The board of directors of the Egyptian Iron and Steel Company (EISC) passed on Tuesday a resolution liquidating the company and dividing it into two new entities.
The EISC has been one of the country's industrial icons since its establishment in 1954 and start of operations in the early 1960s.
The resolution stipulated the EISC will be divided into a company for iron and steel and another for mines and quarries.
The move lays the groundwork for private sector investments to play a role in the two companies in the future, in light of the state’s plan to make use of its loss-making assets and untapped opportunities.
The EISC board said the decision was made as a result of the heavy losses that have been accumulating over the years, which hit EGP 9 billion, EGP 982.8 million of which was lost between July 2019 and June 2020.
According to the balance sheet of the EISC, which is listed in the Egyptian Exchange (EGX), the company’s total value of assets witnessed a modest increase from 2017 through 2021.
The value of assets slightly rose to around EGP 3 million in 2021, up from EGP 2.9 million in 2017, incurring a net loss worth EGP 274.4 million in 2021 with a negative gross profit amounting to about EGP 215 million, according to EGX data.
In January 2020, Minister of Public Enterprise Hisham Tawfik told Ahram Online that the strategy to improve state-owned companies provides that companies will be liquidated if their losses exceed their capital.
The EISC's registered capital is estimated at EGP 500 million.
Egyptian lawyer Samir Sabry initiated on Tuesday a court action to stop the resolution that ends 67 years of one of the iron manufacturing icons in the Arab world.
Egyptian Iron and Steel Company HADISOLB, an affiliate of the Metallurgical Industries Company, is the major iron and steel production company operating in the public sector with total investments estimated at EGP 650.7 million, according to the company’s data.
The company and its plant were founded in 1954 in the Helwan district in south Cairo as per a decree issued by then-president Gamal Abdel-Nasser.
The company was founded as a joint stock company with majority equity from the state as the first-ever iron industry complex in the Arab region.
The company started operations in 1961 and was listed in the EGX.
The key activity of the company is the manufacturing of iron and steel products with the highest quality and lowest cost based on the needs of the local and global markets at a rate of up to 2.1 million metric tons, according to the company’s data.
The main products the company provided include hot rolled steel angles; hot round edge channels; hot rolled steel for general purposes; reinforced steel bar; hot rolled squares for general purposes; steel plates and steel sections; iron ore and iron oxides; green clay; oxygen convert slag and zinc doors; and industrial gases, such as oxygen, argon and nitrogen in both gas and liquid forms.
The company also produces spare parts and steel structures on customers' requests and provides testing, rewinding, repair and revamping services for electric motors.
State-owned enterprises in emerging markets, especially in the southern and eastern Mediterranean, are playing a major role in primary sectors in these economies, stated a report by the European Bank for Reconstruction and Development (EBRD) in November.
According to the report, state-owned enterprises and the broader public sector, over the years, remain a critical source of the social contract in those economies, a source of jobs, and a part of the social safety net and an engine for public investment.
The report cited Egypt’s privatisation experience that had been applied in the 1990s, saying that when the state-owned enterprise sector was downsized in Egypt, it caused a culling of unproductive but relatively well-paid employment, yet, it was not accompanied by sufficient strengthening of the social safety net or job creation in the private sector.