Last checked at 16 Dec 2008 16:07
AL EZZ STEEL REBARS REPORTS CONSOLIDATED THIRD QUARTER 2008 RESULTS
Cairo, 16 December 2008 - Al Ezz Steel Rebars S.A.E. ("ezzsteel") (EGX: ESRS; London Stock Exchange: AEZD), the largest producer of steel in the MENA region and market leader in Egypt, today announced its consolidated third quarter results for the period ending 30 September 2008. The audited results have been prepared in accordance with Egyptian Accounting Standards.
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Key highlights
| EGP | 9M 2007 | 9M 2008 | YoY+/- |
| Net sales | 12.0bn | 17.4bn | +45% |
| Gross profit | 2.9bn | 4.1bn | +43% |
| EBITDA* | 3.2bn | 4.2bn | +32% |
| Net profit before tax | 2.2bn | 3.4bn | +56% |
| Tax and deferred tax | 442mn | 674mn | +53% |
| Net profit after tax and minority interests | 917mn | 1,520mn | +66% |
| EPS on a weighted average number of shares | 5.12 | 8.49 | +66% |
| Net debt to Equity | 0.99x | 0.33x | |
*EBITDA = sales - cost of goods sold - selling & marketing expense - G&A expense + depreciation and amortisation
Commenting on the results, Mr Paul Chekaiban, Managing Director, said:
"ezzsteel saw exceptional growth during the third quarter of 2008 as a result of record global and domestic steel demand and prices. The extra-ordinary performance of the first nine months of 2008 was an outstanding achievement. This has enabled us to build a robust balance sheet, which, coupled with the solid demand in our domestic market, will help us to effectively confront the global slowdown that has taken place since the close of the period."
Operational Review
Sales
All of the below financial breakdowns are based on ezzsteel's consolidated financials which include three quarters of financial performance for ezzsteel (ESR/ESM), EZDK and EFS.
| Sales | ESR/ESM | EZDK | EFS | Total |
| EGP Mn | ||||
| Long | 5,112 | 6,450 | 11,562 | |
| Flat | 2,389 | 3,294 | 5,684 | |
| Others | 0 | 121 | 1 | 122 |
| Total | 5,112 | 8,961 | 3,295 | 17,368 |
Consolidated net sales for 9M 2008 were EGP 17.4 billion compared with EGP 12 billion during 9M 2007, representing an increase of 45% per cent. Long steel products accounted for 67 per cent of total sales and flat steel products represented 33 per cent of sales in 9M 2008.
The contributions of ESR/ESM, EZDK and EFS to net sales for the period ending 30 September 2008 were 29 per cent, 52 per cent, and 19 per cent respectively.
| EGP Mn | Domestic | per cent | Export | per cent |
| Long | 11,446 | 99% | 96 | 1% |
| Flat | 2,192 | 38% | 3,492 | 61% |
Sales of long products constituted the largest proportion of consolidated net sales in the period as demand within the Egyptian market remained robust. Again, long product sales were primarily directed towards servicing the construction growth within the local market, with only 1% of long products exported. The majority of flat product is exported, with a similar proportion as in the first 9 months of 2007.
Production
Long products production for 9M 2008 reached 2,370,742 tonnes compared with 2,335,569 during 9M 2007, representing a slight year-on-year increase.
Flat products production for 9M 2008 was 1,227,231 tonnes, a slight decrease from 9M 2007 production of 1,259,209 tonnes. Flat steel production volumes at EZDK were lower than Q2 2008 as a result of damage to an electrical transformer that resulted in a 27 day shutdown of the flat products facility in July.
Cost of Goods Sold
Consolidated cost of goods sold for 9M 2008 represented 76 per cent of consolidated net sales. Despite inflation in global raw material costs, this ratio was managed at the same level from 9M 2007.
Gross profit
Gross profit of EGP 4.1bn in 9M 2008 represented an increase of 43 per cent over the EGP 2.9bn recorded in 9M 2007, largely as a result of record selling prices during the quarter. Despite cost inflation, the company maintained a gross profit margin of 24%, as the benefits of its integration strategy were felt.
EBITDA
EBITDA for the period reached EGP 4.2 billion, up from EGP 3.2 billion for the same period in 2007 representing an increase of 32 per cent.
Tax and deferred tax
ezzsteel continues to be one of the largest corporate tax payers in Egypt with Tax and Deferred Tax amounting to EGP 674 million in 9M 2008, up from EGP 442 million in 9M 2007.
Net profit after tax and minority interests
In 9M 2008, net profit after minority interests was EGP 1.5billion, up 66 per cent from the comparable period in 2007.
Correspondingly, the earnings per share of EGP 8.49 in 9M 2008 was 66% higher than EGP 5.12 per share reported in 9M 2007 on a weighted average number of shares basis.
Stand Alone Performance - Divisional Overview
| EZDK Performance |
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| Sales (EGP): | Sep-07 | Sep-08 |
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| Value | 6.6 | 9.0 | BN | ||
| Volume |
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| Long | 1,379,614 | 1,308,415 | Tonnes | ||
| Flat | 574,293 | 531,739 | Tonnes | ||
| Export as % of Sales |
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| Long | 11% | 2% |
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| Flat | 47% | 37% |
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| EBITDA | 2.7 | 3.7 | BN | ||
| Production | Sep-07 | Sep-08 |
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| Long Product | 1,316,354 | 1,355,476 | Tonnes | ||
| Flat Product | 566,154 | 527,185 | Tonnes | ||
| Billets | 1,403,100 | 1,428,025 | Tonnes | ||
| ESR/ERM Performance |
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| Sales (EGP): | Sep-07 | Sep-08 |
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| Value | 3.4 | 5.1 | BN | ||
| Volume | 1,045,729 | 1,007,492 | Tonnes | ||
| Export as % of Sales | 9% | 1% |
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| EBITDA | 282 | 414 | Mn | ||
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| Production | Sep-07 | Sep-08 |
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| Long | 1,019,215 | 1,015,266 | Tonnes | ||
| Billets | 598,257 | 524,667 | Tonnes | ||
| EFS Performance |
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| Sales (EGP): | Sep-07 | Sep-08 |
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| Value | 2.2 | 3.3 | BN | ||
| Volume | 668,080 | 712,682 | Tonnes | ||
| Export as % of Sales | 72% | 80% |
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| EBITDA | 223 | 50 | MN | ||
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| Production | Sep-07 | Sep-08 |
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| Flat Product | 693,055 | 700,046 | Tonnes | ||
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Liquidity and capital resources
ezzsteel completed a successful EGP1.1 billion bond issue in June and conducted a capital increase of EGP1.8 billion by way of a rights issue in September.
At the end of the period, ezzsteel had cash on hand of EGP 3.7 billion and net debt of EGP 2.8 billion. The company has a conservative level of gearing of Net Debt / Equity of 0.33 times, and Net Debt / Annualised EBITDA of 0.51 times.
During the period, ezzsteel increased its stake in EZDK from 50.28% to 53.24%.
Outlook
Global steel prices have collapsed in the face of a significant fall in demand, and this will continue to have an impact on domestic prices which are linked to global markets. However, the price of raw materials and consumables have also fallen sharply, and although there will be a period of adjustment, margins will in due course reflect this.
Despite the global slowdown, which will impact export markets, local demand is still very strong, in particular in respect of private house building. A Government stimulus package is also expected to support demand for long products in Egypt.
ezzsteel's choice of technology allows it increased flexibility to adjust production without undue cost or damage to production facilities. An example of this flexibility, was the recent suspension of production at EFS, during which major maintenance planned for 2009 was implemented.
ezzsteel's flexible processes mean that it can take advantage of changes to raw material costs and balance its requirements across scrap, DRI or billet accordingly. ezzsteel's proactive procurement policy has also diversified sourcing consumables away from western suppliers to a greater proportion of Asian suppliers with a direct impact on costs.
- Ends -
For further information:
| Ezz Steel | Tel | Mobile |
| Kamel Galal | + 20 2 3762 2144 | + 20 10 539 5499 |
| Capital MS&L | ||
| Jennifer Martin | + 44 20 7307 5335 | |
| Supriya Mathur | + 44 20 7307 5347 | + 44 7725 952 314 |
About Al-Ezz Steel Rebars Co. S.A.E.
Al Ezz Steel Rebars (ezzsteel) is the largest steel producer in the Middle East and North Africa, with a total actual capacity of 5.3 million tonnes of finished steel. It is the Egyptian market leader with over 65 per cent market share in terms of sales.
In 2007, the Company produced 3.1 million tonnes of long products (typically used in construction) and 1.7 million tonnes of flat products (typically used in consumer / industrial goods). ezzsteel's customer base is geographically diversified, with flat products mainly directed to export markets, whereas long products are sold in the domestic market. More than 70 per cent of its plants are less than 10 years old using the latest in modern steel making technology.
Disclaimer:
This press release is issued by Al Ezz Steel Rebars S.A.E. ("ezzsteel" or the "Company"), in connection with the disclosure of the Company's financials results for the 9 month period ending 30 September 2008. This document includes forward-looking statements. These forward-looking statements include all matters that are not historical facts. In particular, the statements regarding the Company's strategy, the expected strength of demand for long products in Egypt and in regional markets and for flat steel in the international markets, and other future events or prospects are forward-looking statements. Recipients of this document should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are in many cases beyond the control of the Company. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance and the Company's actual results of operations, financial condition and liquidity, and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that the Company, or persons acting on its behalf, may issue. Various factors could cause actual results to differ materially from those expressed or implied by the forward-looking statements in this document including worldwide economic trends, global and regional trends in the steel industry, the economic and political climate of Egypt and the Middle East and changes in business strategy of the Company and various other factors. These forward-looking statements reflect the Company's judgment at the date of this document and are not intended to give any assurances as to future results. The Company undertakes no obligation to update these forward-looking statements, and it will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document. None of ezzsteel, or any of its directors, officers or employees or any other person can give any assurance regarding the future accuracy of the information set forth herein or as to the actual occurrence of any predicted developments nor shall assume, and each of ezzsteel, any of its directors, officers or employees or any other person expressly disclaims, any obligation, except as required by law, the listing rules of the CASE or the LSE or the FSA, to update any forward-looking statements or to conform these forward-looking statements to ezzsteel's actual results.