REG - EZZ Steel Company - Annual Financial Report
15/04/2024 09:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240415:nRSO5306Ka&default-theme=true
RNS Number : 5306K EZZ Steel Company - S.A.E. 15 April 2024
EZZ STEEL REPORTS CONSOLIDATED FY23 RESULTS
Cairo, 8 April 2024 - 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 2023. 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/5306K_1-2024-4-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/5306K_1-2024-4-14.pdf)
Key Highlights
EGP Mn
FY23 FY22
Net sales 142,914 83,984
Gross profit 39,305 18,778
EBITDA* 35,239 16,810
Net profit before tax** (983) 8,926
Net profit (717) 6,647
Earnings per share (EPS)*** (0.21) 7.98
* EBITDA = sales - cost of goods sold - selling & marketing
expense - G&A expense + depreciation and amortisation
** After allowing for an FX loss of EGP 30.9 bn.
*** EPS = Net profit after tax & Minority Interest / No. of shares
at the end of the period, for the fiscal year ending 31 December 2023.
For further information:
Ezz Steel
Ahmed Nabil +20 2 27989844 +20 100 177 7703
Eman Abou Zeid +20 2 27989900 +20 100 2500153
Comment
Commenting on the results, the board issued the following notes to the
shareholders:
· Sales amounted to EGP 142,914 million in FY23 compared to EGP
83,984 million in FY22 (up 70%). Reinforcing steel bars and wire rod coils
(reinforcing steel) sales accounted for 61% of total sales, and hot rolled
coils (HRC) flat steel sales accounted for 38%.
· Ezz Steel achieved a new export record in FY23 as its exports
reached $1,584 million, the highest for a manufacturing company in Egypt's
history. HRC exports amounted to $1,006 million (63.5% of the total), and
reinforcing steel amounted to $578 million (36.5%). In FY22, exports were $797
million, divided into HRC ($639 million) and reinforcing steel ($158 million).
· In FY23, 1,402 thousand tonnes of HRC were exported,
representing 63% of total HRC sales. This is compared to 697 thousand tonnes
in FY22 (only 38% of HRC sales). As for reinforcing steel, exports in FY23
reached 963 thousand tonnes representing 28% of its sales, compared to 195
thousand tonnes in FY22 (only 6% of reinforcing steel sales). The company
continues to give utmost priority to exports as its proceeds in foreign
currency funds procurement of imported raw materials and consumables.
· The company's domestic sales of reinforcing steel went down from
3,058 thousand tonnes in FY22 to 2,485 thousand tonnes in FY23 (19%) as sales
were directed towards exports.
· Ezz Steel domestic HRC sales decreased by 28% from 1,127
thousand tonnes in FY22 to 807 thousand tonnes in FY23. Same as reinforcing
steel, the decline in local sales was a consequence of maximising export
sales.
· Steady production of the second electric arc furnace (EAF) n
Sokhna - Suez, started in May 2023, with a capacity of 1.6 million tonnes
annually. Danieli, the world's renown steel technology and equipment supplier,
provided knowhow, supplied equipment, and conducted commissioning tests. This
expansion cost is EGP 4.2 billion, financed by a EGP 2.2 billion loan with the
balance from the company's internal resources. Worth noting that the second
EAF helped increase production and sales in general and that of HRC in
particular.
· In 2023, Egypt's crude steel production rose by 6% to 10.4
million tons according to World Steel Association (WSA). This was driven by
increased exports, especially HRC, the proceeds of which enabled the industry
to secure imports of essential raw materials.
· According to data from the Ministry of Supply & Internal
Trading, Egypt's consumption of reinforcing steel plummeted by 17% from 7,916
thousand tons in 2022 to 6,531 thousand tons in 2023. HRC local consumption
fell by 13% to 1,477 thousand tons vs. 1,700 thousand tons in 2022. This
decline can be mainly attributed to a critical shortage of dollars coupled
with the devaluation of EGP, which negatively affected the economic growth.
The heightened costs and prices affected the purchasing power of consumers.
· Worth mentioning that Egypt's consumption of reinforcing steel
has been suffering a significant downward trend since 2016, during which
consumption reached 8,610 thousand tons (24% higher than 2023). Construction
activities by owner/builder contractors in particular came to a near
standstill in 2023; however, the successful floatation of EGP on 6 March 2024,
and the associated economic decisions, are expected to restore growth and,
with it, higher consumption. Furthermore, the new building legislations and
their executive regulations which were passed in 2023 and 2024 may result in
issuing more private licenses and the resumption of private building in Egypt.
· In spite of the heavy drop in consumption by 17%, the production
of reinforcing steel in Egypt only declined by 4% to 8 million tons in 2023,
compared to 8.4 million tons in 2022. Robust growth of Egyptian exports
prevented a more significant production shortfall. Exports increased in FY23
more than 3-fold to 1.54 million tons up from 523 thousand tons in 2022.
· Healthy exports of HRC were the driver for production to
increase by 31% in 2023 to 2,345 thousand tons vs. 1,796 thousand tons in
2022. Exports rose by 103% reaching a record 1.4 million tons in 2023 compared
to 690 thousand tons in 2022. The emphasis on exports allowed imports to fill
the supply gap rising from 574 thousand tons in 2022 to 665 thousand tons in
2023 (16%), benefiting from low entry barriers. This is in line with
historical high penetration of, mostly low quality/low cost, imported HRC.
Egypt remains with no remedies or trade actions to limit unfair practices of
imported HRC.
· Forex losses reached EGP 30.9 billion in 2023. Of this amount
EGP 15.9 billion were to arrange the foreign currency component including the
short-term dollar banks' and suppliers' facilities which financed imports of
raw materials and consumables- accordingly, it is in essence an element of the
cost of goods sold (COGS). The compelled local price increases of reinforcing
steel and HRC were to absorb part of such forex loss. The company fully
understands the unusual economic circumstances which led to this situation;
going forward, upon the floatation of the Egyptian Pound on 6 March, the
resulting availability of foreign currency and stability of EGP is expected to
reduce forex losses. Ezz Steel prides itself of having been transparent
throughout the year, disclosing to its stakeholders the severe noticeable
de-facto devaluation of EGP over the period, whereby investors could analyse
the real value of the company's liabilities every quarter.
· Net loss before taxes reached EGP 983 million in FY23. This is
compared to a net profit before tax of EGP 8,926 million in FY22. Income tax
amounted to EGP 3,746 million, and deferred tax (asset) EGP 4,012 million. Net
loss after tax accordingly reached EGP 717 million in FY23, compared to a net
profit of EGP 6,647 million in FY22.
· The Central Bank of Egypt (CBE) increased the lending rate twice
in 2023 by a total of 3% to reach 20.25% in August. The upward interest rates
trend led to higher interest and financing expenses of EGP 6,198 million in
FY23, an increase of 84% compared to FY22 (EGP 3,363 million). On 1 February
2024 and on 6 March 2024, after the end of the fiscal year, interest rates
were increased by 2% then by 6% respectively to reach 28.25%. This will
increase interest expense in coming periods. However, such high level of
interest rate is expected to be temporary to contain inflation and would then
decrease gradually.
· Within the frame of its growth strategy, Ezz Steel plans to
diversify the flat steel product and increase its production. The company's
current production of HRC ranges in thickness from 1mm to 16mm and width from
800mm to 1600mm. The expansion project aims to produce 1 million tons annually
of hot-rolled steel plates with a thickness ranging from 5 mm to 120 mm, and a
width of up to 3.65 meters. This will be integrated with the industrial
complex in Sokhna, Suez. Among the key design parameters are reducing carbon
footprint and emissions. The company's objectives are to localize the steel
plate industry, meet the needs of local market replacing imports, and to
increase exports relying on Ezz Steel's global sales network. The company
obtained the project's licenses at a cost of EGP 2.1 billion (including VAT),
which was fully paid. Detailed studies for the project are underway. Plans to
invest in these new plants are contingent to granting Ezz Steel license to
produce directly reduced iron (DRI) which is the main metallic input for
quality production of flat steel.
· The steel sector globally managed to sustain the crude steel
production of 2023 at 1.89 billion tons, same as that reached in 2022.
Contributing to this were the persistence of robust production in China,
reaching 1.02 billion tons, and a noteworthy 12% surge in India's output to
140 million tons, which were largely driven by Government-funded initiatives.
Elsewhere, the industry faced a setback as demand for steel dwindled amid
soaring inflation and high interest rates which affected the construction and
manufacturing domains in Europe and the United States.
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 2022 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 2023, the Company produced 3.55 million tonnes of long products (typically
used in construction) and 2.23 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
The below financial breakdowns are based on Ezz Steel's consolidated
financials.
Sales
Consolidated net sales for FY23 were EGP 142.9 billion compared to EGP 84.0
billion in FY22, representing a 70% increase.
Long steel products accounted for EGP 87.2 billion, or 61% of sales in FY23,
while flat steel products represented 38% of sales at EGP 54.6 billion. Long
steel product exports accounted for 20% of its sales, while flat product
exports accounted for 57% of its sales.
Sales Value Domestic % Export %
EGPMn
Long 69,333 80% 17,844 20%
Flat 23,622 43% 30,997 57%
Long sales volume increased 6% to reach 3.45 million tonnes during FY23
compared to 3.25 million tonnes during FY22. Flat sales volume increased 21%
to reach 2.21 million tonnes compared to 1.82 million tonnes during FY22.
Ezz Steel's consolidated sales volumes totalled 5.66 million tonnes in FY23
compared to 5.07 million tonnes in FY22, an increase of 12%.
Production
Long steel production volumes totalled 3.52 million tonnes during FY23, 8%
increase compared to 3.27 million tonnes during FY22. Flat steel production
volumes increased 30% to reach 2.33 million tonnes in FY23 compared to 1.79
thousand tonnes in FY22.
Cost of Goods Sold
Consolidated Cost of Goods Sold in FY23 represented 72.5% of sales compared to
77.6% in FY22, to reflect an increase of realized gross profit margin from
22.4% in FY22 to 27.5% in FY23.
Gross profit
Gross profit of EGP 39.3 billion was recorded in FY23 for Ezz Steel
consolidated, a 109% increase compared to the EGP 18.8 billion recorded in
FY22.
EBITDA
Consolidated EBITDA for FY23 amounted to EGP 35.2 billion, a 110% increase
compared to the EGP 16.8 billion recorded in FY22.
Foreign Exchange Loss
Foreign exchange loss amounted to EGP 30.9 billion in FY23.
Tax
During FY23, Ezz Steel incurred an income tax of EGP 3.7 billion and a
deferred tax (asset) of EGP 4.0 billion.
Net profit/loss before Tax
Net loss reached EGP 983 million FY23.
Net profit after Tax
Net result after tax and minority interests recorded a loss of EGP 717 million
for FY23.
Liquidity and capital resources
At the end of the period, Ezz Steel had cash on hand of EGP 32.1 billion and
net debt of EGP 37.5 billion.
Outlook
· Globally, in 2024, according to WSA, it is anticipated that
global steel demand will increase by 1.9% from 1.89 million tons to 1.92
billion tons. However, uncertainties persist, particularly concerning China's
economic trajectory amidst ongoing structural transitions in its property
market which could affect Chinese consumption, and accordingly world
consumption, of steel.
· Locally, the recent economic reforms -in particular the EGP
floatation on 6 March 2024- attracted significant loans from prestigious
financial institutions such as the IMF and EU. It also paved the way for mega
projects such as the Ras El Hekma project which considerably enhanced foreign
currency inflows. This is expected to restore the pace of national projects
once again and boost major real estate developments. Furthermore, private
building is also expected to benefit from stability and from clear building
legislations in place. Based on these developments, a 5% growth in steel
consumption is anticipated in 2024.
· Ezz Steel is cognizant of how important it is for heavy
industries, particularly steel, to lower emissions. The company is committed
to a cleaner, more sustainable world. Operationally, the Carbon Border
Adjustment Mechanism (CBAM), will become effective starting 2026 in the EU,
other countries are expected to follow with similar procedures. The objective
is to encourage trade of products with lower emissions and apply a tariff on
those which do not meet the guidelines. Ezz Steel started to disclose its
carbon emissions to its EU clients as required in preparation for applying
CBAM. The industrial configuration of the company relies on directly reduced
iron (DRI) as main feedstock, uses natural gas to reduce the DRI from its
oxides and electricity as the energy source for electric arc furnaces (EAF) in
the steel making for melting; as such it is already in the lowest quartile in
carbon emissions among steel makers. Notwithstanding, the company is
reassessing its production lines for further reduction in emissions and
seeking the highest measures of emission reduction and control in new projects
and upgrades.
Divisional Overview
Ezz Steel Standalone FY 2023 FY 2022 4Q 2023 3Q 2023
Sales (EGP):
Value: Mn 27,635 16,666 8,296 8,533
Volume: 000 Tonnes 887 936 233 256
Exports as % of Sales: 8% - - 6%
EBITDA: Mn 4,880 1,307 1,861 1,383
Production:
Long Products: 000 Tonnes 883 895 243 226
Billets: 000 Tonnes 847 845 231 210
FY 2023 FY 2022 4Q23 3Q23
Ezz Steel Consolidated
Sales (EGP):
Value: Mn 142,914 83,984 39,672 40,980
Volume:
Long: 000 Tonnes 3,448 3,248 945 1,064
Flat: 000 Tonnes 2,209 1,824 567 549
Exports as % of Sales:
Long: 22% 6% 16% 18%
Flat: 57% 38% 52% 59%
EBITDA: Mn 35,239 16,810 9,804 10,219
EBT Mn (983) 8,926 1,252 (1,755)
Net Profit Mn (717) 6,647 1,212 (1,118)
Production:
Long Products: 000 Tonnes 3,518 3,274 1,025 1,001
Flat Products: 000 Tonnes 2,328 1,787 601 589
Billets: 000 Tonnes 3,626 3,299 1,104 992
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 March 2022. 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR IIMLTMTJBBAIRecent news on Ezz Steel Co SAE
See all newsREG - EZZ Steel Company - Notice of AGM
AnnouncementREG - EZZ Steel Company - Board of Directors Resolutions re FY23 results
AnnouncementREG - EZZ Steel Company - Annual Financial Report
AnnouncementREG - Official List - Restoration - Ezz Steel Company - S.A.E
AnnouncementREG - EZZ Steel Company - Annual Financial Report 2022 IFRS
Announcement