual net income is set aside as a legal reserve. Setting aside this
percentage stops when the total accumulated reserve reaches 50% of the Company’s issued capital. If the reserve falls below the
defined level (50 % of the issued share capital), then the company is required to resume settling aside 5 % of the annual profit until
it reaches 50 % of the issued share capital. This reserve is used to increase the Company’s issued capital or to cover the Company’s
losses.

Other Reserves
According to the Company’s articles of incorporation, the General Assembly can establish and use other reserves from annual revenue
upon a recommendation by the Board of Directors.

23 Retained earnings
In 2006, the adjustment to retained earnings consists of the effect of the following:

LE’000

Changes in accounting policy by a subsidiary (52,858)

Deferred tax adjustment (44,037)
Share based payments and a foreign exchange adjustments (40,805)
Prior year adjustments in a subsidiary 43,861

Total (93,839)

Orascom Construction Industries Annual report 2006 77

Notes to the consolidated financial statements continued

24 Treasury stock
As of 31 December 2006, the treasury stock item amounting to LE 136.5 million represents the carrying cost of 1,546,806 shares
owned by OCI ESOP Limited and 38,279 shares owned by Asia Tel (two subsidiaries). The OCI shares held by OCI ESOP Limited are
acquired to discharge the liabilities under the Employee Share Option Plan. The net cost of acquisition of shares and GDRs of OCI,
including share dividends, adjusted for the share dividends and split, were as follows:

31/12/2006 31/12/2005 31/12/2004

LE’000 LE’000 LE’000

Number of shares (including 47,987 GDR’s) 1,546,806 1,062,774 1,017,774

Book value 137,912 33,392 23,023

Average cost per share 89.16 31.42 22.62

Market value 426,764 232,397 73,884

Price per share 275.90 218.67 72.54
Price per GDR 552.76 430.50 146.96

25 Income tax expense

Income tax expense recognized in the income statement is as follows:

Description 2006 2005 2004

LE’000 LE’000 LE’000

Current tax expense 144,457 68,342 83,362

Deferred tax expense (benefit) (8,079) 46,101 (6,150)

Total tax expense 136,378 114,443 77,212

Reconciliation of effective tax rate to statutory tax rate:

Description 2006 2005 2004

LE’000 LE’000 LE’000

Income before tax 3,549,987 2,303,840 1,581,290

Statutory corporation tax rate 20% 20% 42%
Income tax at statutory corporation tax rate 709,997 460,768 664,141
Add (deduct) tax effect on the following:
Non-deductible expenses 15,863 10,328 2,855
Non- taxable income (624,391) (420,034) (571,017)
Provisions for claims and doubtful debts (16,917) (10,985) (2,717)
Depreciation temporary differences 46,749 32,241 (5,387)
Other deductions and adjustments to prior years (42,074) (27,321) 8,086
Effect of different tax rates in foreign jurisdictions 69,612 69,446 (18,749)

Total tax expense 136,378 114,443 77,212

Effective tax rate 3.84% 4.97% 4.88%

78 Orascom Construction Industries Annual report 2006

26 Share-based payments
OCI has a plan to provide some of its employees with stock options on its shares. According to this plan, OCI ESOP Limited, a British
Virgin Islands Company, purchases OCI shares from the stock market equivalent to the value of options granted to employees. This
purchase is financed by a loan from OCI. The exercise price of the options granted to employees is equal to the fair market value of the
shares on the date of grant. When the options vest, the employee has the right to exercise the options by payment of the full option
price. Payment may be by cash, OCI shares owned for at least six months, delivery of an employee promissory note bearing interest
and secured by a pledge of the OCI shares purchased by the note, or consideration received from OCI ESOP under a cashless exercise
program implemented in connection with the plan. Payments received from employees for options exercised are used by OCI ESOP
Limited to repay the outstanding loan due to OCI or to finance the purchase of other options.

There is a limit on the number of options which OCI ESOP may grant to employees under the plan. OCI ESOP may not grant options
to employees representing more than ten per cent of the Company’s shares in any five-year period and may not grant options
representing more than two per cent of the Company’s shares in any one year. Options granted under the plan generally vest only
after four years from the date of grant, however, under the plan, OCI ESOP may allow options to vest beforehand under certain
circumstances.

On 27 December 2006, the Shareholders approved at an extraordinary general assembly to issue shares at nominal value with a ceiling
of 1% of the current issued shares, in order to meet any of the Company’s obligations under share-based payments relating to the
incentive programs for employees and managers, subject to the approval of the regulatory authorities.

Share Option Activities Number of shares Average per share Average per share
subject to option exercise price market price

Shares LE LE

Balance at 31 December 2002 257,731 20.18 23.16

Options exercised 2003 (257,731) (20.18) (92.75)
Options granted 2003 250,000 10.46 11.36
Balance at 31 December 2003 250,000 10.46 72.51
Options granted 2004 617,808 36.50 36.02
Options exercised 2004
Balance at 31 December 2004 867,808 29.00 72.54
Options granted 2005 1,161,708 80.41 81.58
Options exercised 2005
Balance at 31 December 2005 2,029,516 58.43 218.67
Options granted 2006 625,541 224,32 221.42
Options exercised 2006
Balance at 31 December 2006 2,655,057 97.51 275.90

The fair value of services received in return for share options granted are measured by reference to the fair value of share options
granted. The estimate of the fair value of the services received is measured using independent probability and simulation models and
the following assumptions:

Fair value of share options and assumptions 2006 2005 2004 2003

Fair value at measurement date (LE) 48.00 27.82 12.29 4.98

Share price at grant date (LE) 221.42 97.88 36.02 11.36
Exercise price (LE) 224.32 97.15 36.50 10.46
Expected volatility (%) 34% 39% 46% 53%
Option life (years) 5 5 5 5
Expected dividend yield (%) 3% 3% 3% 3%
Risk-free interest rate (%) 5.06% 5.03% 5.39% 7.35%
Forfeiture per year (%) 5% 5% 5% 5%

As at 31 December 2006, the cumulative cost of share-based pay under the OCI Employee Share Option Plan amounting to LE 55.4
million has been provided for and included in “Accrued Liabilities” (Note 20) and “other long-term liabilities” (Note 21) in the amounts
of LE 37.2 million and LE 18.2 million respectively.

Orascom Construction Industries Annual report 2006 79

Notes to the consolidated financial statements continued

27 SWAP agreement
The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2006 were US$ 3,945,320 and US$
10,600,607 for a commercial facility and an Ex-Im Bank facility, respectively. At 31 December 2006, the fixed interest rates were
5.8975% to 5.9525% for the commercial portion of the Ex-Im Bank loans and the floating rates, based on LIBOR, on both facilities.
The gains and losses on these swap contracts are recognized under hedging reserve in equity on interest rate swap contracts at 31
December 2006.

The Group entered into several agreements of foreign currency swaps at 31 December 2006 to exchange LE 128.4 million against US$
22.4 and then exchange US$ 22.4 million for LE 128.86 in January 2006.

28 Dividends
The following cash dividends were paid by the Company:

LE‘000 LE per share

2004 142,931 0.75

2005 171,517 0.90
2006 403,992 2.00

The Group employee’s share in profits, which have been charged to equity, amounted to LE 78.2 million (2005, LE 37.9 million)
(2004, LE 31.2 million).

29 Earnings per share

Earnings per share are calculated by dividing the net income available for shareholders’ dividends, after deducting the employees’
profits share, by the weighted average number of shares outstanding during the period, adjusted for the share split, as follows:

Description 31/12/2006 31/12/2005 31/12/2004

LE’000 LE’000 LE’000

Net income 2,670,718 1,700,230 1,101,228

Less: Employee share in company’s profit (116,964) (42,350) (19,058)
Employee share in subsidiaries profit (17,239) (18,391) (15,010)

Adjusted net profit 2,536,515 1,639,489 1,067,220

Shares’000 Shares’000 Shares’000

Weighted average number of shares 197,709 190,575 190,575

Less: Treasury stock (1,547) (1,099) (1,054)

Adjusted weighted average number of shares 196,124 189,476 189,521

Earnings per share (LE) 12.93 8.65 5.63

80 Orascom Construction Industries Annual report 2006

30 Contingent liabilities
Guarantees
Letters of guarantee issued by banks for OCI and its subsidiaries in favor of others as at
31 December 2006 amounted to LE 2.9 billion (2005, LE 2.5 billion) (2004,LE 1.9 billion). The restricted cash margin for these letters of
guarantee amounted to LE 72.5 million (2005, LE 72.4 million) (2004, LE 56.8 million).

Outstanding letters of credit as at 31 December 2006 (uncovered portion) amounted to LE 3.5 billion (2005, LE 1.0 billion) (2004, LE
291.2 million).

OCI guarantees facilities for US$ 300.0 million in favor of lending banks. On 31 December 2006, there was no balance in these
facilities.

OCI guarantees to International Finance Corporation relating to a loan amounted to US$ 90.0 million.

One of the Company’s subsidiaries (Contrack International) contributes in a joint venture which OCI guarantees the facilities granted to
this JV by LE 1.5 billion representing 50% of facilities granted to this Joint Venture.

Litigation
In the normal course of business, the Group entities and joint ventures are involved in some arbitration or court cases as defenders or
claimants. These litigations are carefully monitored by the entities management and legal counsels, and are regularly assessed with
due consideration for possible insurance coverage and recourse rights on third parties. Provisions are made if required and regularly
updated.

The major portion of the business of the Company’s US subsidiary involves contracting with departments and agencies of the
U.S. Government. Such contracts are subject to audit and possible adjustment by the respective agencies. The USAID Agency has
investigated the nature of the relationship and performance of a contract with an Egyptian Joint Venture of which the company has
40% share. The USAID Agency have recently filed a suit against all partners of the Joint Venture contending that it is entitled to refund
from the partners all the contract funds paid for these projects plus damages and civil penalties. Management has substantive reasons
to oppose the allegations raised by Agency. The Company management also believes that the ultimate resolution of any such claims
and counter claims will not have a negative impact on reported results of operations, financial position and cash flows.

In June 2006, a court judgment in the amount of Euro 1.2 million (LE 9.0 million) has been pronounced against one of the jointly-
controlled companies and its manager relating to a construction project almost 11 years ago in an African country where the company
is currently less active. An appeal has been made against the judgment, and a provision has been recognized to an extent consistent
with the external legal counsel’s opinion.

In 2005, one of the subsidiaries terminated two subcontract agreements for the failure by the subcontractor to meet their contractual
obligations. The subcontractors filed a request for arbitration for compensation for the loss incurred. The ultimate resolution of the
first arbitration was in favor of the Company by refusing the claim of the subcontractor in the amount of LE 218.7 million. The other
subcontractor claimed compensation in the amount of LE 17.3 million and the case has not been resolved yet.

Management of a completed joint venture contract, with a total value of LE 1.2 billion and in which OCI contribution is 50%, has
entered a judicial motion on 25 January 2006 to settle matters of dispute with the owner regarding a claim by the Joint Venture
for the unjustified liquidation by the owner of letters of guarantee valued at LE 66.0 million, owner’s refusal to pay price difference
of imported supplies amounting to LE 8.15 million and USD 2.4 million, in addition to the owner’s failure to meet the contracted
obligation to pay 50% of completed work value in US Dollars at the rate of LE 3.4. The court is not yet to make any judgment
regarding this dispute. Project management and the legal department of OCI believe that the Joint Venture has enough documents
and justification to support its position and reserve its rights and, therefore, collecting the total of LE 142.0 million due from the owner
with no obligation to pay any delay penalties.

31 Commitments
At 31 December 2006, capital commitments of the Group for purchasing fixed assets amounted to approximately LE 1.8 billion.

The balance of the Group’s investment in the share capital of associated companies and investments-available-for sale which have not
become due for payment at the balance sheet date amounts to LE 3.5 million.

OCI has a commitment to cover any deficit pertaining to the financing of construction of the Algerian Cement Company’s (ACC) plant
(an indirectly owned subsidiary) to a maximum of US$ 52.0 million. The Company is also committed to maintain, directly or indirectly,
an ownership interest of at least 51% in ACC’s capital.

OCI is committed to cover the deficit, if any, in financing the construction of Pakistan Cement Company (an indirect subsidiary) to a
maximum of US$ 43.0 million in favor of lending banks for this subsidiary.

Orascom Construction Industries Annual report 2006 81

Notes to the consolidated financial statements continued

32 Financial instruments and related risk management

The financial instruments of OCI and its subsidiaries are represented in the financial assets (cash, banks, investments in securities,
accounts receivable and some debtors and debit accounts) and financial liabilities (banks-overdraft, short-term loans, long-term loans,
suppliers and subcontractors, notes payable and some creditors and credit accounts) in the consolidated balance sheet. The Group is
exposed to risks relating to interest rates, credit, liquidity and currency arising from the financial instruments it holds. The Group does
not use derivative financial instruments for speculative purposes. The risk management policies employed by the Group to manage
these risks are as follows.

Interest Rate Risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group
is exposed to interest rate risk in relation to its interest-bearing assets and borrowings. Interest-bearing assets and borrowings issues
at variable rates expose the Group to cash flow interest rate risk. Borrowings at fixed rates expose the Group to fair value interest
rate risk. The interest rates on the Group’s borrowings are shown in note (19). The Group’s management monitors the interest rate
fluctuations on a continuous basis and act accordingly.

Credit Risk
Credit risk is represented in the ability of customers to pay their debts. To limit this risk, OCI and its subsidiaries provide credit only to
government entities, associated companies, and a large number of credits worthy private sector customers. For specific activities in
certain cases, insurance is concluded regarding country risk.

Liquidity Risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match or when the Group is unable to liquidate
its assets with values that approximate their fair values to meet the Group’s liabilities. While an unmatched position may enhance
profitability, it can also increase the risk of losses. To manage the liquidity risk, the Group’s management aims to have sufficient
amounts of cash, available finance and credit facilities to discharge the liabilities when due and minimizes potential losses. For
construction contracts, attention is paid to obtaining a pre-financing by the client.

Currency Risk
Currency risk is the risk that the value of the financial instruments will fluctuate due to changes in foreign currency exchange rates.
Currency risk arises when the transactions and recognized assets and liabilities are denominated in a currency that is not the Company’s
functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to
foreign operations. The Group manages this risk by monitoring the exchange rates fluctuations on a continuous basis and by matching
its liabilities in foreign currencies with its sources of funds in foreign currencies.

Fair Value
A number of the Group’s accounting policies and disclosures require determination of fair value for both financial and non financial
assets and liabilities. Fair values have been determined for measurement purposes based on the following methods:

Property plant and equipment

The fair values of property, plant and equipment recognized as a result of a business combination are based on market values.

Inventory
The fair values of inventory acquired in a business combination is determined based on its estimated selling price in the ordinary course
of business less the estimated cost of completion and sale, and a reasonable profit margin based on the effort required to complete
and sell the inventory.

Trade and other receivables

The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash
flows, discounted at the market rate of interest.

Derivatives
The fair value of forward exchange is based on their listed market price or, if not available, the difference between the contractual
forward price and the current forward price for the residual maturity of the contract.

The fair value of interest rates swaps is based on broker quotes tested for reasonableness by discounting estimated future cash flows
using market interest rates for similar instruments at the measurement date.

Investments in equity securities

The fair values of financial assets at their fair value through profit or loss and investments available for sale are determined by reference
to their quoted bid prices at the reporting date.

82 Orascom Construction Industries Annual report 2006

 33 Related Parties transactions
The intra-group transactions, balances and unrealized profits or losses have been eliminated. Transactions with non-consolidated
companies and joint ventures are in the normal course of business at arms’ length prices. The aggregate sales to the associated
companies during the year amounted to LE 321.5 million and these associates supplied the Group by an amount of LE 176.9 million.

Balances with non-consolidated companies and joint ventures are reported in the consolidated balance sheet under due from and due
to related parties, as follow:

33.1 Due from Related Parties

Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Joint Ventures 6,522 9,188 37,765

Egyptian Company for Investment & Development 4,524 4,416 4,572
National Pipe Company 55 4,722 4,245
Orascom Telecom Holding 571 7,985 10,516
National Equipment 1,120 1,333
Orascom Trading 725 1,810 1,423
Al Yamama Orascom United 8,250 4,684
United Cement Nigeria 3,760
MEPECO 60,361
Other companies 2,467 545 2,671

Total 23,114 98,591 62,525

33.2 Due to Related Parties

Description 31/12/2006 31/12/2005 31/12/2004
LE’000 LE’000 LE’000

Joint Ventures 12,799 9,648 15,303

United Paints and Chemicals 9,131 9,131
Other companies 24 191 125

Total 21,954 18,970 15,428

Orascom Construction Industries Annual report 2006 83

Selected financial data
years ended 31 December

Supplementary financial information in Egyptian Pounds

The selected consolidated financial data for the five years ended 31 December 2005 has been extracted without material adjustment
from the consolidated financial statements of the Company. The selected data should be read in conjunction with the consolidated financial
statements and the notes thereto reported upon by KPMG Hazem Hassan, the Company’s auditor.

31/12/2002 31/12/2003 31/12/2004 31/12/2005 31/12/2006

LE ‘000 LE ‘000 LE ‘000 LE ‘000 LE ‘000

Income Statement Data

Revenue
Construction revenue 1,784,254 3,208,807 6,413,365 9,070,808 13,147,511
Cement revenue 946,475 1,242,102 2,254,847 3,295,247 4,948,099
Concessions / materials revenue 405,503 506,559 597,790
Elimination of intra-group revenue (225,397) (554,324) (710,208) (999,461) (1,620,411)

Total revenue 2,910,835 4,403,144 8,555,794 11,366,594 16,475,199

Cost of services and goods sold

Construction cost 1,507,811 2,661,612 5,391,593 7,836,426 10,836,670
Cement cost 539,418 737,584 1,106,026 1,585,456 2,288,961
Concessions / materials cost 299,873 386,007 429,644
Elimination of intra-group cost (195,715) (591,721) (726,331) (1,020,566) (1,616,518)

Total cost of services and goods sold 2,151,387 3,193,482 6,200,932 8,401,316 11,509,113

Selling, general and admin expenses 169,768 264,510 522,681 719,723 1,149,458

Income from operations 589,680 945,152 1,832,181 2,245,555 3,816,628

Other income and expenses

Interest income 66,723 9,971 14,889 61,983 106,356
Foreign exchange gain (loss) 102,954 245,117 (1,482) (73,089) 210,085
Income from investments 3,469 9,043 (117) (5,414) 13,762
Gain (loss) on sale of investments (17,267) 1,975 19,721 27,678 51,846
Net change in market value of investments 100,082 21,050
Other income 10,045 6,088 28,139 20,366 72,991
Interest expense (282,361) (263,382) (329,583) (392,285) (567,080)
Gain (loss) on sale of equipment 2,062 (3,187) 507 35,279 5,475
Negative goodwill amortization 76,755 312,968
Profit on intra-group construction (425) (97,895) (59,720) (29,283) (181,126)

Net other income (expense) (114,800) (92,270) (250,891) 58,285 (266,641)

Income before taxes and minority interest 474,880 852,882 1,581,290 2,303,840 3,549,987

Provision for income taxes (8,966) (28,637) (77,212) (114,443) (136,378)

Minority interest (102,062) (265,959) (402,790) (489,167) (742,891)

Net income 363,852 558,286 1,101,288 1,700,230 2,670,718

Per share information

Earnings per share 1 3.60 5.56 5.63 8.65 12.93
Cash dividend per share 2 0.47 0.71 0.85 1.89 5.50

84 Orascom Construction Industries Annual report 2006

 31/12/2002 31/12/2003 31/12/2004 31/12/2005 31/12/2006
LE ‘000 LE ‘000 LE ‘000 LE ‘000 LE ‘000

Balance Sheet Data

Cash and cash equivalents 787,494 917,421 1,576,363 2,168,316 2,738,067
Accounts receivable - customers (net) 480,413 585,456 1,653,045 1,678,902 3,196,684
Total current assets 2,452,851 2,881,439 5,666,664 8,182,779 11,008,340
Property, plant and equipment (net) 2,862,359 3,610,567 5,518,146 6,672,420 9,104,053
Assets under construction 842,661 1,378,012 1,177,638 2,134,916 6,441,241

Total assets 6,327,433 8,111,499 12,531,126 17,610,360 28,616,330

Short-term debt 757,958 714,442 982,983 1,343,855 2,987,693

Accounts payable 1,303,782 1,170,655 3,132,092 3,353,496 5,868,789
Total current liabilities 2,273,796 2,106,588 4,430,462 5,245,180 9,865,069
Total long term liabilities 1,737,873 2,701,129 3,569,400 6,135,671 7,591,153
Minority interest 876,293 1,145,553 1,486,917 1,965,285 2,488,380
Total shareholders’ equity 1,439,471 2,158,229 3,044,347 4,264,224 8,671,728

Total shareholders’ equity and liabilities 6,327,433 8,111,499 11,044,209 15,645,075 26,127,950

Other Data
Return on sales 3 12.50% 12.68% 12.87% 14.96% 16.21%
Return on equity 4 27.09% 31.04% 42.34% 46.53% 41.29%
Current ratio 5 1.08 1.37 1.28 1.56 1.12
Net debt to equity ratio 6 0.74 0.76 0.66 0.85 0.70

1 Net income available for shareholder dividends, after deducting the employees’ profit share, divided by the weighted average
number of shares outstanding during the period.
2 Total cash dividend paid for each year divided by current number of shares of 190,575,000.
3 Net income as a percentage of sales.
4 Net income as a percentage of average total shareholders’ equity.
5 Current assets to current liabilities.
6 Net debt to internal finance (shareholders’ equity plus minority interests).

Orascom Construction Industries Annual report 2006 85

Selected financial data continued
years ended 31 December

Supplementary financial information in US$

The selected consolidated financial data for the five years ended 31 December 2005 has been extracted without material adjustment from the
consolidated financial statements of the Company. The selected data should be read in conjunction with the consolidated financial statements
and the notes thereto reported upon by KPMG Hazem Hassan, the Company’s auditor.

31/12/2002 31/12/2003 31/12/2004 31/12/2005 31/12/2006

US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000

Income Statement Data

Revenue
Construction revenue 356,851 519,224 1,058,311 1,558,558 2,286,524
Cement revenue 189,295 200,987 372,087 566,194 860,539
Concessions / materials revenue 81,101 81,967 98,645
Elimination of intra-group revenue (45,079) (89,696) (117,196) (171,729) (281,811)

Total revenue 582,167 712,483 1,411,847 1,953,023 2,865,252

Cost of services and goods sold

Construction cost 301,562 430,682 889,702 1,346,465 1,884,638
Cement cost 107,884 119,350 182,513 272,415 398,080
Concessions / materials revenue 59,975 62,461 70,898
Elimination of intra-group cost (39,143) (95,748) (119,857) (175,355) (281,134)

Total cost of services and goods sold 430,277 516,745 1,023,256 1,443,525 2,001,585

Selling, general and admin expenses 33,954 42,801 86,251 123,664 199,906

Income from operations 117,936 152,937 302,340 385,834 663,761

Other income and expenses

Interest income 13,345 1,613 2,457 10,650 18,497
Foreign exchange gain (loss) 20,591 39,663 (245) (12,558) 36,537
Income from investments 694 1,463 (19) (930) 2,393
Gain (loss) on sale of investments (3,453) 320 3,254 4,756 9,017
Net change in market value of investments 17,196 3,661
Other income 2,009 985 4,643 3,499 12,694
Interest expense (56,472) (42,618) (54,387) (67,403) (98,623)
Gain (loss) on sale of equipment 412 (516) 84 6,062 952
Negative goodwill amortization 12,666 53,775
Profit on intra-group construction (85) (15,841) (9,855) (5,031) (31,500)

Net other income (expense) (22,960) (14,930) (41,401) 10,015 (46,372)

Income before taxes and minority interest 94,976 138,007 260,939 395,849 617,389

Provision for income taxes (1,793) (4,634) (12,741) (19,664) (23,718)

Minority interest (20,412) (43,035) (66,467) (84,049) (129,198)

Net income 72,770 90,338 181,731 292,136 464,473

Per share information

Earnings per share1 0.72 0.90 0.93 1.49 2.25
Cash dividend per share2 0.09 0.11 0.14 0.32 0.96

86 Orascom Construction Industries Annual report 2006

 31/12/2002 31/12/2003 31/12/2004 31/12/2005 31/12/2006
US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000

Balance Sheet Data

Cash and cash equivalents 157,499 148,450 260,126 376,444 478,683
Accounts receivable - customers (net) 94,734 94,734 272,780 291,476 558,861
Total current assets 490,570 466,252 935,093 1,420,621 1,924,535
Property, plant and equipment (net) 572,472 584,234 910,585 1,158,406 1,591,618
Assets under construction 168,532 222,979 194,330 370,645 1,126,091

Total assets 1,265,487 1,312,540 2,067,843 3,057,354 5,002,855

Short-term debt 151,592 115,606 162,208 233,308 522,324

Accounts payable 260,756 189,426 516,847 582,204 1,026,012
Total current liabilities 454,759 340,872 731,099 910,622 1,724,663
Total long term liabilities 347,575 437,076 589,010 1,065,221 1,327,125
Minority interest 175,259 185,365 245,366 341,195 435,031
Total shareholders’ equity 287,894 349,228 502,367 740,317 1,516,036

Total shareholders’ equity and liabilities 1,265,487 1,312,540 1,822,477 2,716,159 4,567,824

Other Data
Return on sales 3 12.50% 12.68% 12.87% 14.96% 16.21%
Return on equity 4 25.90% 28.36% 42.68% 47.02% 41.17%
Current ratio 5 1.08 1.37 1.28 1.56 1.12
Net debt to equity ratio 6 0.74 0.76 0.66 0.85 0.70
Foreign exchange rate (LE = US$ 1) 5.00 6.18 6.06 5.76 5.72
Foreign exchange rate (LE = US$ 1) PL 5.82 5.75

1 Net income available for shareholder dividends, after deducting the employees’ profit share, divided by the weighted average
number of shares outstanding during the period.
2 Total cash dividend paid for each year divided by current number of shares of 190,575,000.
3 Net income as a percentage of sales.
4 Net income as a percentage of average total shareholders’ equity.
5 Current assets to current liabilities.
6 Net debt to internal finance (shareholders’ equity plus minority interests).

Orascom Construction Industries Annual report 2006 87

Management and corporate information

Board of Directors Corporate Officers Construction Group

Eng Onsi Sawiris Mr Nassef Sawiris Eng Osama Bishai
Chairman Director and Chief Executive Officer Managing Director
OCI Construction
Mr Nassef Sawiris Mr Salman Butt
Director Chief Financial Officer Mr Johan Beerlandt
Chief Executive Officer
Eng Mohamed Youssef Mr Nicolas Estay BESIX Group
Director Executive Vice President – Europe
Mr Karim Camel-Toueg
Eng Maged Abadir Mr Adel Bishai President, Contrack Group
Director Corporate Governance Director

Eng Osama Bishai Ms Dalia Khorshid

Director Corporate Treasurer Cement Group
Mr Karim Camel-Toueg Mr Fady Kiama Eng Milad Bishay
Director Corporate Controller Cement Group Director

Mr Alaa Saba * Mr Hussein Marei Mr Nassef Sawiris

Non-executive Director General Counsel Managing Director, ECC

Dr Tarek Hatem * Mr Kevin Struve Mr Ayman Anis

Non-executive Director Strategic Planning Director Managing Director, ACC

Eng Mohamed Farouk Abdel Moneim * Mr Hassan Badrawi Mr Ahmad Heshmat

Non-executive Director Investor Relations Director Managing Director, PCC

Mr Osama Elrefaie
* Members of the Audit Committee Managing Director, UCC

Mr Valentin Tunon
Chairman, Group GLA

Investor Relations Shareholder Information

Ms Sarah Makiya Corporate Office

sarah.makiya@orascomci.com
Mr Omar Darwazah
omar.darwazah@orascomci.com
Tel: +20 22 461 1036
Nile City South Tower
2005A Corniche El Nil
Cairo, Egypt 11221
Tel: +20 22 461 1111
Fax: +20 22 461 9400

www.orascomci.com

Full Listing: Cairo & Alexandria Stock Exchange

Reuters / Bloomberg: OCIC.CA / ORCI EY

GDRs Listed: London Stock Exchange

Reuters / Bloomberg: OCICq.L / ORSD LI

88 Orascom Construction Industries Annual report 2006

Business segments and activities

Construction Group Cement Group

OCI Construction Activities Egyptian Cement Company (53.7%)
Regional engineering, procurement and construction services Cement manufacturer
BESIX Group (50%) Algerian Cement Company (100%)
Global engineering, procurement and construction services Cement manufacturer
Contrack Group (100%) Pakistan Cement Company (62.75%)
Engineering, procurement and construction services on U.S. Cement manufacturer
government-financed projects
United Cement Company (60%)
Cementech Limited (100%) Tasluja cement plant operator in northern Iraq
Specialized engineering, procurement and construction services
OCI Cimento (100%)
on cement plants
Cement manufacturer in Turkey
Orascom Road Construction (90%)
Group GLA (50%)
Asphalt and concrete paving
Aggregates, ready-mix concrete and cement importer in Spain
National Steel Fabrication (50%)
Ciment Blanc d’Algerie (100%)
Steel cutting, bending, welding, and painting services
Cement manufacturer
Alico Egypt (50%)
Bazian Cement Company (65%)
Building facade, curtain walling, and window systems
Cement manufacturer in northern Iraq
Emirates Cement Company (49%)
Concessions / Industrial Cement manufacturer

Suez Industrial Development Company (60.5%) United Cement Company of Nigeria (UNICEM) (70%)
Industrial park developer and operator Cement manufacturer

Egyptian Container Handling Company (50%) Sudacem (49%)

Stevedoring services at Adabiya port Cement import terminal in Sudan
– Sokhna Port Development Company (85%) Baticim Cimento (21.6%)
Stevedoring services at Sokhna port Cement manufacturer in Turkey
Egyptian Basic Industries Corporation (30%) OCI Cement Trading (100%)
Ammonia fertilizer manufacturer Global cement trader
Ready Mix Egypt (100%)
Other Building Materials Aggregates and ready-mix concrete
Ready Mix Algeria (100%)
United Paints & Chemicals (50%)
Aggregates and ready-mix concrete
Pre-blended dry plaster, putty, and tile adhesives
– Egyptian Gypsum Company (50%) National Bag Company (75%)
Gypsum manufacturer Cement, building materials and foodstuff bags
– MBT Egypt (50%)
Algerian Bags Company (100%)
Construction chemicals
Cement, building materials and foodstuff bags
– A-Build Egypt (50.1%)
Waterproofing contractor EgyptSack (100%)
Cement, building materials and foodstuff bags
National Pipe Company (40%)
Concrete pipe
SCIB Chemical (15%)
Paints and building chemicals

designed by dmicreative + 44 (0) 20 7993 2583

Orascom Construction Industries
Nile City Tower
2005A Corniche El Nil
Cairo, Egypt 11221

Tel: +20 22 461 1111

Fax: +20 22 461 9400