Egypt's Qalaa Holdings, one of the country's largest investment companies, reported on Sunday a 23 percent year-on-year decline in revenues for the first quarter of the year. Revenues fell to 8.0 billion Egyptian pounds ($510.4 million) in the first quarter ended 31 March 2021 impacted by lower contribution from the Egyptian Refining Company (ERC) as the refinery suffered from operational difficulties that led to a 29-day stoppage and 20 days of production slowdown during the quarter. Qalaa recorded a first-quarter net loss of 478.6 million pounds compared to a net loss of 405.1 million pounds in the same quarter last year. Excluding ERC, Qalaa made a 9 percent year-on-year increase in revenues to 3.9 billion pounds in the first quarter. Qalaa's positive performance was supported by a recovering external environment that supported results across the majority of its subsidiaries, the company said in a statement. At TAQA Arabia, improved volumes at its power and marketing divisions drove a 3 percent year-on-year increase in the company's top-line for the first quarter of the year. Meanwhile, recovering international trade has reflected positively on exports and supported top line growth at ASCOM and National Printing during the quarter. Finally, Dina Farms reaped the rewards of its extensive facility enhancements as well as the launch of six new juice products in the first quarter. "Following a difficult 2020 during which our Company showcased strong resilience in the face of harsh market conditions, we headed into 2021 ready to capitalize on a gradually improving environment with the continued easing of COVID-19 restrictions," said Qalaa's chairman and founder Ahmed Heikal. "I am pleased to report that save for the operational stoppage at ERC that exacerbated the effect of COVID-19 on its refining margins, we delivered strong performances across our subsidiaries as we reaped the rewards of carefully executed growth strategies and successful operational efficiency initiatives. "At TAQA Arabia, we capitalised on easing COVID-19 restrictions, with growing power distribution volumes in turn driving improved revenue by TAQA Power. TAQA successfully commenced operations at its Sixth of October industrial zone substation in March and we are optimistic about its contributions going forward." "We also inaugurated our new subsidiary, TAQA Water, which will see us develop a variety of valuable water treatment solutions to serve the industrial, agricultural, touristic, and real estate sectors. I am also pleased with TAQA Gas' growing footprint in the CNG market as we successfully increased the number of CNG filling stations from nine locations at the end of 1Q20 to 21 stations as of 1Q21." "Meanwhile, at ASCOM and National Printing, we capitalised on recovering export markets with both companies delivering improved performances and significantly contributing to the c. US$20 million in exports recorded by Qalaa during the period. Additionally, dividend income from affiliates and our local foreign currency revenue recorded c. US$276.2 million during 1Q21. "We also continued to benefit from the government's exports incentive programme, which has strengthened our cash flows during the period. Finally, our facility enhancements at Dina Farms, coupled with the launch of new juice products at ICDP, drove Dina Farms' top line growth in 1Q21." "At ERC, a 29-day stoppage at the refinery in 1Q21 and a 20-day production slowdown severely impacted revenues for the quarter, which coupled with the refinery's significantly lower gross refining margin as compared to pre-COVID-19 levels in 1Q20 also impacted its EBITDA. "It should be noted that the technical management (O&M) of ERC is contracted by EPROM, a company fully owned by EGPC. I also note that ERC has resumed full operations and its results are gradually recovering, with its scheduled maintenance currently underway set to drive improved efficiency and profitability going forward," Heikal added. ERC's stoppage during the quarter along with a significantly lower Gross Refining Margin (GRM) in the first quarter of 2021 compared to its pre-COVID-19 levels in the same period last year led to an 87 percent year-on-year decline in Qalaa Holdings' recurring EBITDA to 90.5 million pounds for the period. Qalaa's recurring EBITDA excluding ERC recorded an increase of 12 percent year-on-year to 356.7 million pounds in the first quarter driven primarily by improved profitability at ASEC Holding and National Printing. "Debt restructuring at Qalaa Holdings is progressing and remains a cornerstone of our strategy," Heikal noted. "Qalaa's positive recurring EBITDA performance excluding ERC reflects the success of our various operational efficiency initiatives across our platform companies in 1Q21," Hisham El-Khazindar, Qalaa's co-founder and managing director, said. Hisham El-Khazindar, Qalaa Holdings Co-Founder and Managing Director "This comes despite an increase in global shipping costs and an unfavourable commodity cycle, and was bolstered by new capacities coming online during the period. At National Printing we benefited from an optimized pricing strategy at Uniboard and the cost benefits generated from El Baddar's new fully operational facility, both of which supported the company's EBTIDA performance. "Additionally, ASEC Holding saw a strong recovery in EBITDA on account of higher cement prices in Sudan and improved operational efficiency and restructuring measures across the cement group in 1Q21." "On the debt front, we have made significant headways in finalising the two remaining debt restructurings at Qalaa's subsidiaries, in addition to the restructuring of Qalaa Holdings' senior debt. "Looking ahead, ERC is currently undergoing scheduled maintenance and we are optimistic that upon completion, the refinery should witness overall improved operational performance. However, it should be noted that refining margins are currently at less than half of their pre-COVID levels." "At TAQA Arabia, I am pleased to announce that we inked an agreement to deliver natural gas to El Wadi El Gedid governorate, which should see c. 14 thousand homes connect to the grid in its first phase across the governorate and contribute significantly to the company's performance going forward. Additionally, TAQA is looking to expand its portfolio of CNG filling stations and a reach a total of 51 stations by the end of 2021." "Our performance for the period excluding ERC is a testament to our ability to continuously grow our operations despite challenging conditions and swiftly capitalise on a recovering environment to deliver positive results. "Management will remain cautious and continuously monitor COVID-19 related developments to adjust our safety procedures accordingly and ensure the health and wellbeing of our people. We look forward to continue capitalising on recovering market conditions to generate increased value from our operations and deliver improving results throughout the course of the year," concluded El-Khazindar.
