Egypt's Ezz Steel Records Dramatic Rise in Earnings amid Strong Local Demand in H1 CY18

Egypt's biggest steel producer, Ezz Steel has recently unveiled its performance for the first half (H1) from Jan to Jun'18 of CY18 and if we analyse the company's consolidated earnings, the same has recorded a significant increase of 164% y-o-y basis backed by the strong local demand.

Ezz Steel's EBDITA (Earnings before interest, taxes, depreciation and amortization) in H1 2018 amounted to EGP 3.50 billion (USD 194.80 million), an increase of 164.37% from EGP 1.32 billion (USD 74 million) in H1 2017.

The company's top management attribute this increase in company's earnings to a substantial increase in global turnover through the combined effect of higher average selling prices and incremented production and sales volumes.

Egypt has imposed anti-dumping duties on rebar imports from China, Turkey and Ukraine for a period of five years with effect from December 2017 which helped the country's local demand to improve over January-June this year. However, the country has started rebar imports from Saudi Arabia from Jun'18 which may impact its performance in the latter half of the year.

The company saw a significant jump in its earnings in the first quarter of 2018 (Jan-Mar) and continuing the trend Ezz Steel repeated its operational performance in the second quarter of the year, leading to the consolidation of a stable recovery.

However, for the second half of 2018, the positive effect of improved performance on the bottom line is expected to be hindered by the growing disturbance in the global steel sector, coming from the implementation of trade protection measures.

Production and prices

During Jan-Jun'18, the company produced 1.70 MnT of long steel products, up by 13% from the corresponding period of 2017. The company produced 652,000 tonnes of flat steel products, a decrease of 3% compared with the first half of 2017. And it produced 11.64 MnT of billet in January-June 2018, 8.83% more than the 1.50 MnT produced in the same period of 2017.

Egypt's domestic rebar prices in the month of June were trending in the range of EGP 12,525-12,528 (USD 700) per tonne ex-works, including 14% VAT which is up from EGP 11,950-11,980 (USD 669) per tonne ex-works, including 14% VAT, at the start of the year.

The steel market activity in Egypt is subdued resulting which country's domestic rebar prices fell in the end of August month. The current rebar offers of Ezz Steel are trending at EGP 12,180 - 12,198 (USD 680) per tonne including VAT of 14%.

Sales volume

Ezz Steel sold 1.73 MnT of long steel products in the first half of 2018, 16% more than the 1.49 MnT sold in the first six months of 2017.This development was largely driven by improved domestic demand, especially for flat steel products, and continued improvements in price-per-tonne for both long and flat products in domestic and international markets as quoted by company's official.

In Egypt, long steel product prices were up by 32% and flat prices increased by 14%. Internationally, prices rose by 29% for long steel and by 23% for flat products sold during the first half of 2018.

Ezz Steel's flat steel sales decreased by 2% to 603,000 tonnes in the first six months of 2018.
The group's consolidated sales volumes totalled 2.30 MnT in the first half of 2018, an increase of 11% year-on-year from 2.07 MnT in the same period of 2017.

Ezz Steel Performance

Source: Company data