27th May 2008 15:40
AL EZZ STEEL REBARS REPORTS CONSOLIDATED FULL YEAR 2007 RESULTS
Strong Operating Performance; Growth Opportunities Progressed
Cairo, 27 May 2008 - Al Ezz Steel Rebars S.A.E. ("ezzsteel") (CASE: ESRS; London Stock Exchange: AEZD), the largest independent producer of steel in the MENA region and market leader in Egypt, today announced its consolidated full year results for the period ending 31 December 2007. The audited results have been prepared in accordance with Egyptian Accounting Standards.
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Key highlights
|
EGP |
2006 |
2007 |
+/- |
| Net sales |
11.6bn |
16.2bn |
+40% |
| Gross profit |
3.2bn |
3.6bn |
+12% |
| EBITDA* |
3.6bn |
3.9bn |
+8% |
| Net profit before tax |
2.6bn |
2.9bn |
+11% |
| Tax and deferred tax |
611m |
653m |
+7% |
| Net profit after tax and minority interests |
995m |
1.1bn |
+12% |
| EPS on a weighted average number of shares |
5.85 |
6.26 |
+7% |
| Net debt to Equity |
1.26x |
0.99x |
-21% |
*EBITDA = sales - cost of goods sold - selling & marketing expense - G&A expense + depreciation and amortisation
Comment
Commenting on the 2007 results, Mr. Ahmed Ezz, Chairman and Managing Director of Ezz Steel, said:
""2007 reinforced our position as a leading steel producer, both in the Middle East and internationally and our results are a testament to this, with total net sales reaching EGP 16.2 billion and total production capacity of 5.3 million tonnes per year.
"These results should be viewed in the context of a highly dynamic global steel market. Internationally, steel prices rose considerably during 2007, and continue to do so, underpinned by an increasing supply and demand imbalance and the impact of rising raw materials prices. While visible in our top line, this is also reflected in our margins.
"Despite the record levels of production achieved during the year and efficiency levels which rival those of our international peer group, our focus has been on securing the future because of this industry context. In 2007, we initiated strategies for growth and improved integration efficiency across our operations, designed to build on the production performance we have become synonymous with."
Outlook
The Company is building on its strong market position at home and overseas, expanding and optimizing existing operations as well as forging ahead with plans for the development of new facilities to further enhance productivity, minimize our exposure to industry pressures and pursue the opportunities presented by robust demand conditions.
The Company expects to maintain its current production in the near term and to benefit from the expansion and enhancement projects as they come on-stream.
The Company expects that there will continue to be strong demand for long products in Egyptian and regional markets. Demand for flat steel products is expected to continue to grow strongly in the Egyptian market as the country becomes increasingly industrialized. Steel prices globally have risen considerably in recent months, underpinned by an increasing supply and demand imbalance and the impact of rising raw materials prices.
2007 was also a landmark year for ezzsteel, making its first expansion outside of Egypt. This involved signing a Memorandum of Understanding with the Algerian Government to build and operate an integrated mini-mill complex that will provide the company a platform from which to serve the booming Algerian construction industry.
Algeria is attractive to ezzsteel because it is a country that is rich in oil and natural gas and has an economy that is growing rapidly. The country is a net importer of steel, consuming 2.8 million tonnes of rebar annually, but only producing in the region of 600 thousand tonnes domestically. There is a strong pipeline of government approved projects such as house building and road construction.
Full Year 2007 Operational Review
Regional steel sector overview
Steel consumption throughout the region has expanded rapidly in recent years underpinned by demand from the construction sector. Strong growth in demand has supported production growth across the region. MENA steel production was up by 9 per cent in 2007 and now represents one of the highest growth markets worldwide. MENA countries produced approximately 25.9 million tonnes of crude steel in 2007. Despite the growth in total crude steel output in the region, supply continues to be outpaced by MENA demand which grew 12 per cent to 38.1 million tonnes in 2007. As a result, the region remained a net importer of steel. Considering the high oil prices, steady GDP growth and construction projects in the pipeline, particularly in GCC region, the demand for rebar is expected to continue to grow.
Steel prices respond to supply and demand and fluctuate in response to general and industry-specific economic conditions. The price of steel - long and flat - continued to rise in 2007 as worldwide demand surged and the price of raw materials rose significantly.
During the course of 2007, Egyptian steel demand grew 15 per cent, compared with just 4 per cent in 2006 as the impact of major infrastructure projects and the expansion of real estate market took effect. The outlook for steel demand remains robust and all indications are that local market demand will be sustained.
As the market leader in Egypt, with over 65 per cent domestic market share in terms of sales, ezzsteel's priority is to facilitate industrial and economic growth in our home market and output is, therefore, first directed internally. Egypt is the Company's largest single market, with long and flat products having established a reputation for the highest quality and prompt delivery. Almost 74 per cent of sales in 2007 were derived from Egypt.
Sales
All of the below financial breakdowns are based on ezzsteel's consolidated financials which include 12 months financial performance of ezzsteel (ESR/ESM), EZDK and EFS. This is the first full year of consolidation for all of these entities, resulting from the restructuring undertaken in 2006.
Consolidated net sales for 2007 were EGP 16.2 billion compared with EGP 11.6 billion during 2006, representing a rise of 40 per cent. Long steel products accounted for 64 per cent of total sales and flat steel products represented 35 per cent of sales in 2007. Local sales accounted for 74 per cent of total sales, a rise of 13 per cent, this resulted from the Company's commitment to supply demand in the local market as a priority. The EU was ezzsteel's largest export market accounting for 72 percent of flat product in 2007, up from 34 per cent in 2006. Greatest demand for long product outside of Egypt came from the MENA region, which took 85 per cent of ezzsteel's rebar export compared to 62 per cent in 2006.
The contributions of ezzsteel, EZDK and EFS to net sales for the period ending 31 December 2007 were 28 per cent, 54 per cent, and 18 per cent respectively.
|
Sales |
ESR/ESM |
EZDK |
EFS |
Total |
|
EGP Mn |
||||
|
Long |
4,536.17 |
5,865.06 |
10,401.23 |
|
|
Flat |
2,701.69 |
2,916.40 |
5,618.09 |
|
|
Others |
1.26 |
128.67 |
10.13 |
140.06 |
|
Total |
4,537.43 |
8,695.42 |
2,926.53 |
16,159.38 |
The Egyptian market remains the focus for sales of long products while flat sales were mainly directed towards international markets, as illustrated below:
|
EGP Mn |
Domestic |
per cent |
Export |
per cent |
|
Long |
9,466 |
91 |
935 |
9 |
|
Flat |
2,291 |
41 |
3,327 |
59 |
Rigorous attention to achieving best practice remained a focal point, as did a strong focus on developing the skills of the workforce. In 2007, production per employee stood at 883 tpa.
Cost of Goods Sold
|
EGP Mn |
ESR/ESM |
EZDK |
EFS |
The Company |
|
Sales |
4,537 |
8,826 |
2,932 |
16,159 |
|
COGS |
4,215 |
5,710 |
2,721 |
12,511 |
|
COGS / Sales |
93per cent |
65per cent |
93per cent |
77per cent |
In 2007, scrap and billet prices increased by 18 per cent and 29 per cent in dollar terms respectively. Freight costs, which influence overall feedstock prices, were stable for most of the year, however, sharp increases were seen in the final two months of 2007. Compared with global prices, ezzsteel's energy prices remained low and accounted for just 7 per cent of total costs.
Fluctuating feedstock prices continue to represent a challenge for the industry and the outlook remains volatile. ezzsteel took significant steps in 2007 towards reducing its ongoing exposure to this volatility. In addition to the existing DRI plants in operation at its EZDK facility in Alexandria, 2007 saw ezzsteel laying the foundations for two new DRI plants to be located in close proximity to its existing operations. Both plants will provide a captive supply of DRI for internal company use, thus reducing ezzsteel's reliance on externally sourced scrap. The plants are expected to process an additional 3.2 million tonnes of DRI for internal consumption, with production scheduled to commence in Q3 2010.
Gross profit
Increased vertical integration allows ezzsteel to protect and improve gross margin. Gross profit for the period ended 31 December 2007 was EGP 3.6 billion up from EGP 3.2 billion in 2006. The significant price appreciation witnessed in global raw material prices has put some pressure on our gross margin, which ended the year at 23 per cent.
EBITDA
EBITDA for the period reached EGP 3.9 billion, up from EGP 3.6 billion for the same period in 2006 reflecting a 10% growth in the absolute value of EBITDA between 2007 and 2006.
At ezzsteel, EBITDA is calculated as follows: Sales - cost of goods sold - selling & marketing expenses - G&A expenses + Depreciation and amortization.
Tax and deferred tax
The corporate tax rate for Egyptian companies is 20 per cent of net income. Tax and deferred tax reached EGP 653 million in 2007, compared to EGP 611 million in 2006, making ezzsteel one of the largest corporate tax payers in Egypt. Income tax paid during 2006 amounted to EGP 492 million.
Net profit after tax and minority interests
Net profit after minority interests was EGP 1.1 billion, up 13 per cent in comparison to the same period in 2006. This has delivered earnings per share (EPS) of EGP 6.26 in 2007, a 7 per cent increase versus EGP 5.85 per share in 2006 on a weighted average number of shares basis.
Net debt
During the course of 2007, cash generated from operations has been used to reduce net debt. By 31 December, 2007 Net Debt stood at EGP 5.3 billion. This represents a Net Debt / EBITDA ratio of 1.3x compared to 1.8x in 2006.
Divisional Overview
Please note that the below mentioned overview reflects the full year performance of each entity on a stand alone basis rather than the consolidated portions within the 2007 ezzsteel consolidated financials.
|
EZDK (Alexandria) Sales: |
2007 |
2006 |
% change |
|
Value: |
EGP 8.8 bn |
EGP 8.1 bn |
8.6% |
|
Volume: Long: Flat: |
1,824 thousand ton 770 thousand ton |
1,785 thousand ton 962 thousand ton |
2.2% -20% |
|
Exports as % of Sales: Long: Flat: |
10% 47% |
27% 54% |
|
|
EBITDA: |
EGP 3.5bn |
EGP 3.4bn |
+5% |
|
Production: |
|||
|
Long Products: |
1,759 thousand ton |
1,721 thousand ton |
2% |
|
Flat Products: |
775 thousand ton |
984 thousand ton |
-21% |
|
Billets: |
1,869 thousand ton |
1,818 thousand ton |
3% |
|
No. of Employees: |
3,500 |
||
|
ESR/ESM (Sadat City & 10th of Ramadan City) Sales: |
2007 |
2006 |
% change |
|
Value: |
EGP 4.5 bn |
EGP 3.5 bn |
29% |
|
Volume: |
1,395 thousand ton |
1,281 thousand ton |
19% |
|
Exports as % of Sales: |
8% |
18% |
|
|
EBITDA: |
EGP 314 mn |
EGP 312mn |
+1% |
|
Production: |
|||
|
Long Products: |
1,367 thousand ton |
1,243 thousand ton |
10% |
|
Billets: |
788 thousand ton |
763 thousand ton |
3% |
|
No. of Employees: |
1,700 |
||
|
EFS (Suez) Sales: |
2007 |
2006 |
% change |
|
Value: |
EGP 2.9 bn |
EGP 2.3 bn |
26% |
|
Volume: |
892 thousand ton |
781 thousand ton |
14% |
|
Exports as % of Sales: |
71% |
60% |
|
|
EBITDA: |
EGP 291 mn |
EGP 343mn |
-15% |
|
Production: |
|||
|
Flat Products: |
932 thousand ton |
784 thousand ton |
19% |
|
No. of Employees: |
1,000 |
For further information:
|
Ezz Steel |
Tel |
Mobile |
|
Kamel Galal |
+ 20 2 762 2144 |
+ 20 10 539 5499 |
|
Capital MS&L |
||
|
Claire Maloney |
+44 207 307 5341 |
+ 44 7770 958 479 |
|
Jennifer Martin |
+ 44 20 7307 5335 |
+ 44 7841 401304 |
About Al-Ezz Steel Rebars Co. S.A.E.
Al Ezz Steel Rebars (ezzsteel) is the largest independent steel producer in the Middle East and North Africa, with a total actual capacity of 5.3 million tonnes of finished steel per annum in 2007. It is the Egyptian market leader with over 65 per cent market share in terms of sales.
In 2007, the Company produced 3.1 million tonnes of long products (typically used in construction) and 1.7 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 70 per cent of its plants are less than 10 years old using the latest in modern steel making technology.
Disclaimer:
This press release is issued by Al Ezz Steel Rebars S.A.E. ("ezzsteel" or the "Company"), in connection with the disclosure of the Company's financials results for the year 2007. This document 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 products in Egypt and in regional markets and for flat steel in the 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 made in or suggested 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 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, or 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 nor shall assume, and each of ezzsteel, any of its directors, officers or employees or any other person expressly disclaims, any obligation, except as required by law, the listing rules of the CASE or the LSE or the FSA, to update any forward-looking statements or to conform these forward-looking statements to ezzsteel's actual results.
By accepting any copy of this document, you agree to be bound by the foregoing limitations and restrictions.
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