The management of Egypt's leading steel producer Ezz Steel has announced that the company may become profitable in the second or third quarter of 2021.
However, profitability will depend on the ongoing current strong market conditions.
The management also said that it expects to produce 1.8 million tons of flat steel and between 3 million and 3.5 million tons of rebar in 2021. This needs to be confirmed in the coming months, depending on demand.
At the same time, it is believed that the company's financial situation will improve in 2021 in terms of managing working capital and related ratios. Currently, they sell most of their production in cash and do not have collection problems.
The company planned to manage its debts in three stages. Phase one saw most of its debt roll over into the 8% venture they accomplished in Q4 2020. The second phase involved restructuring the debt balance of the entire group, with the exception of the EZDK, which was also completed. The third phase will see some restructuring of EZDK's working capital facilities.
Regarding the local rebar market, the management has seen an increase in demand since October 2020. This came with the end of the six-month ban on construction activities, causing wholesalers to stockpile.
The stockpile gives management confidence that volumes will return to 2018 levels, which are at least 400,000-500,000 tons above 2020 consumption levels.
Due to increased demand and rising global steel prices, the company and the Egyptian steel market were able to pass on to consumers the rising raw material costs associated with iron ore and scrap.
As a result, Ezz Steel achieved a small margin with consecutive price increases of up to 3,500 EGP/tonne. This means that in Q4 2020 alone, it reached EGP 13,654/tonne, an increase of approximately 35%, including 14% VAT. Before that, there was an increase of EGP 550/tonne in Q3 2020.
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