Consolidated Nine Months 2011 Results

ezzsteel Reports Consolidated Nine Months 2011 Results

Cairo, 31 January 2011 - 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 nine months results for the period ending 30 September 2011. 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/4359W_-2012-1-30.pdf

Key highlights

*EBITDA = sales - cost of goods sold - selling & marketing expense - G&A expense + depreciation and amortisation

**Reflecting the higher corporate tax rate and a one-time adjustment to the deferred tax liability

Comment

Commenting on the results, Mr Paul Chekaiban, Chairman and Managing Director of ezzsteel, said:

"Despite the unstable environment that prevailed in Egypt during the first nine months of 2011, we are proud to have recorded strong performance in terms of Production, Sales, Revenues and Margins.

"We believe that the steady quarter by quarter improvement in our results reflects our ability to fully overcome the negative consequences of the current circumstances."

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 5.8 million tonnes of finished steel.

In 2010, the Company produced 3.4million tonnes of long products (typically used in construction) and 1.5 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 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 first nine months of 2011 were EGP 14.2 billion, representing an increase of 22 per cent on the same period in 2010. This increase in sales reflects higher prices during the period, with long product prices rising by 27 per cent year on year over both local and export markets, while flat steel prices rose by 17 per cent domestically and by 22 per cent for export markets.

Long steel sales volumes reached 2.47 million tonnes during the first nine months of 2011, representing a 5 per cent increase over the 2.36 million tonnes sold during the same period last year. This increase over the previous year was to meet continued domestic demand for ezzsteel's long products, which has remained strong. Flat steel sales volumes fell by 17 per cent to 0.82 million tonnes in 9M 2011, principally due to weaker exports sales volumes which were down 34 per cent following the suspension of flat production at EFS in the quarter, while local market flat volumes rose by 8 per cent.

It is important to note that the consolidated revenues do not account for 187 thousand tonnes of long product sales made by EFS during the period. These sales were made during the commissioning period for the new long product rolling mill recently installed at EFS and are consequently capitalised within the total project cost in the balance sheet and not in the income statement. If the 187 thousand tonnes were added to the group's consolidated sales volume, the overall sales volume would total 3.47 million tonnes during 9M 2011, representing a 4 per cent increase over the tonnage sold during 9M 2010.

Long steel products accounted for EGP 10.4 billion, or 73 per cent of total sales in the first nine months of 2011, while flat steel products represented 25 per cent of sales at EGP 3.6 billion. Long product exports accounted for 4 per cent of total long sales, down from 11 per cent in the same period last year, reflecting the continued market demand for ezzsteel's long products, mainly from private house building activity in Egypt. Conversely, flat product exports accounted for 48 per cent of total flat sales.

Long steel production volumes reached 2.60 million tonnes during the first nine months of 2011, a 2 per cent increase from the 2.55 million tonnes in 9M 2010.During the period, EFS suspended its flat steel production to focus on long steel as part of the commissioning process of its new facilities. Flat steel production volumes were 31 per cent lower at 0.79 million tonnes in 9M 2011, compared to 1.14 million tonnes in 2010.

The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales for the period ending 31 September 2011 were 31 per cent, 64 per cent, and 5 per cent respectively.

Cost of Goods Sold

Consolidated cost of goods sold for the nine months to 31 September 2011 remained flat at 88 per cent of sales. EFS's cost of goods sold, at 110 per cent, continues to reflect the impact of the reduction in production associated with the plant development programme.

Gross profit

Gross profit of EGP 1,712 million was recorded in the first nine months of 2011, an increase of 20 per cent from the EGP 1,427 million recorded in the same period in 2010.

EBITDA

EBITDA for the period reached EGP 1,900 million, up from EGP 1,579 million for 9M 2010 representing an increase of 20 per cent over the previous year.

Tax

The company's effective tax rate has increased, due to Egypt's higher corporate tax rate of 25 per cent which came in to effect in 2011, this compares with the 20 per cent rate in 2010.

Because of the tax rate increase, there was a one-time adjustment to the deferred tax liability and this was fully accounted for during the period

Net profit after tax and minority interests

Net profit after tax and minority interests was EGP 179 million, in comparison to EGP 242 million for the corresponding period in 2010.

Liquidity and capital resources

At the end of the period, ezzsteel had cash on hand of EGP 1.3 billion and net debt of EGP 8.1 billion. The company has gearing of Net Debt / Equity 1.24 times.

Outlook

Our flexible business model which we have built over the last 15 years has demonstrated its resilience to adverse circumstances and we expect that it will enhance our performance as more normal conditions return to Egypt.

With our new long product rolling mill at EFS, we have greater flexibility than ever before to tailor production to demand and we will continue to pursue our plans for further vertical integration to improve our margins.

Divisional Overview

As the long product sales made by EFS during the nine months 2011 were during the Commissioning Period of the plant, they are consequently capitalised within the total project cost in the balance sheet and not in the income statement

- 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 nine month period ending 31 September 2011. 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.