Ezz Steel H1 net profit drops 79pc
Cairo, December 15, 2011
Ezz Steel, Egypt's biggest steelmaker, posted a 79 per cent drop in first-half net profit as it set aside a potential tax liability to cover measures introduced by the government in the wake of Egypt's uprising.
The group has been rocked by the political and economic turmoil of the uprising that ousted Hosni Mubarak in February.
Egypt's public prosecutor jailed the company's chairman Ahmed Ezz in February on charges of graft.
Shortly after the uprising, Egypt's government raised the corporate income tax to 25 per cent from 20 per cent to help keep a rapidly expanding budget deficit under control at a time when civil servants were demanding higher salaries and the economy was falling into recession.
Ezz said on Thursday its first-half net profit after tax and minority interest dropped to 51 million Egyptian pounds ($8.5 million) from 241 million pounds the same time last year.
Net sales climbed 24 per cent to 9.33 billion pounds, while earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 3 per cent to 1.24 billion pounds.
"For a firm that spends more time in court than in the office and with a steel industry that had months of no work, growth in their revenue and EBITDA profit is impressive and unexpected," Omar Taha of Beltone Financial said.
Ahmed Ezz quit the board of Ezz Steel and its Ezz Dekheila Steel unit in May to fight the charges against him. A court jailed him in September and ordered the withdrawal of two of his firm's licences.
While overall revenues grew, flat steel sales volumes dropped 11 per cent during the period to 573,000 tonnes.
"The revenue miss was mainly caused by lower than expected volumes at Ezz Flat Steel (EFS), resulting in a top line of 0.7 billion pounds, versus our expected 1.8 billion," a note by Beltone Financial said.
Ezz Steel set aside a deferred tax loss of 158 million pounds, mainly recognised during the first quarter of the year, which further pulled profits downwards, Beltone said. It also realised a foreign exchange loss of 66 million pounds. – Reuters