- Top-line growth was backed by robust investment and growth strategies driving strong performances across all subsidiaries as well as improved refined product prices and refining margins at ERC
- Excluding ERC the Group records a strong 32% y-o-y growth in consolidated revenue to EGP 5.5 billion and a 105% y-o-y increase in recurring EBITDA to EGP 931.7 million in 2Q22.
Key Operational Highlights
- ERC results were primarily supported by a recovery in refined petroleum product prices coupled with an increasing gross refining margin;
- TAQA Arabia’s solid top line results reflect strong performance at TAQA Petroleum and were further supported by higher power distribution volumes at TAQA Power and volume growth at TAQA Gas;
- ASEC Holding’s growing revenue was driven by a strong performance in Al-Takamol Cement, which accounted for 79% of the ASEC Holding’s revenue. Al-Takamol Cement performance is expected to suffer from political turmoil in Sudan;
- National Printing saw improved volumes and capitalized on higher prices at all its companies. El Baddar state-of-the-art facility delivered substantial volume growth despite not operating at full capacity yet;
- ASCOM’s topline growth was driven by better performance at ACCM and increased volumes at GlassRock;
- Dina Farms Holding’s revenue grew year-on-year as facility enhancement improved operations at Dina Farms and ICDP’s volumes benefitted from its direct distribution strategy;
- The Group will continue focusing on exports to benefit from the commodity cycle and leverage the advantage available to local manufacturers as global logistic costs continue to surge;
- The continued strategy of small incremental investments to grow our cashflow together with gradual deleveraging will eventually pay dividends;
- ERC’s receivables from EGPC are starting an unwelcomed upward creeping trajectory;
- The Group’s export proceeds recorded c. USD 43.9 million in 2Q22, while local foreign currency revenue recorded c. USD 1.2 billion;
- Finalizing debt restructurings at Qalaa Holdings and ERC remains a top priority;
- Qalaa’s profitability might be affected in 3Q22 by global economic uncertainty and any ensuing weakness of the Egyptian pound;
- In September 2022, Qalaa Holdings deposited the equivalent of USD 18.5 million with the Dokki Court, representing the total cheque amounts claimed in relation to ongoing legal cases that are pending final rulings. The legal cases and appeals are expected to continue for a long period.
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 quarter ending 30 June 2022. The Group recorded a 165% y-o-y increase in revenue to EGP 27.0 billion in 2Q22, and recurring EBITDA of EGP 9.0 billion compared to EGP 750.0 million in 2Q21. The strong performance reflects the success of Qalaa’s robust operational and growth strategies across its subsidiaries. Furthermore, improved refining margins at ERC along with a global surge in commodity prices benefitted the Group’s consolidated performance during the quarter. At Qalaa’s bottom-line, the Group returned to profitability booking a net income of EGP 361.6 million in 2Q22 compared to a net loss of EGP 401.5 million in the same quarter last year.
Excluding ERC, Qalaa’s revenue grew by 32% y-o-y to EGP 5.5 billion in 2Q22, driven by improved performances across all its subsidiaries. TAQA Arabia’s revenue grew 13% y-o-y during the quarter to EGP 2.5 billion. Revenue growth was primarily driven by a strong performance at TAQA Petroleum and further supported by higher power distribution volume at TAQA Power and volume growth at TAQA Gas.
National Printing delivered a 99% y-o-y top line increase in 2Q22 as it reaped the rewards of its new El Baddar state-of-the-art facility. Additionally, higher volume and an optimized pricing strategy at both Shorouk and Uniboard reflected positively on National Printing’s results during the quarter. Meanwhile ASCOM delivered a 57% y-o-y increase in top-line to EGP 354.8 million in 2Q22, supported by higher export proceeds at ACCM as well as increased volume and higher prices at GlassRock.
At ASEC Holding revenue increased 45% y-o-y to EGP 1.1 billion in 2Q22, driven by a strong performance at Al-Takamol which accounted for 79% of total revenue. And at Dina Farms’ holding company, revenue reached EGP 343.0 million in 2Q22, up 13% y-o-y as facility enhancement improved operations at Dina Farms and ICDP’s volumes benefitted from its direct distribution strategy. Finally, Nile Logistics delivered a 6% y-o-y increase in revenue to EGP 67.9 million in 2Q22.
“I am very pleased with Qalaa’s continued strong top line results and solid performances across the board during the second quarter of the year. The Group’s impressive performance continues to highlight Qalaa’s resilience and agility during a period of tough and everchanging macroeconomic dynamics,” said Qalaa Holdings’ Chairman and Founder Ahmed Heikal. “The Group delivered a remarkable 165% year-on-year top line growth throughout a difficult and uncertain operating environment, and our exceptional performance has seen us book a net profit of EGP 361.6 million this quarter.” “The world economy is facing significant challenges, from supply chain disruptions and energy concerns to tight labor markets, severe inflationary pressures and dislocations in financial markets, all of which are being exacerbated by the Russo-Ukrainian conflict. As inflation persists, central banks around the world are doubling down on monetary tightening, a cycle that is expected to continue well into next year. This recent shift in monetary policy, particularly by the USD Federal Reserve, is putting significant pressure on currencies and debt levels in emerging markets, with Egypt being no exception. However, we remain confident in the government’s stewardship of the economy and in Qalaa’s competitive position thanks to our diverse energy portfolio, local manufacturing operations and export-driven businesses,” said Heikal.
“Qalaa continued building on a strong first quarter and carried that momentum into 2Q22, delivering stellar performances across all the Group’s platforms owing to prudent strategies. TAQA Arabia’s results were supported by a strong performance at master gas and TAQA Petroleum in addition to higher power distribution volume at TAQA Power and volume growth at TAQA Gas, while National Printing continues to benefit from new capacities and optimized pricing strategies. Additionally, ASCOM continued to record solid results driven by higher export proceeds at ACCM and GlassRock. Finally at ERC, a significant year-on-year improvement in gross refining margin on account of higher petroleum products prices helped drive the refinery’s profitability and in turn the Group’s improved consolidated bottom-line.” “With regards to our financials, management adheres to the auditor’s guidance; however, auditors review historical performance rather than future performance. It is important to note that the true value of Qalaa’s performing assets is masked due to the adoption of international accounting standards, which account for assets at their historical value and adjust for impairments without considering revaluation adjustments.” “Furthermore, in September 2022 Qalaa Holdings deposited the equivalent of USD 18.5 million with the Dokki Court, representing the total cheque amounts claimed in ongoing cases pertaining to Mr. Ali Bin Hassan Aldayekh, until final rulings are rendered in these disputes. It is important to note that Qalaa has initiated during the past period several civil claims and criminal cases in relation to this dispute,” concluded Heikal.
Qalaa’s recurring EBTIDA increased substantially to EGP 9.0 billion in 2Q22 compared to EGP 750.0 million in 2Q21. Profitability was primarily supported by ERC’s positive performance during the quarter. Excluding ERC, Qalaa’s recurring EBITDA growth was driven by improved profitability across most of the Group’s subsidiaries.
“While we are extremely pleased with this quarter’s solid operating performance and the resulting positive net income, we remain cognizant of the challenges ahead,” said Hisham El-Khazindar, Qalaa Holdings’ Co-Founder and Managing Director. “In particular, Qalaa’s results are vulnerable to FX changes owing to Qalaa’s sizeable USD denominated debt. Consequently, any further depreciation in the Egyptian Pound may impact the Group’s results. On that note, debt restructuring efforts continue to be a priority for us as we work to optimizing Qalaa’s capital structure, and we’re in advanced negotiations with our lenders on that front.” “Operationally, the strengths and competitive advantage of our portfolio companies are real, and we have made significant gains in terms of business development, cost cutting, and operational efficiencies that are here to stay. As such we have consistently delivered recurring EBITDA growth excluding ERC, with this quarter’s figure recording a substantial 105% y-o-y increase to EGP 931.7 million in 2Q22. EBITDA growth during the quarter was broad based across our subsidiaries, with TAQA, National Printing and Cement being the primary drivers,” El-Khazidar added.
“Our performance in the second quarter is testament to the success of Qalaa’s growth strategies and resilience the face of a challenging operating environment, and we look forward to continue driving this momentum for many quarters to come," concluded El-Khazindar.
Qalaa Holdings’ full business review for 2Q 2022 and the financial statements on which it is based are now available for download on ir.qalaaholdings.com.