Recurring EBITDA excluding ERC recorded a 12% y-o-y increase in 1Q21 supported by improved profitability at ASEC Holding and National Printing
Key Operational Highlights
- ERC’s results were impacted by an operational stoppage and the continued negative impact of COVID-19 in 1Q21;
- TAQA Arabia commenced operations at its Sixth of October industrial zone substation and launched its new subsidiary TAQA Water;
- El Baddar’s new state-of-the-art facility is now fully operational leading to improved results at National Printing;
- Dina Farms is reaping the rewards of its extensive facility enhancements as well as the launch of six new juice products in 1Q21;
- Qalaa’s subsidiaries recorded c. USD 296 million of foreign currency revenues in 1Q21;
- Debt restructuring at Qalaa Holdings remains a priority;
- Continuous adherence to health, safety, and business continuity measures to help manage risks related to COVID-19 and navigate upcoming period of uncertainty without layoffs.
Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange, formerly Citadel Capital), released today its consolidated financial results for the first quarter ended 31 March 2021. Qalaa recorded a 23% y-o-y decline in revenues to EGP 8.0 billion, 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 in 1Q21. Qalaa recorded a net loss of 478.6 million in 1Q21 compared to a net loss of EGP 405.1 million in the same quarter last year.
Excluding ERC, Qalaa recorded a 9% y-o-y increase in revenues to EGP 3.9 billion in 1Q21. Qalaa’s positive performance was supported by a recovering external environment that supported results across the majority of its subsidiaries. At TAQA Arabia, improved volumes at its power and marketing divisions drove a 3% y-o-y increase in the company’s top-line for 1Q21. Meanwhile, recovering international trade 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 1Q21.
“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 Holdings’ 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 capitalized 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 capitalized on recovering export markets with both companies delivering improved performances and significantly contributing to the c. USD 20 million in exports recorded by Qalaa during the period. Additionally, dividend income from affiliates and our local foreign currency revenue recorded c. USD 276.2 million during 1Q21. We also continued to benefit from the government’s exports incentive program, 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,” said Heikal.
ERC’s stoppage during the quarter along with a significantly lower Gross Refining Margin (GRM) in 1Q21 compared to its pre-COVID-19 levels in the same period last year led to an 87% y-o-y decline in Qalaa Holdings’ recurring EBITDA to EGP 90.5 million for the period. Qalaa’s recurring EBITDA excluding ERC recorded an increase of 12% y-o-y to EGP 356.7 million in 1Q21 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,” added Heikal.
“Qalaa’s positive recurring EBITDA performance excluding ERC reflects the success of our various operational efficiency initiatives across our platform companies in 1Q21,” said Hisham El-Khazindar, Qalaa Holdings’ Co-Founder and Managing Director. “This comes despite an increase in global shipping costs and an unfavorable 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 finalizing 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 capitalize 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 capitalizing on recovering market conditions to generate increased value from our operations and deliver improving results throughout the course of the year,” concluded El-Khazindar.
Qalaa Holdings’ full business review for 1Q 2021 and the financial statements on which it is based are now available for download on ir.qalaaholdings.com.