ezzsteel H1 2010 Results

ezzsteel Reports Consolidated First Half 2010 Results

Cairo, 26 August 2010 - ezzsteel (formerly: Al Ezz Steel Rebars S.A.E.) (EGX: ESRS; London Stock Exchange: AEZD), the largest independent producer of steel in the MENA region and market leader in Egypt, today announced its first half results for the period ending 30 June 2010. 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

Comment

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

"The results reflect a substantial improvement from the comparable period last year. We have achieved a strong operational performance in the first half of 2010 with revenue growth of 17 per cent year-on-year, mainly driven by the restart of our EFS flat steel facility and a more positive pricing environment.

"As we go forward, despite a general context of sharp volatility, we expect demand and prices of steel products to improve gradually during the second half of 2010."

For further information:

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 2009, the Company produced 3.3 million tonnes of long products (typically used in construction) and 1.0 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 the first half of 2010 were EGP 7.5 billion, 17 per cent higher than in H1 2009, reflecting the restart of production at EFS in Q2 2010.

ezzsteel's production of long steel products is primarily directed to serving the domestic market, while flat steel production is mainly aimed at the global steel market.

Long steel sales volume reached 1,553 thousand tonnes during H1 2010, which represents a 2 per cent decrease over the 1,578 thousand tonnes sold during the same period in 2009.Flat steel sales volumes witnessed an increase from 523 thousand tonnes in H1 2009 to 644 thousand tonnes for H1 2010; an increase of 23 per cent.

Long steel products accounted for 68 per cent of total sales in H1 2010 accounting for EGP 5,138 million, while flat steel products represented 30 per cent of sales at EGP 2,284 million. This is in comparison to a long:flat mix of 77 per cent to 22 per cent in H1 2009 when the EFS facility was shut.

Long product exports accounted for 2 per cent of total long product sales due to the continued strength of the domestic market demand for long products. Flat product exports accounted for 59 per cent of total flat sales, due to renewed global steel demand for flat prodcuts.

Long steel production volume reached 1,726 thousand tonnes during H1 2010 representing a 2 per cent increase over the 1,688 thousand tonnes produced during the first half of 2009. Flat steel production volumes increased by 53 per cent to 721 thousand tonnes.

On a plant basis, EZDK long steel production fell by 3 per cent year-on-year in comparison with 2009. However on a quarter-on-quarter basis, when viewed sequentially, EZDK long production rose by 3 per cent. ESR/ERM long production rose by 9 per cent to 799 thousand tonnes in the same period, resulting from the upgrading of the long products finishing line. Flat production at EZDK was 4 per cent higher at 489 thousand tonnes in comparison to H1 2009. After a stoppage of 18 months, restart tests were performed at EFS, which came online to full operation mode at the beginning of the second quarter 2010. The production at EFS is now 231 thousand tonnes for the period.

The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales for the period ending 30 June 2010 were 32 per cent, 59 per cent, and 9 per cent respectively.

Cost of Goods Sold

Consolidated cost of goods sold for the period ended 30 June 2010 represented 85 per cent of sales, compared to 88 per cent for the same period in 2009, despite higher raw material costs.

EFS margins were negative in H1 2010. However, it recorded a positive margin during the second quarter of 2010 when operations were restarted at the plant.

Gross profit

Gross profit of EGP 1,094 million was recorded in H1 2010, an increase of 48 per cent from the EGP 741 million recorded in the same period in 2009.

EBITDA

EBITDA for the period reached EGP 1,206 million, up from EGP 845 million for H1 2009 representing an increase of 43 per cent.

Net profit after tax and minority interests

For the year ending 30 June 2010, net profit after tax and minority interests was EGP 241 million, 151 per cent higher than the EGP 96 million reported for H1 2009.

Liquidity and capital resources

At the end of the period, ezzsteel had cash on hand of EGP 1.9 billion and net debt of EGP 7.9 billion. The company has gearing of Net Debt / Equity of 1.24 times.

Outlook

Despite a general context of sharp volatility, we expect demand and prices of steel products to improve gradually during the second half of 2010. We are confident about the strength of the Egyptian market, which is driven by private housing growth and infrastructure activities. We also believe that the global flat steel market is set to experience a sustained recovery.

We are continuing our expansion efforts which are focused on vertical integration and flexibility. This includes increasing our DRI production by 1.85 million tonnes per year through the construction in Suez of a production facility. This will further increase our level of backward integration and decrease our production costs, replicating our EZDK model at our other facilities. Production at the site is expected to start during the second half of 2011.

Divisional Overview

- Ends -

Disclaimer:

This press release is issued by ezzsteel (formerly: Al Ezz Steel Rebars S.A.E.) or the "Company", in connection with the disclosure of the Company's financial results for the 6 month period ending 30 June 2010. 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.