Revenue – USD962mn, -16.0% Y-o-Y, -6.0% Q-o-Q; -3.8% vs. EFGe EBITDA margin – 4.2%, 3Q15: 5.4%, 2Q16: 4.9%; EFGe: 5.0% Net profit – USD26.0mn, +6.1% Y-o-Y, -1.1% Q-o-Q; EFGe: +18.2%   Orascom Construction Limited (OC) reported its 3Q16 financial results. New awards were relatively weak, with the majority (c76%) brought-in by Weitz and Contrack, with the balance coming from Egypt (cUSD180mn). Revenue roughly met expectations, but EBITDA margin was weak (4.2%), dragged down by negative margins in the US. We highlight the improved performance of BESIX as the main positive aspect of the results, which -together with lower- than-expected finance charges- contributed to the 18% earnings beat.   Positives Revenue came in roughly in line with estimate (variance: -3.8%) coming in at USD962mn, (-16.0% Y-o-Y, -6.0% Q-o-Q), roughly equally split between MENA and US operations. 9M16 revenue totalled USD2,959mn (-2.0% Y-o-Y) Improved income from BESIX, contributing USD16.6mn (3Q15: USD1.1mn, 2Q16: USD8.6mn), bringing 9M16 total contribution to USD30.7mn (9M15: USD17.6mn) Net cash position maintained, at USD236mn, albeit slightly lower than the USD299mn reported in June 2016 Better management of working capital cycle, with positive working capital of USD222mn in 9M16, compared to USD55mn in 9M15 Net income beat our estimate (variance: 18.2%), coming in at USD26.0mn (+6.1% Y-o-Y, +-1.1% Q-o-Q). 9M16 net income was USD75.4mn (+17.3% Y-o-Y). The beat came on the back of lower-than-expected interest expense and higher-than-expected income from BESIX, which more than compensated for the weakness in EBITDA   Negatives Relatively weak awards for the quarter, totalling USD756mn (3Q15: USD483mn, 2Q16: USD2,222mn). 9M16 new awards were USD3,487mn (-7.1% Y-o-Y). We estimate awards of USD3.6bn for 2016e. The backlog reached USD7.5bn in September, roughly unchanged Q-o-Q. We expect a c9% downward adjustment for backlog in December, as the translation of the EGP-denominated backlog takes effect (c26% is denominated in EGP) Weak EBITDA margin of 4.2%, the weakest of record (saved for 4Q15, which carried the heavy losses from the Iowa project). The drag came from the company’s operations in the US, which reported negative EBITDA margins of 3.2% in 3Q16 and 0.4% in 9M16. MENA EBITDA margin was healthy, at 11.7% in 3Q16 and 9.8% in 9M16   We expect OC to start 2017 with c9% lower backlog Y-o-Y, as the translation of the EGP-denominated backlog takes effect. This will have a negative implication on revenue, which we assume will see a 6.1% drop. EBITDA margin, on the other hand, will expand by 10bps Y-o-Y to 4.85%, in our numbers, helped by improved margins on FX-denominated contracts in Egypt (c26% of total backlog) and on less severe drag from the US portfolio. Borrowing will grow as the company funds the cost overruns from the Iowa project, but we expect the company’s net cash position to be maintained through the year. (Company disclosure, Mai Attia, Sara Boutros)   Orascom Construction Limited: EGP95.86 as of 21 November 2016, Rating: Neutral, FV: EGP93.63 per share, MCap: USD654 million, ORAS EY / ORAS.CA