Q: Could you tell me about your background and your current role as the director of OCI?
Bishai: I have been working in OCI now for 27 years; I joined the company right after I graduated from Cairo University’s Faculty of Engineering. At that time, the group was relatively small and I was part of this growing business and success story.

I spent some time in the US during the establishment of our US business, also developing the fertilizer business in Algeria and expanding the construction business in Algeria and Saudi Arabia.

Q: The group’s consolidated net income for the first nine months of 2011 showed a 35% increase over 2010. Considering the turmoil in Egypt and the region, how has the company managed to maintain such a strong growth rate?
Bishai:  A portion of our profits came on the back of the construction business’s performance, but an even bigger contributor was the rising price of fertilizers in 2011 compared to 2010. We had also acquired a Dutch fertilizers (DSM) plant in 2010 and so a combination of both contributed to this strong growth.

Furthermore, as a company, we have a great degree of immunity to certain cyclicality in Egypt due to the fact that our business is internationally diversified. Even our fertilizer plants that are based in Egypt export all their production.

Q: How much does Egypt contribute to the construction business’s bottom line? And how has the construction business in Egypt fared in 2011 compared to 2010? Has the company’s local backlog shrunk?
Bishai: Egypt contributes around 24% of our revenues and bottom line in the construction business. Surprisingly, our local construction business in 2011 was quite successful. You have to note that the real impact of this year’s events on the construction sector will be clearer in 2012. This is due to the fact that any project that has started in 2010, the financing has been secured and was actually implemented in 2011.

An example of that is our Assiut barrage project, it was designed and the tender held in 2010 then awarded at the end of 2011. Also, the power sector in Egypt has not been affected – perhaps a minor slowdown at the beginning of the year —but all the projects now are ongoing and have secured their funding. The projects that are on track have not been stopped or derailed and business is continuing despite of the events.

As for 2012, we are not pessimistic as a company because we are diversified geographically and so even if there is a slowdown in Egypt we will be able to offset this with business elsewhere.

Q: Have the company’s operations been affected in any way after the revolution? For example was it easy to relocate and secure your machinery at different construction sites?
Bishai: We had some minor difficulties during the curfew period; there was a limitation in people’s mobility and we had one or two sites that were close to Tahrir so those were affected a bit.  Once the curfew ended, however, our operations returned to normal. In general, I would say those were minor slowdowns, but there was no negative impact.

Q: There were reports that OCI is seeking partnerships with local real estate developers in return for completing contracting services on their incomplete projects, as was the case most recently with Palm Hills’ Village Gardens projects. Is there any truth to this? And, if so, is this a part of OCI’s larger strategy or a one-time event?
Bishai: It’s not a partnership per se, but there are some real estate developers that, in addition to being business for us, they benefit from having a reliable contractor on the ground; it gives confidence to their clients.

We do our due diligence with our clients so they know that we will never — to the best of our capabilities — embark on a project where finance will not be available. This is what we are doing, there are two or three developers whose financing we feel is secured and we can work with them.

Q: Can you explain how a contract for public infrastructure or any government contracted work is implemented while pointing out the difficulties and inefficiencies that OCI faced with its dealings with the previous regime? Have there been any changes since January 2011?
Bishai:  Let’s not mix construction with politics. All the entities that contract work have their own systems and procedures. The majority of the work we receive has some international component involved. The barrage, the new metro line and power plants are all financed by international institutions. So there are systems and procedures and there is a tender law that is respected by all parties. 

And as far as the actual tenders are concerned, I have to admit that the majority of the projects that we get involved in that have an international component, the terms and conditions are very clear and the procedures are very clear as well. So it has nothing to do with politics.

Q: In terms of policy and regulation, what, in your opinion, is the biggest policy hurdle that relates to construction that you think the future government must address?
Bishai: Right now the main problem is that there is a slowdown in decision-making, and we are worried that there won’t be many infrastructure projects that are 100% locally financed due to the financial situation.

We would also like to see more technical evaluation to the contractors so it isn’t strictly awarded on lowest price. We want to see more awards based on ‘best value,’ which is a combination of technical qualification and compliance in addition to responsive prices.

Q: Four years ago, OCI divested its cement activities and announced that the decision was to allow it to focus on and grow its construction activities. Today, however, the construction business only constitutes 30% of your consolidated income with the remaining 70% coming from fertilizers. Has the company realized a better opportunity in fertilizers? 
Bishai: The divestment was a transaction for the benefit of shareholders. We had reached a point in the cement expansion where the next step would have been either to merge with or acquire another cement group. This was not possible since our cement business was mixed with the construction business.  Mind you, it was not a real divestment as our principle shareholders and founders have swapped shares and became major shareholders and board members in Lafarge.

Our fertilizer business had started while we were building the cement in early 2000. We were actually involved in fertilizers even before OCI’s initial public offering so it was an ongoing activity.

After the divestment, we wanted to have a second leg next to our construction business as we always try to create a model where we have an industrial capability. This helps to create a continuous revenue stream and hedges the construction business from cyclicality; that’s why we focused on fertilizers. bt