ezzsteel Consolidated FY2011 Results

ezzsteel REPORTS CONSOLIDATED FULL YEAR 2011 RESULTS

Cairo, 10 April 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 full year results for the period ending 31 December 2011. The audited results have been prepared in accordance with Egyptian Accounting Standards.

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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

*** 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:

"2011 was a challenging year both in Egypt, because of the ongoing exceptional political circumstances, and globally because of the slowdown in the steel industry.

"However, we are pleased that ezzsteel managed to come through this period with an improved performance across production, sales, revenues and margins.

"With the completion of our long product mill in Suez, which further increases the flexibility of our production portfolio, and given the strength of our domestic market and the solidity of our balance sheet, we are confident that ezzsteel's business model will deliver even better results as a more stable political environment returns to Egypt."

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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 2011, the Company produced 3.6 million 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 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 2011 were EGP 18.6 billion, representing an increase of 12 per cent year on year. This increase in sales reflects higher prices during the period, with long product prices rising by 23 per cent year on year over both local and export markets, while flat steel prices rose by 17 per cent domestically and by 20 per cent for export markets.

Long steel products accounted for EGP 13.8 billion or 74 per cent of sales in 2011, while flat steel products represented 24 per cent of sales at EGP 4.5 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, mainly from private house building activity in Egypt. Conversely, flat product exports accounted for 48 per cent of total flat sales, 10 per cent lower than that in 2010, due to the reduced activity in the global flat steel market.

Long steel sales volumes reached 3.62 million tonnes during 2011, seven per cent higher than the 3.39 million tonnes sold during the same period last year, to meet the domestic demand for ezzsteel's long products, which has continued to remain strong. It is important to note that the consolidated revenues do not account for 339 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 on the balance sheet and not in the income statement. From the beginning of 2012, when the new plant began commercial operations, long product sales by EFS are accounted for within the income statement.

Flat steel sales volumes fell by 21 per cent to 1 million tonnes in 2011, principally due to weaker export sales volumes, which were down by 35 per cent year on year due to the suspension of flat production at the EFS plant during the installation of the new long product mill.

The group's consolidated sales volume reached a total of 4.7 million tonnes in 2011, the same tonnage sold as during 2010.

The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales for the period ending 31 December 2011 were 31 per cent, 65 per cent, and 4 per cent respectively.

Long steel production volumes reached 3.57 million tonnes during the year, a 5 per cent increase from the 3.41 million tonnes in 2010. Flat steel production volumes were 32 per cent lower at 1 million tonnes for the year, compared to 1.46 million tonnes in 2010. During 2011, EFS suspended its flat steel production to focus on long steel as part of the commissioning process of its new facilities.

Cost of Goods Sold

Consolidated cost of goods sold for the year ended 31 December 2010 represented 88 per cent of sales, and remains the same as during the preceding year.

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 2,207 million was recorded in 2011, an increase of 15 per cent from the EGP 1,924 million reached in 2010.

EBITDA

EBITDA for the year ending 31 December 2011 reached EGP 2,440 million, representing an increase of 16 per cent from EGP 2,111 million recorded in 2010.

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 year.

Net profit after tax and minority interests

Net profit after tax and minority interests was EGP 202 million for 2011, in comparison to EGP 252 million for 2010.

Liquidity and capital resources

At the end of the period, ezzsteel had cash on hand of EGP 1.2 billion and net debt of EGP 8.0 billion. The company has gearing of Net Debt / Equity of 1.20 times.

Outlook

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

With our new long product rolling mill in Suez, 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 full year 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. Starting 2012, the new plant began commercial operation. Therefore, Long Product sales by EFS will be accounted for within the income statement going forward.

- 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 twelvemonth period ending 31December2011. 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.