REG - EZZ Steel Company - Annual Financial Report

Ezz Steel Co SAEAnnouncement

03/03/2022 14:15

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RNS Number : 5619D  EZZ Steel Company - S.A.E.  03 March 2022

 

 

EZZ STEEL REPORTS CONSOLIDATED FY 2021 RESULTS

 

Cairo, 02 March 2022 - Ezz Steel (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 31
December 2021. The audited results have been prepared in accordance with
Egyptian Accounting Standards.

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Key Highlights

EGP Mn

 

                                         FY 2021  FY 2020
     Net sales                           67,819   38,625
          of which Exports (US$ Mn)      $1,291   $458
     Gross profit                        13,770   1,220
     EBITDA*                             12,870   535
     Net profit before tax**             7,172    (4,963)
     Net profit                          5,398    (4,685)
     Earnings per share (EPS)***         6.61     (5.85)

 

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

**      Deferred Taxes amounted to EGP 844mn; and Income Taxes to EGP
930mn

***    EPS = Net profit after tax & Minority Interest / No. of shares
at the end of the period, for the 6 months period ending 30    December

 

 

 

 For further information:

 Ezz Steel
    Ahmed Nabil            +20 2 27989844  +20 100 177 7703
    Haya Azab              +20 2 27989900  +20 122 998 8739

Comment

Commenting on the results, the board issued the following notes to the
shareholders:

·      Sales amounted to EGP 67,819 million compared to the EGP 38,625
million recorded in FY20. Rebar sales constituted 54% of total sales, and HRC
sales 45%. Sales totalled EGP 18,763 million during 4Q21.

·      Ezz Steel achieved a record export sales value in FY21. Exports
amounted to USD 1,291 million, of which Hot Rolled Coil (HRC) sales
contributed USD 1,079 million and Wire Rod sales USD 212 million. Exports
sales during 4Q21 amounted to USD 277 million, of which HRC sales contributed
USD 257 million and Wire Rod sales USD 20 million.

·      Net profit before tax reached EGP 7,123 billion in FY21. This is
compared to a loss of EGP 4,963 million in FY20. Deferred tax and income tax
for FY21 were EGP 1,774 million; net profit after tax therefore reached EGP
5,432 million for the year.

·      The positive contribution of Ezz Flat Steel (EFS) and Ezz Rolling
Mills (ERM), wholly owned by Ezz Dekheila Steel, Alexandria (EZDK), continued
following the group's restructuring. Both companies achieved a combined net
profit amounting to EGP 1,330 million during FY21 of which EGP 403 million
during 4Q21. Their profits are reflected in the net profit of EZDK, and thus
on the consolidated net profit of Ezz Steel.

·      World production of steel increased to 1,911 million tons in
FY21, 1.8% higher than FY20. Mainly due to China's stricter environmental
measures and imposed credit limitations on its real estate sector, world
production in 2H21 (909 Mn tons) was lower than that of 1H21 (1002 Mn tons).

·      Local rebars consumption reached 7.344 million tons in 2021, an
increase of 7% over the 6.865 million tons consumed in 2020. Worth noting that
local consumption in 4Q21 made an upward correction rising 27% above 3Q21 with
the momentum of national projects continuing. In particular "Decent Life
Project" to upgrade over 4700 villages is progressing quickly and boosting
demand. Growth pace in private building consumption is also picking up.

·      With Ezz Steel once again assuming an important position as a
flat steel exporter in 2021, it has become necessary to maximise flat
production from Ezz Flat Steel (EFS) at the expense of rebars production. The
company's rebar sales accordingly decreased from 3.175 million tons in FY20 to
2.936 million tons in FY21, in spite of an increasing local market
consumption. This prompted Ezz Steel to build a second meltshop in EFS. Once
operative, smooth simultaneous, rather than alternating, production of flat
steel and rebars would be achieved enabling the company to seize a growth
opportunity.

 

·      Construction and erection of the second meltshop in EFS are
making good progress. Start-up is scheduled in 4Q22 with full capacity to be
reached in 1Q23. The 1.6 million ton per year meltshop will cost approximately
EGP 3.2 billion, being financed from EGP 1 billion internally generated funds
and a EGP 2.2 billion syndicated bank loan. The project will integrate with
the downstream casting and rolling plants already in place.

·      Ezz Steel efforts to increase the awareness and market its
B500WDR high tensile steel rebars is paying off. In-house led market survey
showed that not only the company's strong branding, but also the properties
and cost savings such superior steel grade provides, contribute to the
product's price premium in the market.

·      Local flat steel consumption reached 1.421 million tons in 2021.
Though this is lower than the 1.563 million tons of 2020, it remains at a
higher level than recent years which hovered around the 1.2 million tons per
year. Ezz Steel market share grew from 676k tons in 2020 to 906k tons in 2021
having substituted a portion of imports. As local consumption is considerably
lower than Ezz Steel's flat production capacity, the company continues to
balance its commitment as the anchor supplier to the local market, with its
role as a leading exporter.

·      In December 2021, EZDK's board approved the purchase of 18% of
the total equity of "Egyptian Steel" for a total value of EGP 2.5 billion; to
be paid from EZDK's own resources. The transaction was made in January 2022
(after the fiscal year); 50% the amount was paid, and the balance will be paid
in two equal instalments after 12 and 24 months from the transaction date.
This marks an important and strategic investment initiative by Ezz Steel.

 

About Ezz Steel

Ezz Steel is the largest steel producer in the Arab World and North Africa
according to the World Top Steel Makers for 2020 published by World Steel
Association (WSA). The Company is the Egyptian market leader with a total
capacity of 7 million tonnes of finished steel products per annum. Ezz Steel
was established on 2/4/1994 as an Egyptian joint stock company in accordance
with the provisions of Law No. 159 for the year 1981.

In 2021, the Company produced 2.9 million tonnes of long products (typically
used in construction) and 2.1 million tonnes of flat products (typically used
in engineering industries, automotive, steel pipes and consumer products). Ezz
Steel 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 Ezz Steel's consolidated
financials, which include the consolidated financial performance of EZDK.
Following the latter's acquisition of EFS/ERM, both are full subsidiaries of
EZDK.

 

Sales

 

Consolidated net sales for FY 2021 were EGP 67,819 million compared to EGP
38,625 million in FY2020.

 

              Ezz Steel    EZDK           Ezz Steel

Standalone
Consolidated
Consolidated
 EGPMn*
    Long      11,207       25,388         36,595
    Flat      -            30,527         30,527
    Others    -            697            697
 Total        11,207       56,612         67,819

*after the elimination of intercompany transactions.

 

Long steel products accounted for EGP 36.6 billion, or 54% of sales in FY
2021, while flat steel products represented 45% of sales at EGP 30.5 billion.
Long product exports accounted for 9% of total long sales. Flat product
exports accounted for 56% of total flat sales.

 

 Sales Value  Domestic  %    Export  %

 EGPMn
 Long         33,259    91%  3,336   9%
 Flat         13,526    44%  17,001  56%

Long sales volumes were 2.9 million tonnes during FY 2021 and flat sales were
2 million tonnes. In 4Q21, long sales volume was 839 thousand tonnes, 3% below
that of 4Q20 which was 863 million tonnes.

 

The group's consolidated sales volumes totalled 4.9 million tonnes in FY 2021.

 

Production

 

Long steel production volumes totalled 2.9 million tonnes during FY 2021.

Flat steel production volumes reached 2.1 million tonnes for the period.

 

 

Cost of Goods Sold

 

Consolidated Cost of Goods Sold for FY 2021 represented 80% of sales. Gross
profit margin reached 20% in FY 2021.

 

Ezz Steel Standalone reported a COGS/Sales ratio of 89% for FY 2021.

 

 EGPMn*      ESR                                  EZDK           Ezz Steel

Standalone
Consolidated
Consolidated
 Sales                      11,207                56,612         67,819
 COGS        10,009                               44,039         54,048
 COGS/Sales  89%                                  78%            80%

*after the elimination of intercompany transactions

Gross profit

Gross profit of 13.8 billion was recorded for FY 2021 for Ezz Steel
consolidated, compared to the EGP 1.2 billion recorded in FY 2020.

EBITDA

Ezz Steel consolidated EBITDA for FY 2021 amounted to EGP 12.9 billion
compared to EGP 535 million in FY 2020.

Tax

During FY 2021, Ezz Steel had deferred taxes in the amount of EGP 844 million
and income tax of EGP 930 million.

Net profit

Net profit reached EGP 5.4 billion in FY 2021.

Net result after tax and minority interests

Net result after tax and minority interests recorded a profit of EGP 3.5
billion for FY 2021.

Liquidity and capital resources

At the end of the period, Ezz Steel had cash on hand of EGP 3.5 billion and
net debt of EGP 31.4 billion.

 

Outlook

 

·      Industry analysts forecast an increase in global steel production
by 0.8% in 2022 to 1.933 billion tons. China's production in 2022, however, is
forecasted to remain at the same level of 2021. As an exporter, Ezz Steel
would benefit from an increasing demand and consumption as markets have opened
up in the aftermath of the Corona pandemic. On the cost side, China's
determination to maximise the use of scrap in steel production would reduce
its iron ore consumption and, hence, dampen iron ore price increase.

·      Domestic consumption of rebars is expected to continue to grow in
2022 as well. National projects, including "Decent Life Project" are
progressing in a dynamic pace; private building is also picking up. Local
rebar consumption in 2022 is forecasted to grow by 14% to 8.4 million tons.
Local consumption of flat steel in 2022 is expected to grow by 7% to 1.5m
tons, also supported by national projects.

·      With the increase in crude steel output as EFS's new meltshop
commences operation in Sokhna, Suez, Ezz Steel will be able to enhance its
supply capacity - especially of rebars - and consolidate its market position,
without compromising its flat exports.

·      Ezz Steel follows closely the international inclination to apply
the Carbon Tax, especially in Europe, and its effect on steel markets. The
company looks forward to maximising the return on its exports in view of its
distinctive position with a lower carbon footprint compared to most producers.
This stems from the production technologies adopted by Ezz Steel, which rely
primarily on reduction using natural gas and melting in electric arc furnaces.
Carbon emissions are therefore considerably lower than that from blast
furnaces which is responsible for about 72% of world production.

 

 

 

Divisional Overview

 EZDK Standalone                                 FY 2021  FY 2020  Q3 2021  Q4 2021

 Sales (EGP):
                       Value:        Mn          47,931   34,409   12,804   15,375
                       Volume:
                       Long:         000 Tonnes  2,059    2,126    524      610
                       Flat:         000 Tonnes  1,097    1,030    253      266
 Exports as % of Sales:
                       Long:                     13%      12%      19%      4%
                       Flat:                     51%      42%      57%      52%
                       EBITDA:       Mn          7,928    1,356    1,784    2,228
 Production:
 Long Products:                      000 Tonnes  1,859    1,590    471      424
 Flat Products:                      000 Tonnes  1,101    1,039    281      268
                       Billets:      000 Tonnes  2,090    1,687    527      543

 Ezz Steel Standalone                            FY 2021  FY 2020  Q3 2021  Q4 2021

 Sales (EGP):
                       Value:        Mn          13,170   6,835    4,196    4,187
                       Volume:       000 Tonnes  905      777      246      261
 Exports as % of Sales:                          -        -        -        -
                       EBITDA:       Mn          905      59       227      236

 Production:
 Long Products:                      000 Tonnes  839      767      225      194
                       Billets:      000 Tonnes  867      802      208      218

 

 

 EZDK Consolidated                                          FY 2021  FY 2020  Q3 2021  Q4 2021

 Sales (EGP):
                                    Value:      Mn          61,218   33,967   17,322   17,384
                                    Volume:
                                    Long:       000 Tonnes  2,106    2,413    521      619
                                    Flat:       000 Tonnes  1,997    1,297    505      454
 Exports as % of Sales:
                                    Long:                   13%      10%      19%      4%
                                    Flat:                   56%      48%      61%      52%
                                    EBITDA:     Mn          12,051   512      3,079    3,390
                                    EBT         Mn          6,757    (4,288)  1,822    2,221
                                    Net Profit  Mn          5,837    (4,676)  1,175    1,840
 Production:
 Long Products:                                 000 Tonnes  2,065    2,358    501      539
 Flat Products:                                 000 Tonnes  2,051    1,336    534      472
                                    Billets:    000 Tonnes  2,125    2,393    527      543
 Ezz Steel Consolidated                                     FY 2021  FY 2020  Q3 2021  Q4 2021

 Sales (EGP):
                         Value:                 Mn          67,819   38,625   18,639   18,762
                         Volume:
                         Long:                  000 Tonnes  2,936    3,175    742      839
                         Flat:                  000 Tonnes  1,997    1,297    505      454
 Exports as % of Sales:
                         Long:                              9%       8%       14%      3%
                         Flat:                              56%      48%      61%      52%
                         EBITDA:                Mn          12,870   535      3,303    3,579
                         EBT                    Mn          7,172    (4,963)  1,946    2,306
                         Net Profit             Mn          5,398    (4,685)  1,363    1,638
 Production:
 Long Products:                                 000 Tonnes  2,904    3,126    727      733
 Flat Products:                                 000 Tonnes  2,051    1,336    534      472
                         Billets:               000 Tonnes  2,992    3,195    735      761

 

 

 

Disclaimer:

This press release is issued by Ezz Steel (formerly: Al Ezz Steel Rebars
S.A.E.) the "Company", in connection with the disclosure of the Company's
financial results for the quarter ending 31 December 2021. 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, 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 Ezz Steel, 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, no
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 Ezz Steel's actual results.

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