Al Ezz Gds Regs Regulatory News (AEZD)

EZZSTEEL REPORTS CONSOLIDATED 9M 2017 RESULTS

Cairo, 14 December 2017 - 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 results for the period ending 30 September 2017. The audited results have been prepared in accordance with Egyptian Accounting Standards.

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*EBITDA = sales - cost of goods sold - selling & marketing expense - G&A expense + depreciation and amortisation

**EPS = Net profit after tax & Minority Interest / No. of shares at the end of the period

Comment

Commenting on the results, Mr Paul Chekaiban, Chairman and Managing Director of ezzsteel, said:

"During the third quarter of 2017, we benefited from a favourable market environment; the sustained recovery in international steel sector coupled with the anti-dumping duties applied in Egypt allowed us to improve our selling prices and therefore substantially increase our global turnover.

However, we continued to suffer from adverse conditions in the Egyptian financial environment; the extremely high level of interest rates, coupled with the acute shortage of liquidity in the banking system, prevented us from meeting our working capital minimal requirements.

As a consequence, the capacity utilization of our plants remained at very low levels, resulting in a negative bottom line, which was in-line with our results from the first half of 2017.

We expect the financial authorities in Egypt to quickly reverse their monetary policy in a way to accommodate our working capital needs which will allow us to fully benefit from the prevailing favourable conditions in local and international steel markets."

About ezzsteel

ezzsteel (formerly: Al Ezz Steel Rebars) is the largest independent steel producer in the Middle East and North Africa, and the Egyptian market leader, with a total actual capacity of 5.8 million tonnes of finished steel.

In 2016, the Company produced 3.3 million tonnes of long products (typically used in construction) and 944,000 tonnes of flat products (typically used in consumer / industrial goods). ezzsteel deploys the latest in modern steel-making technology and is committed to further increasing vertical integration across its plants, boosting operational flexibility.

Operational Review

All of the below financial breakdowns are based on ezzsteel's consolidated financials, which include the financial performance of ESR/ERM, EZDK and EFS.

Sales & Production

Consolidated net sales for 9M 2017 were EGP 29.4 billion, representing an increase of 97 per cent year on year. Third quarter net sales further improved, growing 17 per cent over Q2 2017. Prices increased significantly in the first nine months of 2017 due to the steep devaluation in the Egyptian pound. Long steel prices were up 83 per cent and 126 per cent in the local and export market respectively. Flat steel prices increased by 120 per cent in the local and 160 per cent in the export market in 9M 2017 compared to the prior year period.

Long steel products accounted for EGP 20.8 billion, or 71 per cent of sales in 9M 2017, while flat steel products represented 28 per cent of sales at EGP 8.2 billion. Long product exports accounted for eight per cent of total long sales. Flat product exports accounted for 60 per cent of total flat sales.

Long sales volumes were 2.41 million tonnes during 9M 2017, nine per cent lower than the 2.64 million tonnes sold during the same period last year and on the same level as in 9M 2015. The export market showed a solid development, with sales volumes increasing by 171 per cent year on year.

Flat sales volumes rose by 58 per cent to 885 thousand tonnes in 9M 2017. This was mainly due to the healthy development of global flat steel markets. Exported flat volumes increased by 144 per cent in 9M 2017, reaching 559 thousand tonnes compared to 9M 2016.

The group's consolidated sales volumes totalled 3.29 million tonnes in 9M 2017, an increase of three per cent from the 3.19 million tonnes sold in 9M 2016.

The contributions of ESR/ERM, EZDK and EFS to consolidated net sales for the 9M period ending 30 September 2017 were 21 per cent, 66 per cent, and 13 per cent respectively.

Long steel production volumes totalled 2.4 million tonnes during 9M 2017, four per cent down compared to 9M 2016. Flat steel production volumes increased by 49 per cent to 917 thousand tonnes for the period, compared to 615 thousand tonnes produced in the previous year.

Cost of Goods Sold

Consolidated Cost of Goods Sold for 9M 2017 represented 91 per cent of sales. This was largely due low capacity utilisation of our plants during the period. At nine per cent, the 9M 2017 gross profit margin was slightly lower than the 10 per cent recorded in 9M 2016.

EFS's Cost of Goods Sold to Sales ratio was at 114 per cent, compared with 110 per cent in the same period last year. This reflects the continued low capacity utilization rate because of the ongoing shortage of working capital facilities to that company. EZDK's COGS to sales ratio continued to improve gradually to reach 86 per cent, versus 87 per cent in the 9M 2016 period. At ESR/ERM, the COGS to sales ratio was 97 per cent, leading to a gross profit margin of three per cent.

Gross profit

Gross profit of EGP 2,584 million was recorded for 9M 2017, an increase of 77 per cent from the EGP 1,458 million recorded in 9M 2016. This was largely due to the improved price environment and significant increases in flat sales.

EBITDA

EBITDA for 9M 2017 amounted to EGP 2,716 million, representing an increase of 95 per cent from EGP 1,390 million in 9M 2016.

Tax

During 9M 2017, ezzsteel had deferred tax liabilities of EGP 562.9 million and tax expense of EGP 25.8 million.

Net result after tax and minority interests

The net result after tax and minority interests was a loss of EGP 1.39 billion for 9M 2017.

Liquidity and capital resources

At the end of the period, ezzsteel had cash on hand of EGP 5.02 billion and gross debt of EGP 23.9 billion. The company has a gearing of Net Debt / Equity of 2.15 times.

Outlook

We expect the financial authorities in Egypt to quickly reverse their monetary policy in a way to accommodate our working capital needs which will allow us to fully benefit from the prevailing favourable conditions in local and international steel markets.

Divisional Overview

- Ends -

Disclaimer:

This press release is issued by ezzsteel (formerly: Al Ezz Steel Rebars S.A.E.) the "Company", in connection with the disclosure of the Company's financial results for the 9 month period ending 30 September 2017. This press release 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 and flat products in Egypt and in regional and 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 expressed in or implied 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 the 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, 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. Furthermore, none of such parties shall assume, and each of them expressly disclaims, any obligation (except as required by law or the rules of the ESE, the LSE or the FCA) to update any forward-looking statements or to conform these forward-looking statements to ezzsteel's actual results.