Last checked at 22 Apr 2009 16:30
AL EZZ STEEL REBARS REPORTS CONSOLIDATED FULL YEAR 2008 RESULTS
RECORD SALES AND PROFITABILITY DESPITE CHALLENGING GLOBAL MARKETS
Cairo, 22 April 2009 - 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 full year results for the period ending 31 December 2008. The audited results have been prepared in accordance with Egyptian Accounting Standards.
Paste the following link into your web browser to download a PDF of the full financial statements related to this announcement:
http://www.rns-pdf.londonstockexchange.com/rns/9940Q_-2009-4-22.pdf
Key highlights
| EGP | 2007 | 2008 | +/- |
| Net sales | 16.2bn | 21.8bn | 35% |
| EBITDA* | 4.0bn | 4.5bn | 13% |
| EBITDA* / tonne | 815 | 965 | 18% |
| Net profit before tax | 2.9bn | 3.3bn | 14% |
| Tax and deferred tax | 653mn | 746mn | 14% |
| Net profit after tax and minority interests | 1.1bn | 1.2bn | 9% |
| Number of shares (at end of period)** | 182mn | 543mn | |
| EPS (on number of shares at end of period) | 6.15 | 2.25 | |
| Net debt to Equity | 0.99x | 0.51x | |
*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 Ahmed Ezz, Chairman and Managing Director of ezzsteel, said:
"2008 was an outstanding year for ezzsteel, in which we achieved record sales and profits, and the highest turnover of any listed Egyptian industrial company. Despite cost pressures and the global downturn that was seen during the fourth quarter, ezzsteel was still able to significantly improve year on year profitability.
"The Egyptian market, where we are the market leader, has proven extremely resilient to the global financial crisis and economic downturn. This has resulted both in strong demand for our long products and continued access to funding, to further enhance our robust financial position. As a result of our operational flexibility and modern technology, we have been able to adapt quickly to changing market conditions and limit our exposure to weaker export markets.
"While much of the global steel sector is at a standstill due to the global economic turmoil, we continue to pursue our growth strategy and are confident that ezzsteel will emerge even stronger from these challenging markets."
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 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
Sales and Production
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 | ESR/ESM | EZDK | EFS | Total |
| EGP Mn | ||||
| Long | 6,565.08 | 8,301.62 | 14,866.70 | |
| Flat | 3,145.00 | 3,632.78 | 6,777.77 | |
| Others | 0.41 | 142.06 | 5.09 | 147.56 |
| Total | 6,565.49 | 11,588.67 | 3,637.88 | 21,792.03 |
Consolidated net sales for 2008 were EGP 21.8 billion compared with EGP 16.2 billion during 2007, representing a rise of 35 per cent. Long steel products accounted for 69 per cent of total sales and flat steel products represented 31 per cent of sales in 2008.
The contributions of ESR/ESM, EZDK and EFS to net sales for the period ending 31 December 2008 were 30 per cent, 53 per cent, and 17 per cent respectively.
| EGP Mn | Domestic | per cent | Export | per cent |
| Long | 14,771 | 99% | 96 | 1% |
| Flat | 2,572 | 38% | 4,206 | 62% |
Long products
Long product volumes sold were very strong in 2008 as sales were again primarily directed towards servicing the construction growth within the local market, which at c.10 per cent grew more than twice the GDP growth rate in the fourth quarter. Local demand for long products rose by 21% over 2007 to reach a record market size of 5.0 million tonnes per annum in 2008. This has been largely attributable to the growth of the private home building sector.
In line with the global steel industry, local prices for long products rose strongly in the first nine months of 2008, before a sharp decline in the fourth quarter. However, while prices fell, the demand for long steel products in the Egyptian market remained robust, unlike the significant drop in demand in most other markets.
Long products production for 2008 reached 3,184,895 tonnes compared with 3,125,974 during 2007, representing a 2 per cent year-on-year increase. Given the significant production cuts necessitated by the deterioration of demand in the large steel consuming markets, ezzsteel was one of the few steel companies able to achieve year on year production increases.
Flat products
The global market for flat products also performed strongly in the first nine months of the year, before severe demand destruction in the fourth quarter led to sharp price declines and heightened volatility. As a result, a large number of steel producers took action to curtail production in the fourth quarter to improve industry fundamentals.
ezzsteel's exposure to the global steel market is primarily through its flat steel production at EFS, of which the majority is sold to export markets. Consequently, in November, the Company stopped flat steel production at EFS until global market conditions improve. ezzsteel's flat production at EZDK continues unaffected.
Flat products production for 2008 was 1,423,100 tonnes, which was 17 per cent lower than 2007 production of 1,707,630 tonnes. Flat steel production volumes were lower as a result of damage to an electrical transformer at EZDK in July and the decision to shutdown production at EFS in November.
Cost of Goods Sold
Consolidated cost of goods sold for the year ended 31 December 2008 represented 80 per cent of consolidated net sales, compared to 76 per cent in 2007. While the ratio had been maintained at 76 per cent at the end of third quarter 2008, this rose by year end as a result of the significant drop in steel prices in the fourth quarter and management's decision to consume the more expensive raw materials rather than carry over into 2009.
There were structural increases in both gas and electricity costs in Egypt during the first half of 2008, as global energy prices increased. However, despite these increases, both electricity and gas costs for ezzsteel remain highly competitive on a global basis.
Gross profit
Gross profit of EGP 4.3 billion in 2008 represented an increase of 18 per cent over the EGP 3.6 billion recorded in 2007, largely as a result of record selling prices during the first nine months of the year.
Gross profit per tonne of EGP 929 /tonne in 2008 represented an increase of 25 per cent over the EGP 745 /tonne recorded in 2007. This strong increase in profitability per tonne was achieved even though the 2007 levels were the highest recorded to date.
EBITDA
EBITDA for the period reached EGP 4.5 billion, up from EGP 4.0 billion for the same period in 2008 representing an increase of 12 per cent.
EBITDA per tonne for the period reached EGP 965 / tonne, up from EGP 815 / tonne for the same period in 2007 representing an increase of 18 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 746 million for 2008, up from EGP 653 million in 2007.
Net profit after tax and minority interests
For the year ended 31 December 2008, net profit after tax and minority interests was EGP 1.2 billion, up 9 per cent from the comparable period in 2007.
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 4.1 billion and net debt of EGP 3.6 billion. The company has a conservative level of gearing of Net Debt / Equity of 0.51 times, and Net Debt / EBITDA of 0.80 times.
During the year, ezzsteel also increased its stake in EZDK from 50.28% to 53.24%.
Outlook
Despite the global slowdown, the Egyptian economy has remained resilient with continued strong demand, particularly in respect of private home building. The local market for long products is expected to continue to grow significantly throughout 2009 due to private construction and infrastructure projects that are part of the stimulus package announced in late 2008.
ezzsteel's exposure to the global steel industry, through its exports of flat steel, will remain limited while EFS remains shutdown until market conditions improve.
Reflective of the global price environment for finished products, the price of raw materials fell sharply during the fourth quarter of 2008. Raw material prices in 2009 are expected to continue to trade at levels that closely follow movements in global steel prices.
ezzsteel is well positioned to outperform many international peers, and continues to be one of the best performing steel producers globally, due to a number of factors:
Leading market position in a high growth market
Modern technology and operational flexibility allow swift response to changing market dynamics
Strong financial position and continued access to funding
Reiterated commitment to its growth plans
Stand Alone Performance - Divisional Overview
| EZDK Performance |
|
|
| ||
| Sales (EGP): | 2007 | 2008 |
| ||
| Value | 8.8 | 11.6 | Bn | ||
| Volume |
| ||||
| Long | 1,823,832 | 1,784,962 | Tonnes | ||
| Flat | 769,758 | 687,386 | Tonnes | ||
| Export as % of Sales |
| ||||
| Long | 10% | 1% |
| ||
| Flat | 47% | 41% |
| ||
|
|
| ||||
| EBITDA | 3.4 | 4.3 | Bn | ||
| Production | 2007 | 2008 |
| ||
| Long Product | 1,759,054 | 1,811,562 | Tonnes | ||
| Flat Product | 755,168 | 694,551 | Tonnes | ||
| Billets | 1,869,332 | 1,911,276 | Tonnes | ||
| ESR/ERM Performance |
|
|
| ||
| Sales (EGP): | 2007 | 2008 |
| ||
| Value | 4.5 | 6.6 | Bn | ||
| Volume | 1,394,418 | 1,381,692 | Tonnes | ||
| Export as % of Sales | 8% | 0% |
| ||
| EBITDA | 314 | 148 | Mn | ||
|
|
| ||||
| Production | 2007 | 2008 |
| ||
| Long | 1,366,920 | 1,373,333 | Tonnes | ||
| Billets | 787,988 | 747,677 | Tonnes | ||
| EFS Performance |
|
|
| ||
| Sales (EGP): | 2007 | 2008 |
| ||
| Value | 2.9 | 3.8 | Bn | ||
| Volume | 891,660 | 770,537 | Tonnes | ||
| Export as % of Sales | 71% | 80% |
| ||
| EBITDA | 287 | 21 | Mn | ||
|
|
| ||||
| Production | 2007 | 2008 |
| ||
| Flat Product | 932,462 | 728,549 | 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 12 month period ending 31 December 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.