REG - EZZ Steel Company - EZZSTEEL REPORTS CONSOLIDATED H1 2017 RESULTS <Origin Href="QuoteRef">ESRS.CA</Origin>

Ezz Steel Co SAEAnnouncement

10/10/2017 09:11

RNS Number : 1696T
EZZ Steel Company - S.A.E.
10 October 2017
EZZSTEEL REPORTS CONSOLIDATED H1 2017 RESULTS
Cairo, 10 October 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 June 2017. 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:
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Key highlights 
EGPMn
H1 2016
H1 2017
YoY % (+/-)
Net sales 
9,003
17,914
+99%
Gross profit 
819
1,230
+50%
EBITDA* 
808
1,322
+64%
Net profit after tax and minority interest 
(376)
(1,071)
Earnings per share** 
(0.69)
(1.97)
Net debt to equity 
2.92
2.12
*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:
"Continuing the trend we have seen in the first quarter of 2017 ezzsteel registered a very low rate of utilization of its production capacities during the second quarter of the year.
The reason for this performance is the ongoing shortage in working capital facilities, which has been prevailing in Egypt since the severe devaluation of the Egyptian Currency. As a consequence, ezzsteel repeated in the second quarter the overall negative bottom line it had generated in the first quarter.
As soon as working capital will be made available, we shall increase our total output and take advantage of the expected improvement in Egyptian and international steel markets."
For further information: 
ezzsteel
 Kamel Galal 
+20 2 3304 6060 
+20 100 539 5499 
 Ahmed Saad
+20 2 3304 6060
CNC Communications
 Claire Maloney
+44 20 3755 1604 
+44 7770 958 479 
 Maximilian Karpf 
+44 20 3755 1631
+44 7970 716 953 
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 per annum.
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 H1 2017 were EGP 17.9 billion, representing an increase of 99 per cent year on year. This increase in sales was largely due to the devaluation of the Egyptian currency and continued good long and flat steel market conditions. Flat sales increased by 351 per cent compared to the same period in the previous year while long sales increased by 58% year over year. This development was driven by recovering international demand while prices continued to improve, both internationally and in the domestic market. Flat product prices were up by 136 per cent versus the same period of last year. Long product prices improved by 82 per cent compared to the first six months of 2016.
Sales after elimination
EGPMn
ESR/ERM
EZDK
EFS
Consolidated
 Long 
3,556
8,191
357
12,104
 Flat 
-
3,351
2,255
5,606
 Others 
-
169
35
203
Total 
3,556
11,711
2,647
17,914
Long steel products accounted for EGP 12.1 billion, or 68 per cent of sales in H1 2017, while flat steel products represented 31 per cent of sales at EGP 5.6 billion. Long product exports accounted for 9 per cent of total long sales. Flat product exports accounted for 68 per cent of total flat sales.
Sales Value
EGPMn
Domestic
per cent
Export
per cent
Long
10,962
91
1,142
9
Flat
1,782
32
3,824
68
Long sales volumes were 1.49 million tonnes during H1 2017, 13 per cent lower than the 1.72 thousand tonnes sold during the same period last year.
Flat sales volumes rose by 91 per cent to reach 617 thousand tonnes in H1 2017, showing the continued effects of stabilising export conditions following the effective free float of the Egyptian currency and increased international demand.
The group's consolidated sales volumes totalled 2.10 million tonnes in H1 2017, an increase of three per cent from the 2.04 million tonnes in H1 2016.
The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales for the period ending 30 June 2017 were 20 per cent, 65 per cent, and 15 per cent respectively.
Long steel production volumes totalled 1.5 million tonnes during H1 2017, down eight per cent compared to H1 2016. Flat steel production volumes increased significantly by 85 per cent to reach 670 thousand tonnes for the period, compared to 362 thousand tonnes in the previous year.
Cost of Goods Sold
Consolidated Cost of Goods Sold for H1 2017 represented 93 per cent of sales, leading to a decrease in gross profit margin from nine per cent in H1 2016 to seven per cent in H1 2017 due to the low capacity utilisation levels of operation at ESR/ERM and EFS
EFS's Cost of Goods Sold for H1 2017 represented 119 per cent of sales, compared with 109 per cent in the same period last year. This reflects the decreased utilization level at the facility. Long product capacity utilization in particular was down to 10 per cent, from 45 per cent in H1 2016. At the same time, flat capacity utilization at the facility increased from 4 per cent in H1 2016 to 41 per cent in H1 2017. EZDK continued to gradually improve its COGS to sales ratio to reach 87 per cent versus 91 per cent in the prior year period. This development came on the back of better access to natural gas following a period of low LNG imports to Egypt. At ESR/ERM, lower capacity utilization of 58 per cent compared to 76 per cent in the prior year period led to a weaker COGS/Sales performance of 97 percent (83 per cent in H1 2016).
Standalone figures
Consolidated
EGPMn 
ESR/ERM
EZDK
EFS
ezzsteel
Sales
5,462
11,896
2,742
17,914
COGS
5,324
10,351
3,264
16,684
COGS/Sales 
97%
87%
119%
93%
Gross profit
Gross profit of EGP 1,230 million was recorded for H1 2017, an increase of 50 per cent from the EGP 819 million recorded in H1 2016.
EBITDA
EBITDA for H1 2017 amounted to EGP 1,322 million, representing an increase of 64 per cent from EGP 808 million in H1 2016.
Tax
During H1 2017, ezzsteel had deferred tax of EGP 274.5 million and tax liabilities of EGP 18.1 million.
Net result after tax and minority interests
Net result after tax and minority interests recorded a loss of EGP 1,071 million for H1 2017.
Liquidity and capital resources
At the end of the period, ezzsteel had cash on hand of EGP 4.9 billion and net debt of EGP 19.2 billion. The company has a gearing of Net Debt / Equity of 2.12 times.
Outlook
As soon as working capital will be made available, we shall increase our total output and take advantage of the expected improvement in Egyptian and international steel markets.
Divisional Overview
EZDK 
Sales (EGP):
H1 2016
H1 2017
Value:
5,068
11,896
Mn
Volume:
Long:
855,005
1,030,255
Tonnes
Flat:
320,153
362,540
Tonnes
Exports as % of Sales:
Long:
6
14
Flat:
38
56
EBITDA:
461
1,495
Mn
Production: 
Long Products:
841,882
1,025,171
Tonnes
Flat Products:
337,640
405,412
Tonnes
Billets:
853,467
1,108,826
Tonnes
ESR/ERM
Sales (EGP): 
Value:
2,831
5,462
Mn
Volume:
616,509
444,201
Tonnes
Exports as % of Sales:
- 
-
EBITDA:
349
88
Mn
Production: 
Long Products:
567,563
436,545
Tonnes 
Billets:
183,667
314,121
Tonnes 
EFS 
Sales (EGP): 
Value:
1,138
2,742
Mn
Volume:
Long:
254,573
43,193
Tonnes
Flat:
2,480
254,136
Tonnes
Exports as % of Sales:
Long:
-
-
Flat:
2
92
EBITDA:
(7)
(327)
Mn
Production: 
Long Products:
227,050
49,070
Tonnes
Flat Products:
24,127
264,851
Tonnes
Billets:
217,361
56,023
Tonnes
- 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 6 month period ending 30 June 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.

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