Last checked at 27 Aug 2009 07:00
AL EZZ STEEL REBARS REPORTS CONSOLIDATED H1 2009 RESULTS
Cairo, 27 August 2009 - Al Ezz Steel Rebars S.A.E. ("ezzsteel") (EGX: ESRS; London Stock Exchange: AEZD), the largest independent producer of steel in the MENA region and market leader in Egypt, today announced its consolidated H1 results for the period ending 30 June 2009. The audited results have been prepared in accordance with Egyptian Accounting Standards.
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Key highlights
| EGP | H1 2008 | H1 2009 | |
| Net sales | 11.1bn | 6.4bn | |
| Gross profit | 2.7bn | 732mn | |
| EBITDA* | 2.7bn | 838mn | |
| Net profit before tax | 2.3bn | 305mn | |
| Net profit after tax and minority interests | 1.0bn | 101mn | |
| Number of shares (at end of period)** | 182mn | 543mn | |
| EPS (on number of shares at end of period) | 5.69 | 0.19 | |
| Net debt to Equity | 0.71x | 0.88x |
*EBITDA = sales - cost of goods sold - selling & marketing expense - G&A expense + depreciation and amortisation
** increase in shares on due to rights issue in September 2008
Comment
Commenting on the results, Mr Paul Chekaiban, Managing Director of ezzsteel, said:
"The Egyptian market remained strong during the first half of 2009 and although domestic prices have declined in line with international prices, we continued to enjoy a sustained level of demand for our products.
"Despite the cyclical nature of the steel industry, our flexible business model has enabled us to position ourselves as one of the best performers throughout the cycle. Even during industry downturns, such as over the last half year, this flexible model has allowed us to operate profitably, unlike the majority of our peers."
For further information:
| Ezz Steel | Tel | Mobile |
| Kamel Galal | + 20 2 3762 2144 | + 20 10 539 5499 |
| Capital MS&L | ||
| Nick Bastin | + 44 20 7255 5117 | + 44 7931 500 066 |
| Jennifer Martin | + 44 20 7307 5335 | + 44 7841 401 304 |
About Al-Ezz Steel Rebars Co. S.A.E.
Al Ezz Steel Rebars (ezzsteel) is the largest independent steel producer in the Middle East and North Africa, and the Egyptian market leader, with a total actual capacity of 5.3 million tonnes of finished steel.
In 2008, the Company produced 3.2 million tonnes of long products (typically used in construction) and 1.4 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 50 per cent of its plants are less than 10 years old using the latest in modern steel making technology.
Operational Review
All of the below financial breakdowns are based on ezzsteel's consolidated financials which include the financial performance of ESR/ESM, EZDK and EFS.
Sales & Production
Consolidated net sales for the first half of 2009 were EGP 6.4 billion compared with EGP 11.1 billion during the first half of 2008, representing a decline of 42 per cent. This lower level of sales has resulted from lower steel prices, the prevailing weakness in the flat steel market and the shutdown at EFS.
Long steel sales volume reached 1,578 thousand tonnes during the first half of 2009, which represents a 2 per cent increase over the 1,546 thousand tonnes sold during the same period in 2008. Flat steel volumes on the other hand witnessed a sharp decline from 940 thousand tonnes in the first half of 2008 to 523 thousand tonnes in the first half of 2009. This was due to the shutdown of the EFS production facility, with any residual demand met by production at EZDK, which increased by 10 per cent to 492 thousand tonnes.
Long steel products accounted for 78 per cent of total sales in the first half of 2009, while flat steel products represented 22 per cent of sales. Long product exports accounted for less than 1 per cent of total long sales, due to the continued strength of the domestic market demand for long products. Flat product exports accounted for 54 per cent of total flat sales.
Long steel production volume reached 1,688 thousand tonnes during the first half of 2009 representing a 10 per cent increase over the 1,533 thousand tonnes produced during the same period in 2008. Flat steel production volumes on the other hand were 45 per cent lower at 470 thousand tonnes in the first half of 2009 when our EFS production facility was shutdown.
On a plant basis, ESR/ESM long steel production rose by 12 per cent during the half, while EZDK long production was up by nine percent over the same period. Flat production at EZDK was up 18 per cent in the first half of 2009, as production was increased to supply demand from EFS customers while EFS remained closed.
The contributions of ESR/ESM, EZDK and EFS to net sales for the period ending 30 June 2009 were 32 per cent, 67 per cent, and 1 per cent respectively.
| Sales | ESR/ESM | EZDK | EFS | Total |
| EGP Mn | ||||
| Long | 2,052 | 2,857 | 4,909 | |
| Flat | 1,347 | 65 | 1,412 | |
| Others | 64 | 2 | 66 | |
| Total | 2,052 | 4,268 | 67 | 6,388 |
ezzsteel's exposure to the weaker global steel market is primarily through its flat steel products, with long steel products primarily directed to serving the buoyant domestic market.
| EGP Mn | Domestic | per cent | Export | per cent |
| Long | 4,865 | 99% | 44 | 1% |
| Flat | 656 | 46% | 757 | 54% |
Cost of Goods Sold
Consolidated cost of goods sold for the half ended 30 June 2009 represented 89 per cent of sales, compared to 75 per cent in the first half of 2008. This figure was largely impacted by the shutdown in production at EFS during the half and the proportionally higher costs at EZDK.
| Standalone figures | Consolidated | |||
| EGP Mn | ESR/ESM | EZDK | EFS | ezzsteel |
| Sales | 2,052 | 4,285 | 256 | 6,388 |
| COGS | 1,814 | 3,594 | 453 | 5,656 |
| COGS/Sales | 88% | 84% | 89% | |
Gross profit
Gross profit of EGP 731 million was recorded in H1 2009, a 73 per cent decline from the EGP 2.7bn recorded in the first half of 2008. Lower profits were largely a result of production curtailment at EFS, and lower global steel pricing, as well as the continued weakness in the flat steel market.
EBITDA
EBITDA for the period reached EGP 838 million, down from EGP 2.7 billion for the same period in 2008 representing a decrease of 69 per cent.
Net profit after tax and minority interests
For the six months to 30 June 2009, net profit after tax and minority interests was EGP 101 million, down from EGP 1.0 billion in the first half of 2008.
Liquidity and capital resources
At the end of the period, ezzsteel had cash on hand of EGP 2.4 billion and net debt of EGP 5.4 billion. The company has a conservative level of gearing of Net Debt / Equity of 0.88 times.
Outlook
ezzsteel remains confident about the continued strength of the Egyptian market, which has remained largely unaffected by the global economic slowdown. Long product demand is expected to continue to be strong, due to the private housing market and local real-estate activity. Conditions in the global flat steel market had been very weak since the last quarter of 2008, but we are starting to see some signals that there is a pickup in the market of flat steel, evidenced by the increase in flat product prices.
We continue to believe that our key competitive advantage lies in our flexibility and our product and market diversification; this is why our current expansion efforts are focused on vertical integration through:
Adding a billet caster at our flat steel production facility in Suez (EFS) to enable the site to become flexible in producing either flat steel or semi-finished long products at times when the flat steel market is in a low cycle. Construction of the billet caster has already begun and it is expected to be in production during the first quarter of 2010.
Adding a 1.8 mn tonne per year DRI production facility to be located in Suez in order to further increase our level of backward integration and decrease our production costs, replicating our EZDK model at our other production facilities. Construction of the DRI facility has already started and it is expected to be in production during the 2nd half of 2011.
Divisional Overview
| EZDK Performance Sales (EGP): | H1 2008 | H1 2009 | |
| Value: | 6.0 | 4.3 | bn |
| Volume: Long: Flat: | 890,300 445,186 | 925,298 492,235 | Tonnes |
| Exports as % of Sales: Long: Flat: | 2% 40% | 2% 55% | |
| EBITDA: | EGP 2.3 | 0.8 | bn |
| Production: | | | |
| Long Products: | 876,711 | 952,899 | Tonnes |
| Flat Products: | 398,750 | 469,881 | Tonnes |
| Billets: | 961,060 | 1,013,918 | Tonnes |
| | | | |
| ESR/ESM Performance Sales (EGP): | H1 2008 | H1 2009 | |
| Value: | 3.0 | 2.1 | bn |
| Volume: | 657,959 | 657,472 | Tonnes |
| Exports as % of Sales: | 1% | 0% | |
| EBITDA: | 303 | 207 | mn |
| Production: | | | |
| Long Products: | 655,822 | 734,715 | Tonnes |
| Billets: | 397,175 | 418,261 | Tonnes |
| | | | |
| EFS (Suez) Sales (EGP): | H1 2008 | H1 2009 | |
| Value: | 2.1 | 0.3 | bn |
| Volume: | 494,850 | 30,728 | Tonnes |
| Exports as % of Sales: | 82% | 100% | |
| EBITDA: | 89 | -129 | mn |
| Production: | | | |
| Flat Products: | 460,889 | 0 | Tonnes |
| | | | |
- Ends -
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 six months to 30 June 2009. 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.