REG - EZZ Steel Company - First Half Financial Results 2022

Ezz Steel Co SAEAnnouncement

08/09/2022 17:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220908:nRSH8356Ya&default-theme=true

RNS Number : 8356Y  EZZ Steel Company - S.A.E.  08 September 2022

 

EZZ STEEL REPORTS CONSOLIDATED 1H22 RESULTS

 

Cairo, 8 September 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 30
June 2022. 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/8356Y_1-2022-9-8.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8356Y_1-2022-9-8.pdf)

 

Key Highlights

EGP Mn

 

                               1H22    1H21
   Net sales                   38,497  30,417
   Gross profit                10,258  6,380
   Net profit before tax*      5,576   2,920
   Net profit                  4,130   2,397
   Earnings per share (EPS)**  4.88    2.97

 

*        After allowing for an FX loss of EGP 1,127mn.

**      EPS = Net profit after tax & Minority Interest / No. of
shares at the end of the period, for the three months period ending 30 June
2022.

 

 

 

 

 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 38,497 million in 1H22, compared to EGP
30,417 million in 1H21. Rebars sales constituted 58% of total sales, and sales
of hot-rolled flat steel (HRC) 40%.

·      In 1H22, the Company - being Egypt's largest producer- directed
part of its flexible capacity in Suez to maximise rebars production;
accordingly, HRC production and exports were reduced. This helped satisfy the
growing local consumption and hence substituted potential imports. Meanwhile,
the Company maintained the same level of HRC supply to the local market,
especially during 1Q22 which witnessed a noticeable increase in local
consumption, thus continuing to balance its export goals with its domestic
commitments.

·      Ezz Steel achieved an export sales value of USD 514 million in
1H22, of which sales of HRC reached USD 418 million and sales of Wire Rods
reached USD 96 million. Comparatively, in 1H21 exports amounted to USD 587
million dollars, of which USD 477 million from HRC sales and USD 110 million
from Wire Rods sales.

·      Net profit before taxes amounted to EGP 5,576 million in 1H22,
compared to EGP 2,920 million in 1H21. The income tax amounted to EGP 1,360
million and deferred tax (obligation) EGP 87 million. Thus, net profit after
tax amounted to EGP 4,130 million in 1H22 (EGP 2,397 million in 1H21).

·      According to World Steel Association statistics, global crude
steel production decreased 3.3% in 1H22 to reach 972 million tonnes, compared
to 1H21 consumption of 1005 million tonnes. China, which accounts for 54% of
the world's figures, is active in regulating its realestate sector, it also
continues to enforce strict measures to reduce its environmental emission, its
production decreased therefore by 6.4%. Worth noting that Russia's production
went down about 6%, while Ukraine is estimated to have lost over 60% of its
production H-o-H.

·      Domestic consumption of rebars increased 15% to reach 3.895
million tonnes in 1H22 compared to 3.398 million tonnes in 1H21. Both national
projects which maintained its pace and private building's elevated activity
level are responsible for such increase.

·      Coping with such domestic increase, the Company's rebars sales
increased 11% from 1,355 thousand tonnes in 1H21 to 1,503 thousand tonnes in
1H22. High quality and proven savings are further establishing Ezz Steel's
high tensile product (B500DWR) as the product of choice, not only in
technically-demanding mega projects, but also in private builders' small
projects.

·      Local HRC consumption maintained its highs of last year. It
reached 787 thousand tonnes in 1H22, slightly below the 802 thousand tonnes of
1H21 by 2%. Downstream industries continue to favour Ezz Steel HRC products
over imports for quality issues -especially for their export markets- as well
as to overcome foreign currency constraints.

·      Ezz Steel established itself, not only as the largest supplier,
but also as a dependent and reliable source of quality material to local
industries dependent on HRC. Local HRC sales in 1H22 reached 497 thousand
tonnes, 5% above 1H21 (474 thousand tonnes).

·      Forex loss reached EGP 1,127 million in 1H22, almost all of which
incurred in 1Q22 upon a drop of 17% in the EGP to the USD in March 2022. The
Egyptian Pound relaxed a further 5% to the USD in August 2022 (after the
closing of 1H22). As steel is a dollar-based business, the devaluation
strengthens the competitiveness of the Company's exports internationally.

·      The Russia-Ukraine conflict still affects global economy, with no
resolution in sight. Ezz Steel managed to overcome the immediate effect on its
operations by substituting Russian and Ukrainian suppliers of raw materials,
consumables and spare parts with reliable and quality-assured international
suppliers. In spite of the dynamic price movements of both raw materials and
products, the margin to manufacturers remains healthy.

 

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 1H22 were EGP 38,497 million compared to EGP 30,417
million in 1H21, representing a 27% increase.

 

              Ezz Steel    EZDK           Ezz Steel

Standalone
Consolidated
Consolidated
 EGPMn*
    Long      6,346        16,161         22,507
    Flat      -            15,531         15,531
    Others    -            459            459
 Total        6,346        32,151         38,497

*after the elimination of intercompany transactions.

 

Long steel products accounted for EGP 22.5 billion, or 58% of sales in 1H22,
while flat steel products represented 40% of sales at EGP 15.5 billion. Flat
product exports accounted for 48% of total flat sales.

 

 Sales Value  Domestic  %    Export  %

 EGPMn
 Long         20,789    92%  1,717   8%
 Flat         8,127     52%  7,404   48%

Long sales volume increased 11% to reach 1.5 million tonnes during 1H22. Flat
sales volume decreased 13% to reach 907 thousand tonnes.

 

The group's consolidated sales volumes totalled 2.41 million tonnes in 1H22
compared to 2.39 million tonnes in 1H21, an increase of 1%.

 

Production

 

Long steel production volumes totalled 1.66 million tonnes during 1H22
compared to 1.44 million tonnes in 1H21, an increase of 15%. Flat steel
production volumes decreased 13% to reach 912 thousand tonnes in 1H22 compared
to 1.05 million tonnes in 1H21.

 

Cost of Goods Sold

 

Consolidated Cost of Goods Sold for 1H22 represented 73% of sales compared to
79% in 1H21. Consequently, gross profit margin increased to reach 27% in 1H22
compared to 21% in 1H21.

 

Ezz Steel Standalone reported a COGS/Sales ratio of 89% for 1H22.

 

 EGPMn*      ESR                                 EZDK           Ezz Steel

Standalone
Consolidated
Consolidated
 Sales                      6,346                32,151         38,497
 COGS        5,665                               22,573         28,238
 COGS/Sales  89%                                 70%            73%

*after the elimination of intercompany transactions

Gross profit

Gross profit of EGP 10.26 billion was recorded for 1H22 for Ezz Steel
consolidated, a 61% increase compared to the EGP 6.38 billion recorded in
1H21.

EBITDA

Consolidated EBITDA for 1H22 amounted to EGP 8.95 billion compared to the EGP
5.27 billion recorded in 1H21.

Foreign Exchange Loss

The devaluation of the Egyptian Pound by c. 17% on March 21,2022 resulted in
an unrealized foreign exchange loss of EGP 1,127 million.

Tax

During 1H22, Ezz Steel had an income tax of EGP 1,360 million and a deferred
tax of EGP 87 million.

Net profit

Net profit reached EGP 4,130 million in 1H22 compared to EGP 2,397 million in
1H21.

Net profit after minority interests

Net result after tax and minority interests recorded a profit of EGP 2,601
million for 1H22 compared to EGP 1,584 million in 1H21.

Liquidity and capital resources

At the end of the period, Ezz Steel had cash on hand of EGP 4.4 billion and
net debt of EGP 31.5 billion.

Outlook

 

·      In spite of the Russian-Ukrainian war effect, World Steel
Association's updated outlook forecast a growth in world steel consumption
-albeit limited- of 0.4% in 2022 to reach 1,960 million tonnes, followed by a
significant 2.2% growth in 2023 to reach 2,003 million tonnes, an increase of
43 million tonnes. As for China, WSA forecasts no-change in its consumption in
2022, then a 1% increase in 2023.

·      Building on actual domestic market consumption so far this year,
Egypt's rebars consumption is estimated to increase by 10% Y-o-Y in 2022 to
reach 8.1 million tons.

·      The domestic market for HRC is expected to hold closely to the
high grounds it achieved last year. Consumption in 2022 is also estimated to
reach c. 1.5 million tonnes. As with rebars, Ezz Steel plans to serve the
needs of the market and continues as the reliable supplier of choice.

·      The possible consequences of the on-going Russian-Ukrainian war
on the world cannot be underestimated. Supply-side inflation is fuelled by
substantial increase in energy prices, particularly natural gas; heating
requirements for the approaching winter will emphasize the problem. Many
commodity prices, especially agricultural food products, increased as well, as
a reaction to availability and logistics risks. Central banks are increasing
interest rates to curb inflation, but without losing track of possible
recession and unemployment. With fears of economic shrinkage in mind, as well
as slowness in China, the iron and steel sector has been witnessing some
softening in the prices of both raw materials and products, however, so far,
the margin between raw material prices and product prices remains acceptable.

The conflict has been lingering far longer than the worst expectations. The
whole world can only hope for a peaceful and swift resolution.

·      Ezz Steel is well aware of the economic and sectorial challenges.
Pouring in the Company's favour are a) the growth in local market -especially
rebars: market consumption is coming from a low per capita base and has been
revived recently with private building. And, b) the ability to capitalize on
the flexible industrial configuration: Ezz Steel can control the make-up of
the charge mix (between DRI and scrap) to optimise returns and can change that
as often as necessary to cope with price dynamics of raw materials.

 

Divisional Overview

 EZDK Standalone                         1H22    1H21    2Q22    1Q22

 Sales (EGP):
               Value:        Mn          27,002  19,751  13,331  13,671
               Volume:
               Long:         000 Tonnes  1,079   925     490     588
               Flat:         000 Tonnes  502     577     237     265
 Exports as % of Sales:
               Long:                     11%     16%     15%     6%
               Flat:                     48%     47%     52%     44%
               EBITDA:       Mn          6,573   3,916   3,697   2,876
 Production:
 Long Products:              000 Tonnes  1,002   964     521     481
 Flat Products:              000 Tonnes  560     553     282     278
               Billets:      000 Tonnes  1,078   1,020   537     541

 Ezz Steel Standalone                    1H22    1H21    2Q22    1Q22

 Sales (EGP):
               Value:        Mn          6,809   4,786   3,416   3,393
               Volume:       000 Tonnes  435     398     204     231
 Exports as % of Sales:                  -                       -
               EBITDA:       Mn          480     442     254     226
 Production:
 Long Products:              000 Tonnes  440     419     225     216
               Billets:      000 Tonnes  421     441     227     194

 

 EZDK Consolidated                              1Q22    1H21    2Q22    1Q22

 Sales (EGP):
                        Value:      Mn          34,547  26,512  17,386  17,161
                        Volume:
                        Long:       000 Tonnes  1,101   966     513     588
                        Flat:       000 Tonnes  907     1,038   404     503
 Exports as % of Sales:
                        Long:                   10%     15%     15%     6%
                        Flat:                   48%     54%     56%     39%
                        EBITDA:     Mn          8,446   4,802   4,709   3,738
                        EBT         Mn          5,437   2,714   3,704   1,734
                        Net Profit  Mn          4,087   2,060   2,896   1,190
 Production:
 Long Products:                     000 Tonnes  1,220   1,025   627     592
 Flat Products:                     000 Tonnes  912     1,045   437     475
                        Billets:    000 Tonnes  1,240   1,055   627     614
 Ezz Steel Consolidated                         1H22    1H21    2Q22    1Q22

 Sales (EGP):
              Value:                Mn          38,497  30,417  19,856  18,641
              Volume:
              Long:                 000 Tonnes  1,503   1,355   714     789
              Flat:                 000 Tonnes  907     1,038   404     503
 Exports as % of Sales:
              Long:                             8%      11%     11%     4%
              Flat:                             48%     54%     56%     39%
              EBITDA:               Mn          8,947   5,273   4,966   3,981
              EBT                   Mn          5,576   2,920   3,822   1,754
              Net Profit            Mn          4,130   2,397   2,913   1,217
 Production:
 Long Products:                     000 Tonnes  1,660   1,444   852     808
 Flat Products:                     000 Tonnes  912     1,045   437     475
              Billets:              000 Tonnes  1,661   1,496   853     808

 

 

 

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  IR LPMATMTIMBJT