EZZ STEEL (EG), a company active in the Steel industry, reduced its market risk and raised its general evaluation. The independent financial analyst theScreener awarded an improved star rating to the company, which now shows 2 out of 4 possible stars; its market behaviour has improved and can be considered as defensive. theScreener believes that this new assessment merits an overall rating upgrade to Slightly Positive. As of the analysis date March 8, 2022, the closing price was EGP 14.61 and it...
ANOTHER STRONG QUARTER BOLSTERED BY ROBUST PRICES Ezz Steel released a positive set of 3Q21 results further supporting FY21 profitability. ESRS achieved EGP897 million of attributable profits during the quarter versus EGP929 million of losses in 3Q20 and +12% QoQ. Net profit before minority interest was EGP1.36 billion versus net losses of EGP1.34 billion in 3Q20 and net profit of EGP1.21 billion in 2Q21. NPM came positive at 4.8% (+15.6pps YoY, Stable QoQ). The results came in positive on st...
SOARING PRICES SOLIDIFIES PROFITABILITY Ezz Steel released a robust set of 2Q21 results showing strong profitability for the second quarter in a row. ESRS achieved a robust EGP800 million of attributable profits during the quarter (vs our estimates of EGP741 million) and (versus EGP984 million of losses in 2Q20; +2% QoQ). Net profit before minority interest was EGP1.21 billion versus net losses of EGP1.42 billion in 2Q20 and net profit of EGP1.19 billion in 1Q21. NPM came positive at 4.7% (+1...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
STRONG PRICES BOLSTER PERFORMANCE AND SHIFTS BOTTOM-LINE TO THE GREEN Ezz Steel has finally shifted to profitability on the bottom-line level in 1Q21 an occasion that hasn’t occurred since 4Q2016 when the company benefited from the devaluation of the EGP. ESRS achieved EGP784 million of attributable profits compared to a net loss of EGP860 million in 1Q20 and a net loss of EGP346 million in4Q20. Net profit before minority interest was EGP1.19 billion versus net losses of EGP1.35 billion in 1Q...
We present the 1Q21 material prices that are relevant to the petrochemical, consumer and industrial & materials sectors. In our 12-page report, we depict the impact of such changes on the financial performance of listed equities in Egypt. We also present the quarterly breakdown of each sector. Most companies have inventory of raw material that covers somewhere around 2-3 months. The increase in raw material costs is slowing down in 2Q21. Accordingly, we expect the pressure on margins to appe...
STRONG TOP-LINE GROWTH TRIMS BOTTOM-LINE LOSSES Ezz Steel’s attributable net losses recorded EGP346 million in 4Q20 compared to EGP2,715 million in 4Q19 (due to restructuring costs) and EGP929 million in 3Q20. Net losses before minority interest for the quarter recorded EGP574 million, softer than the EGP2,715 million of 4Q19, and the EGP1,339 million of 3Q20.NLM dropped to 2.8% during the quarter (+7.9pps QoQ). The company’s losses were significantly better on a quarterly basis due to strong...
Management stated that they foresee a new upcycle for the steel industry being formed and they think that things have changed starting 4Q20. Regarding the local rebar market, they have seen demand increasing starting October 2020 on the back of the expiry of the six months ban on construction activity which caused stocking up by the wholesalers, which gives the management confidence that volumes will get back to at least the levels of 2018 which are at least about 400k-500k tonnes above the c...
Higher volumes and prices induce topline growth; gross margin turns green Ezz Steel's consolidated revenue recorded EGP8.63 billion (-7.8% YoY, but +22.6% QoQ). The company saw quick top-line recovery which came perfectly in line with our estimates and was driven by c.27% sequential improvement in total volumes sold and an uptick in prices during the quarter after the company raised its prices in August (+EGP200/tonne) and September(+EGP350/tonne) on improving global steel prices and rallyin...
Ezz Steel consolidated revenue recorded a dire EGP7.04 billion, down 47.0% YoY, and 34.7% QoQ. The huge slump in revenue is attributed to restrained demand during the quarter since total long volumes declined by 43.0% YoY and 35.3% QoQ while total flat steel sales dropped by 7.8%YoY and 33.7% QoQ amidst the weak demand caused by lockdowns, Ramadan, and reduced construction activity. Despite the increase in steel ASP/tonne on a sequential basis, sales failed to be cushioned from the demand slu...
Lower steel prices pressure top line, despite volumes improvement Ezz Steel consolidated top line came in at EGP10,786 million in 1Q20 compared to EGP12,616 million in 1Q19 and EGP10,455 million in 4Q19, declining by 14.5% YoY, but up by 3.2% QoQ. The drop in revenues annually is attributed to a decline in steel prices to the levels of EGP8.5 thousand/tonne dropping by 17% YoY despite the 3% YoY increase in volumes sold, while the relative improvement in QoQ revenue is driven by a marginal up...
The Government slashes natural gas and electricity prices In an attempt to alleviate the current pressure, the government has reduced natural gas prices to USD4.5/mmbtu, down from USD5.5/mmbtu for steel, aluminium and tiles producers and down from USD6/mmbtu for cement. In our view, the key beneficiaries are ESRS, IRAX, ECAP, and LCSW. The government will also reduce the electricity tariff by EGP0.10/KWh, which will have a positive impact on EGAL and our cement coverage. We do not rule out th...
Rally unjustified. We raise our TP by 29%, on the net effect of c7% higher USD:EGP estimates over 2018-22, and 17.5% higher non-material cost estimates on sharper fuel subsidy cuts at the new FX rate. Ezz Steel trades on a 2018e EV/EBITDA of 6.8x, and 5.8x in 2019e, in line with global peers for 2018, and only c8% below peers for 2019. We find these multiples elevated, given Egypt’s high capital costs, the company’s weak free cash flow generation, risk profile, and limited growth beyond 2019, gi...
WC funding needs not fully priced-in despite recent share price correction. Ezz Steel is operating its plants sub-optimally due to a shortfall in working capital (WC) funding capacity. However, we assume that management’s plans to raise debt will allow for a full operating rate by 2019e, up from c64% in 2017e, but this will come at a cost which we believe the market overlooks; 2017-19e working capital needs at cEGP13bn (averaging c71% of EBITDA), and in turn undermining FCFF and valuation. EFS, ...
Raise TP by 39% to EGP25/share. The restart of Ezz Flat Steel’s (EFS) flat steel operations in 4Q16 (mainly for export) has us raising total 2017e sales volume by 7% to 5.3mn tonnes—3/4 of our TP upgrade. Egypt’s now competitive currency allows for higher utilisation of the company’s flat steel capacity (which we now see ramping up to 70% by 2020 up from 15% in 2016e) and in turn group level margins. We also assume a lower WACC at ESR/ERM due to the assumption of 2017 debt drawdowns to fund new ...
During Q3 2016, Ezz Steel recorded revenues amounting to EGP5.917bn, a considerable enhancement compared to the EGP3.505bn recognized a year ago. The cost of sales also jumped by 57.5% yoy to reach EGP5.278bn, representing 89.2% of total sales compared to 95.6% last year. The gross margin improved by 643 basis points to stand at 10.8%. The net result moved from EGP-172.359m in Q3 2015 to EGP-187.721m in Q3 2016, i.e a fall of 8.9%. Ezz Steel’s 9M 2016 revenues amounted to EGP14.920bn, an impor...
In Q1 2016, Ezz Steel’s revenues recorded an increase of 3.6% yoy to EGP4.966bn. The cost of sales fell by 2% yoy, with a contribution of 90% to total sales (vs. 95.3% in Q1 2015). This led the gross margin to improve by 517 bps to 9.8%. However, the net result registered a deterioration of 61.25% yoy to stand at EGP235.322m.
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