ezzsteel reports consolidated H1 2013 results

EZZSTEEL REPORTS CONSOLIDATED H12013 RESULTS

Cairo,23 October 2013 - 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 results for the period ending 30 June 2013. 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

** 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:

"The first half of 2013 has seen robust growth for the company, with sales, margins and profit all up significantly compared to the corresponding period of 2012.

"The strong domestic housing market coupled with the restart of the construction of the Direct Reduced Iron (DRI) plant in Suez, gives us confidence moving forward."

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ezzsteel

About ezzsteel

Ezzsteel is the largest independent steel producer in the Middle East and North Africa, and the Egyptian market leader, with a total actual capacity of 5.8million tonnes of finished steel.

In 2012, the Company produced 3.9 million tonnes of long products (typically used in construction) and 893,000 tonnes of flat products (typically used in consumer / industrial goods). ezzsteel deploys the latest in modern steel making technology and is committed to further increasing vertical integration across its plants, to boost operational flexibility.

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 H12013 were EGP11.1billion, which represents an increase of 8 per cent year on year. This increase in sales is due to higher sales volumes for both long and flat, as well as higher realized selling prices.Long product prices increased by 6 per cent year on year in the local market, whilst export prices decreased by 4 per cent.Flat export prices increased by 7 per cent, reflecting the increased confidence in international steel markets, with local prices increasing by 4 per cent.

Long products accounted for EGP 8.7 billionor 78 per cent of sales in H12013, while flat steel products represented 21 per cent of sales at EGP 2.3billion. The domestic market continued to remain strong, with private house building leading the demand for ezzsteel's long products. Long product exports accounted for 8per cent of total long sales. Flat product exports accounted for 46 per cent of total flat sales.

Long sales volumes reached 1.94 million tonnes during H1 2013, 1per cent higher than the 1.92 million tonnes sold during the same period last year.

Flat sales volumes, which are concentrated at EZDK, increased by 9 per cent to 522 thousand tonnes in H1 2013, despite the switching of production at EFS to long products only, in order to meet higher local demand and more attractive pricing.

The group's consolidated sales volumes reached a total of 2.5 million tonnes in H1 2013, an increase of 3 per cent from the 2.4 million tonnes sold in H12012.

The contributions of ESR/ERM, EZDK and EFS to the consolidated net sales for the period ending 30 June2013 were 27 per cent, 62 per cent, and 11 per cent respectively.

Long steel production volumes totalled 2.0 million tonnes during H1 2013, down 5 percent compared to H1 2012.Flat steel production volumes increased by 7 per cent to 504,583 tonnes for the period, compared to 471,548 tonnes in the previous year.

Cost of Goods Sold

Consolidated Cost of Goods Sold for H1 2013 represented 87 per cent of sales, reflecting an improvement in gross profit margin from 10 per cent in H1 2012 to 13 per cent in H1 2013.

EFS's Cost of Goods Sold, at 109per cent, reflects the low capacity utilization level currently at that facility.

Gross profit

Gross profit of EGP 1.4 billion was recorded for H1 2013, an increase of 42 per cent from the EGP 1 billion recorded in H1 2012.

EBITDA

EBITDA for H1 2013 amounted to EGP 1.4 billion, representing an increase of 30 per cent from EGP 1.1 billion in H1 2012.

Tax

The company's tax charge increased 5 per cent from EGP 224 million in H1 2012 to EGP 235 million in H1 2013, in line with the overall increase in the group's profitability.

Net profit after tax and minority interests

Net profit after tax and minority interests was EGP 302 million for H 12013, in comparison to a profit of EGP 82 million for H1 2012.

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 8.6 billion. The company has a gearing of Net Debt / Equity of 1.2 times.

In June, ezzsteel announced it had successfully agreed the deferral by one year of EGP 220 million principal payments originally scheduled in 2013 relating to its EGP 440 million bond maturing in 2014.

ezzsteel subsequently announced that it has signed an EGP 550 million, six-year, top-up syndicated loan facility with National Bank of Egypt, Banque Misr and a group of local banks. The total syndicated loan is now EGP 2.8 billion.

These funds raised will be used to complete the construction of the Direct Reduced Iron (DRI) project at Sokhna-Suez. The cost of this investment is estimated at EGP 3.7 billion, of which EGP 2.8 billion will be financed through debt and the remaining amount through internal cash flows.

Outlook

The Egyptian market continues to see robust local market demand for long products in particular, underpinned by local house building activity. The progress being made on the DRI plant is encouraging and once completed will significantly increase vertical integration and operational efficiency, resulting in higher margins.

Divisional Overview

- Ends -

Disclaimer:

This press release is issued by ezzsteel (formerly: Al Ezz Steel RebarsS.A.E.)the "Company", in connection with the disclosure of the Company's financial results for the 6month period ending 30 June 2013.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 FCA) to update any forward-looking statements or to conform these forward-looking statements to ezzsteel's actual results.