CAIRO: Ezz Al-Dekheila Steel reported its earnings this week, signaling a marked decline from its second quarter earnings a year ago and a small decline from first quarter 2009 revenue. Ezz Steel Rebars owns 52.1 percent of Ezz Al-Dekheila. Revenue for the quarter came in at LE 2.05 billion, an 8.2 percent decline from the previous three months. Net profits for the first half of the year were 78.4 percent off from the first six months of 2008. High cost of production and low steel prices, analysts say, are to blame for the decline. "The local steel market weathered the global economic slowdown well, driven by growth in the construction sector, wrote Shaymaa El-Nemr, an analyst at investment bank Pharos Holding, noting a 4 percent increase in Ezz's long steel sales in the first half of 2009 as compared to the same six months a year earlier. "However, low prices seem to be here to stay and together with seasonality effects, a slowdown in demand and selling prices is evident in the third quarter. The decline in the price of the steel over the past year has been dramatic, cutting significantly into the margins of the steel companies. Average prices reached a high of around LE 8,000 per ton in 2008, while today they're around LE 2,800 per ton. Analysts were split on how to analyze Ezz's performance in the last quarter. "Reported revenues for the second quarter of 2009 came in above our expectations of LE 1,662.0 million, wrote brokerage firm Beltone Financial. Ezz's "first half results came in below our expectations as a consequence of higher cost of production and higher financial charges, wrote El-Nemr. While Ezz's long steel sales volume was up for the half, it declined quarter on quarter by 10.5 percent. Flat steel sales, though, were up by more than 40 percent by volume. Long steel is primarily used in construction, while flat steel is used mostly in industry. Analysts said that improved sales of flat steel were largely reflective of an increase in exports. The latest report comes on the back of a period of struggle for Ezz Steel Rebars, which had reported an 85 percent decline in net profit. Ezz's stock price declined dramatically during the end of 2008, largely because of a fall in demand, both domestically and internationally, in demand. The high end real estate market took a hit in Egypt, while many industrial projects, at home and abroad, were put on hold. Since bottoming out at the beginning of February, the stock price has clawed its way back and now sells for around LE 14.0 per share. Looking forward, analysts have projected mixed results for the steel giant. "Looking forward, we believe Ezz Al-Dekheila shall report lower revenues for the second half of 2009 compared to the first half as a result of a lower average selling price and lower sales volume, especially for rebars. "We believe Ezz Al-Dekheila should achieve a higher gross profit margin. We forecast Ezz Al-Dekheila to generate LE 7,795 million in revenues for fiscal year 2009 and LE 787.4 million as net profit after tax, wrote Beltone.
