Shikun & Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison and managed by Yuval Dagim, will build a new airport in Hoima district, Uganda. The company today reported to the Tel Aviv Stock Exchange (TASE) that an agreement between its SBI subsidiary, which is responsible for the group’s contracting activity, and the Ugandan government has entered into effect.
Construction of the airport, which is being built in order to support development of the oil industry in the region, is scheduled to take three years in rural territory in the oil drilling area near the city of Hoima and Lake Albert in northwestern Uganda.
The price for the project is estimated at $309 million, and is designated for payment during the construction period. UK ministerial department UK Export Finance (UKEF) and a commercial bank are financing the project. SBI has received an advance amounting to 10% of the project’s price.
Work on the project includes building 3.5 kilometers of takeoff and landing runways, development and drainage work, asphalt, concrete, electromechanical work, navigation and communications systems, construction of a terminal building for cargo, a control tower, and other residential and service buildings.
Shikun & Binui adds, “To the best of the company’s knowledge, the Ugandan government is planning to qualify the airport as an international airport serving passengers that will be the country’s second largest airport.”
Shikun & Binui’s share price was down slightly. The share price has climbed 9% over the past year, pushing the company’s market cap up to NIS 3.4 billion.
Dagim stated, “The selection of SMI proves again the great trust parties ordering work in African countries have in the company’s ability to successfully and efficiently construct complicated engineering infrastructure projects. This project follows a long series of projects that the company has carried out, and is still carrying out, in order to improve the quality of infrastructure in these countries.”
Most of Shikun & Binui’s activity in Africa takes place in Nigeria, where there has been great upheaval since 2015, following the steep downturn in oil prices that caused a share devaluation in the local currency, the naira, and a halt in projects in the country for a prolonged period.
The crisis in Nigeria reduced Shikun & Binui’s revenue by 18% to NIS 5.1 billion in 2015, following a $163 million (NIS 640 million) drop in revenue from construction projects in Nigeria. The fall in revenue cut the company’s annual gross profit to NIS 875 million (the gross profit rate remained unchanged at 17%) and its operating profit to NIS 601 million, but its net profit was down only 1% to NIS 425 million.
Shikun & Binui resumed its growth in 2016, with a 6.1% rise in revenue to NIS 5.4 billion and a 9% gain in net profit to NIS 480 million.
The Nigerian crisis pushing Shikun & Binui’s share price into a downward spiral in the second half of 2015, but recovery followed in 2016 simultaneously with the resumption of activity in the country and further growth in the company’s other activities. The company’s share price reached a new record in May 2017 (and then resumed its downward path).