Ezz Steel's gross margins declined to 8.1 per cent in the third quarter of 2010, from 14 per cent in the previous quarter, a statement by the company revealed Wednesday.
But the Q3 results reverse a loss in the same quarter one year ago. "An improvement in prices in the fourth quarter, combined with a reduction in volatility, are both positive signals for our 2011 outlook," Paul Chekaiban, Ezz Steel's managing director, said.
Ezz Steel, which controls 46 per cent of the Egyptian market, added that production at its new facilities would boost results in the coming period. Ezz Steel reported last year it was investing $475 million to set up a new billet production line.
Net sales revenue for the quarter rose 36.3 per cent year-on-year to reach LE4.1 billion. Nine-month net profit was LE242 million, up from LE29 million in the same period a year earlier. The company also recorded in the third quarter 2010 gross profits of LE333 million.
"The company’s margins declined (from the previous quarter) primarily on account of increased raw material costs," commented Beltone Financial Thursday, adding that margins were also affected negatively "due to decline in long steel prices by seven per cent", on a quarterly basis, reaching LE3,368 per ton.
Ezz Steel increased its monthly prices by $50 two days ago. Beltone has expected the company’s margins to be under pressure in the short term, "albeit slightly better than the current quarter," according to the investment bank.
"In first half of 2010, global steel demand has started to show signs of recovery, which contributed to improve financial performance in first half of 2010. Revenues have increased 17 per cent year-on-year and net profit was up 150 per cent on H1 2009," said Ezz Steel earlier on its website.