CONSOLIDATED Q1 & H1 2011 RESULTS

CONSOLIDATED Q1 & H1 2011 RESULTS

Cairo, 15 December 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 first half results for the period ending 30 June 2011. The audited results have been prepared in accordance with Egyptian Accounting Standards.

Key highlights

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

Comment

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

"Despite the exceptional events that took place in Egypt during the first half of 2011, we were able to run all our operations smoothly."

We managed to increase our sales compared to the same period of last year by 1% in terms of volume and 24% in terms of value. This has allowed us to absorb all the additional costs deriving from the major disruptions in the Egyptian economy and to maintain a slightly positive bottom line result."

We have once more proven the efficiency of our plants, the strength of our markets and the solidity of our balance sheet. 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." 

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About Al-Ezz Steel Rebars Co. S.A.E.

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 3.4 million 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 H1 2011 were EGP 9.3 billion compared with EGP 7.5 billion during H1 2010, representing an increase of 24 per cent. This increase in sales reflects higher prices during the period, with long product prices rising by 25 per cent year on year, while flat steel prices rose by 16 per cent in the domestic market and by 23 per cent for export markets.

Long steel sales volumes reached 1,648 thousand tonnes during H1 2011, representing a 6 per cent increase over the 1,553 thousand tonnes sold during H1 2010. This increase over the previous year was to meet strong domestic demand for ezzsteel long products, which has continued despite the disruption to the Egyptian market during the period. Flat steel sales volumes fell by 11 per cent to 573 thousand tonnes in H1 2011. Overall sales volumes reached 2,221 thousand tonnes during H1 2011 representing a 1% increase over the 2,198 thousand tonnes sold during H1 2010.

Long steel products accounted for EGP 6,787 million, or 74 per cent of total sales in H1 2011, while flat steel products represented 26 per cent of sales at EGP 2,445 million. Long product exports accounted for 5 per cent of total long sales, due to the continued market demand for long products mainly coming from private house building activity. Conversely, flat product exports accounted for 54 per cent of total flat sales.

While demand for ezzsteel long products remained strong within the Egyptian market, imports fell from 16 per cent in H1 2010 to 4 per cent in H1 2011.

While production fell somewhat during H1 2011, due to the exceptional events that took place in Egypt, production was nonetheless maintained. Long steel production volumes reached 1,662 thousand tonnes during H1 2011, a 4 per cent decrease from the 1,726 thousand tonnes in H1 2010.

Flat steel production volumes were 24 per cent lower at 545 thousand tonnes in H1 2011, compared to 720 thousand tonnes in H1 2010. This lower flat production was primarily due to disruption to logistics in Q1 and because of the installation of new long product rolling mills at EFS which were completed in the first quarter. In Q2, as more normal operating conditions returned, nearly twice as much flat steel was produced at EFS as in Q1. In addition to flat product, in H1 2011, EFS produced 91 thousand tonnes of long product and 181 thousand tonnes of billet.

The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales for the period ending 30 June 2011 were 30 per cent, 65 per cent, and 5 per cent respectively.

Cost of Goods Sold

Consolidated cost of goods sold for the year ended 30 June 2011 increased to 88 per cent of sales, compared to 85 per cent for the same period in 2010. This was due to significantly higher raw material costs.

Gross profit

Gross profit of EGP 1,110 million was recorded in H1 2011, an increase of 1 per cent from the EGP 1,094 million recorded in the same period in 2010.

EBITDA

EBITDA for the period reached EGP 1,244 million, up from EGP 1,207 million for H1 2010 representing an increase of 3 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 51 million, in comparison to EGP 241 million for the corresponding period in 2010.

Liquidity and capital resources

At the end of the period, ezzsteel had cash on hand of EGP 1.7 billion and net debt of EGP 7.6 billion. The company has gearing of Net Debt / Equity 1.12 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

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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 six month period ending 30 June 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.