Since Orascom Group had been serving fast-growing markets for cement and related construction materials, why did it choose to sell this division in 2007?

Question

What will be an ideal response?

Answer 1

The official reason was to concentrate on higher growth, high technology sectors, notably mobile
telecommunications in emerging economies (where conventional landlines are limited and obsolete,
making a leapfrog to mobile networks attractive), lower cost upgrading prospect. Orascom may have
decided to divest its cement business to realise capital for reinvestment elsewhere, but that will depend
on the decisions made by its main shareholders.
Factual update on subsequent developments
The 2008 global financial crisis has had a significant, albeit delayed impact on Lafarge. Turnover in
2008 was €19 billion, but down in 2009 to €15.8 billion and €16.2 billion in 2010. Group annual net
profits before tax declined over the last four years: €2.8 billion in 2007; €2.4 billion in 2008; €1.3 billion
in 2009; €1.4 billion in 2010. Lafarge has embarked on systematic disposal of its gypsum (plasterboard)
businesses in whole or by selling a stake to third parties, funds to be reinvested in other parts of its
portfolio that appear to be performing acceptably. In hindsight it is open to speculation whether it would
have acquired Orascom Cement.
rascom demerged into Telecom (OT); Construction Industries (OCI) and Development Holdings (ODH),
the latter focusing on developing tourist resorts. Telecom has had a turbulent period, given its
commitments in Egypt, various North African countries, Pakistan and North Korea. It too might have
made different decisions, given hindsight, but is pressing ahead in what must surely be growth markets
for the future and it remains profitable. However, it has implemented some major divestments, signalling
difficulties too. OCI and ODH have not performed particularly well financially, but appear to be stable
and should enjoy future growth.