Ezz Steel is considering cost reductions in order to boost its financials and increase its market share amid fierce competition, a senior company official told Daily News Egypt.
“We are currently working on plans to reduce costs to boost the company’s financial results and at the same time maintain the quality we introduce to our customers,” said Kamal Galal, investor relations manager at Ezz Steel.
“Our sales are on the rise. In the past nine months we almost doubled our sales when compared to the same period during 2016,” he explained.
According to company financial results, seen by Daily News Egypt, Ezz Steel’s consolidated sales grew 97% in the first nine months (9M) of the year, standing at EGP 29.4bn versus EGP 14.9bn in the corresponding period of 2016.
Third quarter (Q3) net sales further improved, growing 17% over Q2 2017.
“The company is also benefiting from a surge in product prices,” Gala stressed.
Prices increased significantly in the first nine months of 2017 due to the steep devaluation of the Egyptian pound.
Long steel prices were up 83% and 126% in the local and export markets, respectively. Flat steel prices increased by 120% in the local market and 160% in the export market in 9M 2017, compared to the prior year-period.
“That could explain why we are on track to gain more customers amid fierce competition in the market,” he confirmed.
“Reducing costs is a priority at the current stage,” he added.
Consolidated cost of goods sold for 9M 2017 represented 91% of sales.
“This was largely due to low capacity utilisation of our plants during that period. At 9%, the 9M 2017 gross profit margin was slightly lower than the 10% recorded in 9M 2016,” the company said in its financial report.
Long steel products accounted for EGP 20.8bn, or 71% of sales in 9M 2017, while flat steel products represented 28% of sales at EGP 8.2bn.
Long product exports accounted for 8% of total long sales, while flat product exports accounted for 60% of total flat sales.
On Thursday, the company reported a decline in its losses by 16% in Q3 this year, according to a stock exchange filing.
Losses fell to EGP 107m in the three-month period ending 30 September from EGP 127.9m in Q3 2016.
During the first nine months of 2017, Ezz Steel’s losses accelerated to EGP 1.07bn from EGP 744.17m a year earlier.
The company’s sales increased to EGP 11.43bn in Q3 2017 versus EGP 5.9bn in the same period last year.
Standalone results showed that the company’s losses hiked to EGP 731.7m in the first three quarters of 2017 from EGP 261.37m in the same period last year.
“During the third quarter of 2017, we benefitted from a favourable market environment; the sustained recovery in international steel sector coupled with the anti-dumping duties applied in Egypt allowed us to improve our selling prices and therefore substantially increase our global turnover,” the company said in a presser last week.
“However, we continued to suffer from adverse conditions in the Egyptian financial environment; the extremely high level of interest rates, coupled with the acute shortage of liquidity in the banking system, prevented us from meeting our working capital minimal requirements,” it added.
Ezz Steel is the largest independent producer of steel in the MENA region and a market leader in Egypt.
“We expect the financial authorities in Egypt to quickly reverse their monetary policy in a way to accommodate our working capital needs which will allow us to fully benefit from the prevailing favourable conditions in local and international steel markets,” said Paul Chekaiban, chairperson and managing director of Ezz Steel.