Ezz Steel anticipates an improvement in the numerous unfavourable conditions that saw it, despite all expectations to the contrary, register deteriorating financial performance in the first quarter.
Consolidated sales rose 4% on-year in Q1 to 1.23 million tonnes. This, despite a weaker export market, was driven by a 5% growth in flat steel shipments to 318,000t thanks to a -13% volume increase in the domestic market. Longs sales rose 4% to 912,000t.
Net sales were flat in Q1 at EGP 12.62 billion ($759.6 million), as sales prices declined, but net loss attributable to Ezz Steel’s owners deepened considerably, reaching EGP 1.08 billion versus EGP 67m in Q1 2018. The Egyptian steelmaker incurred substantially higher cost of sales, selling and marketing expenses, and administrative and general expenses.
Ezz Steel chairman and managing director Paul Chekaiban puts the weak finances down to “… the continuing absence of any safeguard measures in Egypt which led to a major decrease in the selling price of our finished products during the first quarter of the year.” Also, a factor was the “… detrimental price of natural gas, the increasing price of electricity, and the exceptionally high cost of funding, all of which remained at much higher levels compared to our global competitors.”
“The third reason is the accidental collapse of a tailings dam in a Brazilian mine of Vale, the main worldwide supplier of iron ore, that provoked a sharp surge in the price of our main raw material,” Chekaiban adds in a report sent to Kallanish.
Longs and flats prices started to decline in both domestic and export markets, marking the first significant quarter-on-quarter decline of the price environment in 18 months. Longs and flats export prices each fell -6% on-year to EGP 9,590/t and EGP 9,947/t respectively.
Longs accounted for 73% of revenue, while flats comprised 26%, each unchanged on-year. Exports accounted for 8% of longs sales versus 7% in Q1 2018, and for 42% of flats sales versus 48% in Q1 2018.
Ezz Rolling Mills (ERM) and Ezz Steel’s Sadat City-based rebar mill (ESR) together contributed 16% to Q1 consolidated sales versus 19% in Q1 2018. Ezz Dekheila Steel (EZDK) and Ezz Flat Steel (EFS) contributed 58% and 26%, respectively, versus 65% and 16%.
Notably, longs sales at EFS surged 75% in Q1 to 295,294t, reviving the unit’s preference for longs output at the expense of flats seen in the first half of 2018.