REG - EZZ Steel Company - First Half 2021 Results

Ezz Steel Co SAEAnnouncement

09/08/2021 07:00

RNS Number : 9260H
  
EZZ Steel Company - S.A.E.
  
09 August 2021
  
 

 
 
EZZ STEEL REPORTS CONSOLIDATED H1 2021 RESULTS
 
Cairo, 08 August 2021 - 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 30 June 2020. 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/9260H_1-2021-8-8.pdf 
 
Key Highlights
EGP Mn
 




 


 


H1 2021


H1 2020




 


Net sales


30,417


17,826




 


     of which Exports (US$ Mn)


587


156




 


Gross profit  


6,380


78




 


EBITDA*


5,988


(180)




 


Net profit before tax


2,878


(2,928)




 


Net profit 


2,397


(2,772)







Earnings per share (EPS)**


2.91


(3.39)




 
*        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, for the 6 months period ending 30    June
 
 
 
 




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:
•              Ezz Steel is on the right track. In H1 2021, net profit after tax reached EGP 2,397 million, and exports USD 587 million. Results of Q2 2021 confirmed the upward trend with a net profit after tax of EGP 1,209 million and exports of USD 318 million.  
•              Revenues of H1 2021 reached EGP 30,417 million. Long products sales were 53%, and flat sales constituted 45%. Revenues reached EGP 16,919 million in Q2 2021.
•              Exports in H1 2021 of USD 587 million comprised USD 477 millions of Hot Rolled Coils (HRC) and USD 110 millions of wire rods. Exports in Q2 2021 of USD 317 million comprised USD 269 million of HRC and USD 49 millions of wire rods.
•              World consumption of steel increased to 1,004 million tons in H1 2021, a significant 14% over H1 2020. The upward trend continued in Q2 2021 as consumption reached 516 million tons, 6% over Q1 2021. China leads steel consumption driving iron ore and other raw materials prices to increase as well. The ability of manufacturers to reflect raw materials price increases on product prices -which was restored in Q4 2020- continued, reflecting the positive impact from COVID vaccination rollout and its accompanying economic recovery. This explains the increase in Ezz Steel's HRC average selling price per ton from USD 758 in Q1 2021 to USD 931 in Q2 2021 (23%).
•              Local rebars consumption reached 3.36 million tons in H1 2021, an increase of 2% over H1 2020. However, consumption in Q2 2021 made an upward correction rising 24% above Q1 2021 with national projects gathering steam. Growth pace in private building consumption is still slow, but as clarifications on issuing building permits based on the new regulations are being given, consumption outlook is much better.
•              The penetration of Ezz Steel's new product B500WDR high tensile steel is felt in the market. The company is marketing the product's advantages successfully, particularly the savings in quantity, and therefore cost, by approximately 10%. The initial marketing phase concentrated on introducing the new grade to large contractors, leading real-estate developers and integrated design firms: this is now expanded to small and middle size companies and design firms.
•              The benefits of the group restructuring proved to have a positive impact on financial performance. Ezz Flat Steel (EFS) and Ezz Rolling Mills (ERM), both now fully owned by Al-Ezz Dekheila Steel Company, Alexandria (EZDK); together, in H1 2021, contributed EGP 512 million to the net profit after tax of EZDK and therefore to Ezz Steel upon consolidation.
 
 
 
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 2020, the Company produced 3.1 million tonnes of long products (typically used in construction) and 1.3 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 H1 2021 were EGP 30.42 billion. 
 




 
EGPMn*


Ezz Steel

Standalone


EZDK

Consolidated


Ezz Steel

Consolidated


 




   Long 


4,732


11,466


16,198


 




   Flat 


-


13,815


13,815


 




   Others 


-


404


404


 




Total 


4,732


25,685


30,417


 




*after the elimination of intercompany transactions.
 
Long steel products accounted for EGP 16.20 billion, or 53% of sales in H1 2021, while flat steel products represented 45% of sales at EGP 13.81 billion. Long product exports accounted for 11% of total long sales. Flat product exports accounted for 54% of total flat sales.
 
 
 




Sales Value
EGPMn


Domestic


%


Export


%




Long


14,464


89%


1,735


11%




Flat


6,301


46%


7,514


54%




 


 


 


 


 




During Q1 2021 and Q2 2021 the market began recovering from the impact of COVID-19 and the suspension of building permits as long sales volume increased 28% from 595 thousand tonnes in Q1 2021 to 760 thousand tonnes in Q2 2021.  Long sales volumes were 1.35 million tonnes during H1 2021; flat sales were 1.04 million tonnes in H1 2021.
 
The group's consolidated sales volumes totalled 2.39 million tonnes in H1 2021.
 
Production
 
Long steel production volumes totalled 1.44 million tonnes during H1 2021.
Flat steel production volumes reached 1.05 million tonnes for the period.
 
Cost of Goods Sold
 
Consolidated Cost of Goods Sold for H1 2021 represented 79% of sales. Gross profit margin reached 21% in H1 2021. 
 
Ezz Steel Standalone reported a COGS/Sales ratio of 88% for H1 2021. 
 
 




EGPMn*


ESR

Standalone


EZDK

Consolidated


Ezz Steel

Consolidated


 




Sales


4,732


25,685


30,417


 




COGS


4,160


19,877


24,037


 




COGS/Sales 


88%


77%


79%


 




*after the elimination of intercompany transactions.
 
Gross profit
 
Gross profit of 6.4 billion was recorded for H1 2021 for Ezz Steel consolidated.
 
 
 
EBITDA
 
Ezz Steel consolidated EBITDA for H1 2021 amounted to EGP 6 billion. 
 
Tax
 
During H1 2020, Ezz Steel had deferred taxes in the amount of EGP 332 million and income tax of EGP 191 million.
 
Net profit 
 
Net profit after tax reached EGP 2.40 billion in H1 2021. 
 
Net result after tax and minority interests 
 
Net result after tax and minority interests recorded a profit of EGP 1.58 billion for H1 2021. 
 
Liquidity and capital resources
 
At the end of the period, Ezz Steel had cash on hand of EGP 2.12 billion and net debt of EGP 34.5 billion. 
 
Outlook
Locally, the new building regulations of 18 December 2020 were the first major overhaul in the permits system for decades, authorities needed relatively long period to address inquiries about their implementation. Towards the end of Q2 2021, all governorates announced that they will commence issuing new building permits. The effect on market consumption of rebars in light of this will be tested by the end of the year. On average Egypt issues 66,000 building permits annually, it is believed that the latent demand caused by suspending building permits will manifest itself in an increase in consumption. Going forward, Egypt's GDP growth is forecast to arrive at the pre-COVID levels ranging between 5.5% and 5.8%. This would continue to support rebound in consumption of rebars.
Internationally, the strong recovery in global economic growth, particularly in the US and EU, is firming higher consumption levels of steel. The effect of higher oil prices, in addition to its positive effect on GCC economies, tend to strengthen commodities prices in general. 
Ezz Steel has proven its ability to make a strong mark on international flat steel markets. The Company plans to maintain its competitive edge and target higher exports. Taking advantage of its wide distribution network, with exports to about 25 countries since 2020, Ezz Steel aims to emphasize its presence in the world's major import markets.
 
 
 
Divisional Overview 




EZDK Standalone
Sales (EGP): 


 


 


H1 2021


H1 2020


Q2 2021


Q1 2021




 


Value:


Mn


19,751


14,007


10,904


8,847




 


Volume:


 


 


 


 


 




 


Long:


000 Tonnes


925


1,057


535


390




 


Flat:


000 Tonnes


577


470


267


311




Exports as % of Sales:


 


 


 


 


 




 


Long:


 


16%


6%


12%


21%




 


Flat:


 


47%


41%


52%


41%




 


EBITDA:


Mn


3,916


473


2,057


1,859




Production: 


 


 


 


 


 


 




Long Products:


000 Tonnes


964


814


477


487




Flat Products:


000 Tonnes


553


533


273


280




 


Billets:


000 Tonnes


1,020


978


521


500




 


 


 


 


 


 


 




Ezz Steel Standalone
Sales (EGP): 


 


 


 


 


 


 




 


Value:


Mn


4,786


3,346


2,694


2,092




 


Volume:


000 Tonnes


398


390


222


176




Exports as % of Sales:


 


 


 


 


 




 


EBITDA:


Mn


442


(83)


229


213




Production: 


 


 


 


 


 


 




Long Products:


000 Tonnes


419


424


225


194




 


Billets:


000 Tonnes


441


423


217


224




EZDK Consolidated
Sales (EGP): 


 


 


 


 


 


 




 


Value:


Mn


26,512


15,233


14,793


11,719




 


Volume:


 


 


 


 


 




 


Long:


000 Tonnes


966


1,173


540


427




 


Flat:


000 Tonnes


1,038


537


503


535




Exports as % of Sales:


 


 


 


 


 




 


Long:


 


15%


5%


12%


19%




 


Flat:


 


54%


44%


57%


52%




 


EBITDA:


Mn


5,575


31


3,075


2,500




 


EBT


Mn


2,714


(2,455)


1,568


1,023




 


Net Profit


Mn


2,047


(2,303)


1,030


1,017




Production: 


 


 


 


 


 


 




Long Products:


000 Tonnes


1,025


1,346


503


522




Flat Products:


000 Tonnes


1,045


602


545


500




 


Billets:


000 Tonnes


1,055


1,467


523


532




 
 
 




Ezz Steel Consolidated
Sales (EGP): 


 


 


H1 2021


H1 2020


Q2 2021


Q1 2021


 




 


Value:


Mn


30,417


17,826


16,919


13,498


 




 


Volume:


 


 


 


 


 


 




 


Long:


000 Tonnes


1,355


1,550


760


595


 




 


Flat:


000 Tonnes


1,038


537


503


535


 




Exports as % of Sales:


 


 


 


 


 


 




 


Long:


 


11%


4%


8%


14%


 




 


Flat:


 


54%


44%


57%


52%


 




 


EBITDA:


Mn


5,988


(180)


3,288


2,701


 




 


EBT


Mn


2,920


(2,928)


1,676


1,243


 




 


Net Profit


Mn


2,397


(2,772)


1,209


1,188


 




Production: 


 


 


 


 


 


 


 




Long Products:


000 Tonnes


1,444


1,770


728


715


 




Flat Products:


000 Tonnes


1,045


602


545


500


 




 


Billets:


000 Tonnes


1,496


1,890


740


756


 




 


 


 


 


 


 


 


 




 
 
 
 
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 30 June 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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