Consolidated H1 2012 Results

ezzsteel REPORTS CONSOLIDATED H1 2012 RESULTS

Cairo, 17 October 2012 - 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 2012. 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/8836O_-2012-10-17.pdf 

Key highlights

*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:

"During the First Half of 2012, ezzsteel has recorded another period of resilient performance, achieving record volumes both in terms of production and sales. This outstanding operational performance enabled us to remain earnings positive during the period, despite the continued slowdown in the Egyptian economy and the ongoing weakness of global steel markets. "Our flexible business model which has been patiently built over the past twenty years, is again proving its worth. We expect it will be further enhanced when the vertical integration project at Suez will be completed."

For further information:

ezzsteel

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 5.8million tonnes of finished steel.

In 2011, the Company produced 3.6million tonnes of long products (typically used in construction) and 1 million tonnes of flat products (typically used in consumer / industrial goods). ezzsteel's customer base is geographically diversified, with flat products mainly directed to export markets, whereas long products are mostly sold in the domestic market. More than 50 per cent of its plants are less than 10 years old, using the latest in modern steel making technology.

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 2012 were EGP 10.3 billion, representing an increase of 10 per cent year on year. This increase in sales reflects an increase in sales value of long product of 20%, offset by a decrease in flat product sales of 17%.

Long steel products accounted for EGP 8.1 billion or 79 per cent of sales in H12012,while flat steel products represented 20 per cent of sales at EGP 2.0 billion. Long product exports accounted for 4 per cent of total long sales, reflecting the continued strong domestic market demand for ezzsteel's long products. Flat product exports accounted for 45 per cent of total flat sales. This represents a decline of 30% compared to H1 2011, driven by the reduced activity in the global flat steel market.

Long steel sales volumes reached 1,915 thousand tonnes during H1 2012, 16 per cent higher than the 1,648 thousand tonnes sold during the same period last year. This was driven largely by long product production coming on stream at EFS during the period.

Flat steel sales volumes fell by 16 per cent to 479 thousand tonnes in H1 2012, compared to the same period in 2011, principally due to the switching of production at EFS to long products, due to higher demand and more attractive pricing.

Overall, the group's consolidated sales volume reached a total of 2.4 million tonnes in H1 2012, an increase of 8 per cent from the 2.2 million tonnes sold in H1 2011. This was due to increased long product production at EFS following the commissioning of the long product mill during 2011.

The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales figure of EGP 10.3 billion for the period ending 30 June 2012 were 27 per cent, 57 per cent, and 16 per cent respectively.

Long steel production volumes reached 2.1 million tonnes during the period, a 25per cent increase from the 1.7 million tonnes in H1 2011, reflecting the contribution made by EFS during the period. Flat steel production volumes fell by 14 per cent to 472 thousand tonnes for the period, compared to 545 thousand tonnes in H1 2011. This was due to the suspension of flat production at EFS due to weaker global demand and pricing and the concentration of production at that plant on long products.

Cost of Goods Sold

Consolidated cost of goods sold at EGP 9.3 billion for H1 2012 represented 90 per cent of sales. Overall, COGS increased by 13 per cent compared to the same period in 2011, principally driven by higher raw material prices and energy costs.

EFS's cost of goods sold, at 104 per cent, continues to reflect the impact of the suspension of flat production.

Gross profit

Gross profit of EGP 1.0 billion was recorded in H1 2012, a decrease of 10 per cent from the EGP 1.1 billion recorded in H1 2011.

EBITDA

EBITDA for H1 2012 amounted to EGP 1.1 billion, representing a decrease of 11 per cent from EGP 1.2 billion recorded in H1 2011.

Tax

The company's tax charge fell from EGP 337 million in H1 2011 to EGP 224 million in H1 2012, mainly due to the one - time adjustment to the deferred tax liability that was accounted for during H1 2011.

Net profit after tax and minority interests

Net profit after tax and minority interests was EGP 82 million for H1 2012, in comparison to EGP 51 million for H1 2011, reflecting an increase of 61 per cent.

Liquidity and capital resources

At the end of the period, ezzsteel had cash on hand of EGP 743 million and net debt of EGP 8.7 billion. The company has gearing of Net Debt / Equity of 1.37x.

Outlook

Private house building still enjoys high single digit growth in Egypt, in contrast to weaker international steel markets. ezzsteel has maintained market share in its domestic market and has focused production from its EFS facility exclusively on long products to help meet this demand. Flat products pricing was also unusually weak, with long products currently commanding a premium, once again highlighting the need for a flexible asset portfolio that can adapt to evolving market conditions.

Divisional Overview

- Ends -

Disclaimer:

This press release is issued by ezzsteel (formerly: Al Ezz Steel RebarsS.A.E.)the "Company", in connection with the disclosure of the Company's financial results for the 6 month period ending 30 June 2012.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 FSA) to update any forward-looking statements or to conform these forward-looking statements to ezzsteel's actual results.