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Major Egyptian steel producers report solid 2010 profits

Ezz Steel and its high-performing subsidiary Ezz Dekhalia provide long-awaited financial statements, both showing profit gains but a fall in margins

Ahram Online and agencies, Tuesday 9 Aug 2011
Steel, ready for export
Steel, ready for export at surging prices (Photo: Reuters)
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Egyptian group Ezz Steel said its 2010 consolidated net profit almost tripled, buoyed by strong domestic demand for long products and the restart of a flat steel plant.
 
Net profit in 2010 for the chief component of the Arab world's largest steel conglomerate was LE252 million (US$42m), while net sales rose 32 per cent and gross earnings increased 29 per cent, Ezz Steel said on Tuesday.
 
Flat steel production jumped 49 per cent to 1.46 million tonnes because of the restart of production at its EFS unit, Ezz Steel said. Demand for long steel was underpinned by strength in housing and infrastructure last year.
 
According to investment bank Beltone Financial,  the numbers imply much weaker than expected profitability during 4Q2010, with consolidated Earnings before taxes, depreciation and amortisation (EBITDA) margins of 10.6 per cent, down from 13.6 per cent in the first nine months of 2010 and 12.6 per cent in 2009.
 
The steel conglomerate's typically high-performing subsidiary, Ezz Dekhalia, also reported an uptick in its 2010 bottom line when it released much-delayed results on Tuesday.
 
Net income was LE669 million, up 16 per cent year-on-year, less than some analysts had predicted.  The firm also reported EBITDA margins of
12.9 per cent in spite of falling iron ore prices and rising steel prices. 
 
But volumes were healthy with Ezz Dekhalia reporting final quarter growth of 40 per cent year-on-year.
 
The Egyptian stock exchange temporarily banned trade in Ezz Dekhailia stock last month due to its delay in providing consolidated statements.
 
Ezz Steel shares have tumbled this year as its founder Ahmed Ezz -- a political ally of deposed President Hosni Mubarak -- battles corruption charges from prison. The charges centre on the company's dominant role in the local steel market and the terms of its purchase of its Ezz Dekhaila unit.
 
The company, which replaced Ezz as chairman in May, said it had suffered minor disruption and slowed production volume due to the political and economic turmoil that followed Mubarak's overthrow in February. 
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