Key Operational Highlights

  • Qalaa’s consolidated revenue grew 62% y-o-y to EGP 30.3 billion in 1Q23 and recurring EBITDA reached EGP 10.3 billion compared to EGP 3.9 billion in 1Q22, supported by strong performances across all subsidiaries;
  • ERC was the primary driver behind consolidated revenue growth, contributing c.77% to Qalaa’s total revenue in 1Q23. ERC’s refining margins have remained strong during the quarter but have significantly tapered in 2Q23, heading towards normalized margins.
  • Despite ERC’s receivables from EGPC having reached USD 699 million as of 31 March 2023, EGPC continues to make payments that have since reduced the outstanding balance to USD c. 510 million as of end of June 2023. This is a positive development that enabled ERC to pay USD 445 million towards the settlement of debt and the funding of the Debt Service Reserve Account in June 2023;
  • Excluding ERC, Qalaa’s revenue grew by 38% y-o-y and recurring EBITDA increased by 105% y-o-y in 1Q23, driven by positive performances across Qalaa’s subsidiaries, which saw improved results on the back of the Group’s long-standing strategy of focusing on import substitution, export oriented business, and businesses with very high local value added;
  • TAQA Arabia’s solid top line results were primarily driven by a strong performance at its gas division (TAQA Gas), including the increase in CNG volumes sold as a result of the expansion in CNG station numbers. Revenue was also supported by the increase in fuel prices at TAQA Arabia’s petroleum product distribution division (TAQA Petroleum);
  • ASEC Holdings delivered a 26% y-o-y revenue growth on the back of the depreciation of the EGP against foreign currencies of which the revenues of some of the platform’s subsidiaries are denominated;
  • National Printing’s revenue was up across all of its product lines. The segment benefitted from a combination of higher prices and improved volume;
  • ASCOM’s growth was mostly driven by the impact of the EGP devaluation on the USD denominated businesses such as Ascom for Chemicals and Carbonates Manufacturing, and insulation material producer GlassRock;
  • Dina Farms’ revenue grew y-o-y supported by improved operations across all business segments; ICDP, the dairy production facility benefited from selling price increases across the board coupled with new product launches;
  • The Group’s export proceeds reached c. USD 24.2 million in 1Q23, while local foreign currency revenue recorded c. USD 798.4 million. Moving forward, Qalaa will continue focusing on exports to benefit from cost advantage available to local manufacturers;
  • Finalizing debt restructuring at Qalaa Holdings remains a priority. Some of the debts related to Qalaa and its subsidiaries have been successfully settled or restructured. Moreover, Qalaa is negotiating the settlement of other debt obligations using the shares of its recently listed subsidiary TAQA Arabia, with the option of repurchasing these shares in the future. Qalaa may continue to employ this strategy with other assets going forward, as it reaches agreements with its creditors around debt settlement and restructuring. Going forward, Qalaa may also divest a few small non-core or under-performing businesses and assets;
  • The aforementioned debt settlement/restructuring may see Qalaa recognize gains in the coming period, driven by capital gains from the sale of a few assets;
  • Qalaa has been resilient despite highly challenging macroeconomic conditions. The Group will continue driving growth by making small incremental investments in its subsidiaries, expanding its cashflows, and thereby reducing debt to cash flow ratios. Management is confident this strategy will continue to deliver;
  • Qalaa is currently studying several new medium-sized, export oriented, predominantly green, and high local value-added investments, to be executed through its subsidiaries;
  • The staff and assets of Qalaa’s Sudan affiliate Takamol Cement are safe and continue to operate at a limited capacity. Qalaa continues to closely monitor the ongoing developments within the country;
  • Starting 1Q23, Qalaa applied the optional exceptional accounting treatment introduced to the Egyptian Accounting Standards which allows for the FX gains/losses incurred following the devaluation of the EGP to be reclassified into other comprehensive income (OCI) under equity on the balance sheet. 1Q22 financials were restated accordingly for ease of comparison.

Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange), released today its consolidated financial results for the first quarter ending 31 March 2023. The Group recorded a 62% y-o-y increase in revenue to EGP 30.3 billion in 1Q23, and recurring EBITDA of EGP 10.3 billion compared to EGP 3.9 billion in 1Q22. The positive performance reflects solid refining margins at ERC and strong performances across all subsidiaries.

Excluding ERC, Qalaa’s 1Q23 revenue was up 38 % y-o-y, recording EGP 6.9 billion, driven by improved performances across all subsidiaries. TAQA Arabia’s revenue grew 27% y-o-y in 1Q23 reaching EGP 2.9 billion compared to EGP 2.3 billion in 1Q22. The company’s revenue growth was primarily driven by a strong performance at TAQA Gas including the increase in CNG volumes sold as a result of the expansion in CNG station numbers. Revenues were also supported by the increase in fuel prices at TAQA Petroleum.

ERC’s gross refining margin averaged USD 3.7 million per day in 1Q23, up from USD 2.7 million per day in 1Q22, following higher oil product prices. Refining margins have started to normalize in 2023 after reaching a peak in 2022, declining to an average of USD 3.7 million per day in 1Q23 versus USD 4.9 million per day in 4Q22.

National Printing delivered a 54% y-o-y increase in revenue, reaching EGP 1.4 billion during 1Q23 from EGP 915 million in 1Q22, as it continued reaping the rewards of its new El Baddar state-of-the-art facility. Revenue was up across all three of the segment’s companies owing to a combination of increased volumes and higher prices. Meanwhile, ASCOM delivered a 74% y-o-y increase in top-line to EGP 498.3 million in 1Q23, mostly driven by the impact of the EGP devaluation on the USD denominated businesses such as ACCM and GlassRock.

In 1Q23 ASEC Holding’s revenue was EGP 1.3 billion, up 26% y-o-y compared to 1Q22, owing to the depreciation of the EGP against foreign currencies of which the revenues of some of the platform’s subsidiaries are denominated. Meanwhile, Dina Farms revenue reached EGP 409.8 million in 1Q23, up 49% y-o-y. The company’s performance was backed by improved operations and ICDP’s revenue benefiting from higher selling prices coupled with new product launches. Finally, CCTO delivered a 40% y-o-y revenue increase to EGP 130.7 million in 1Q23 driven by improvements across all revenue streams at its Egypt arm NRPMC.

“The global economic landscape continues to present significant challenges, with the world grappling with one of the most difficult economic periods in recent memory. With debt levels still at historic highs and inflation and interest rates yet to normalize, there are continued expectations of long-term depressed economic growth, higher long-term interest rates, and a heightened focus on reducing debt,” said Qalaa Holdings’ Chairman and Founder Ahmed Heikal.

“These challenges are equally daunting on a regional level. On the local front, inflation rates continue their upward trajectory. However, as global inflationary pressures begin to ease, the Central Bank has decided to maintain interest rates for the time being. Despite this difficult environment, we at Qalaa are well-positioned to successfully navigate these challenges,” continued Heikal.

“With resilience, flexibility and efficiency ingrained into the core of our DNA, Qalaa continues to be well-positioned to capitalize on this global transition. Egypt’s positioning as an attractive hub for European markets and an entry point to African and Middle Eastern markets paves the way for unique investment opportunities for Qalaa,”

“I am increasingly proud of Qalaa’s continued positive topline performance, driven by the Group’s resilience,” Heikal continued. “The Group delivered a nearly twofold y-o-y topline growth and nearly three-fold y-o-y EBITDA increase amid this highly uncertain operating environment, thanks to our robust investment and growth strategies across our portfolio companies. Furthermore, Qalaa managed to achieve a positive net income during the quarter, turning a bottom-line profit following the net loss recorded in the previous quarter. Growing our subsidiaries’ cashflows before making investments and carefully deploying our cashflows in a way that balances between high yield incremental investments on the one hand, and debt repayment on the other, remains our main focus.”

“We will continue to push forward our growth strategies across our platforms this coming year, keeping a keen eye on investment opportunities. Our portfolio companies remain resilient in the face of pressures and continue to benefit from Qalaa’s meticulous growth strategy. All our business segments have recorded solid performances this quarter, setting the tone for what is expected to be a year of continued positive results. Qalaa’s outlook remains bright as a result, despite the ongoing challenges,” Heikal Added.

“I am also excited by the recent listing of TAQA Arabia on the Egyptian Stock Exchange, which commenced on the 9th of July. The listing of TAQA Arabia enables Qalaa to follow through on its plan to settle some of its debt obligations through the sale of some of its assets. Qalaa is now in the process of settling some debt obligations through the sale of 20% of TAQA Arabia shares as part of phase one of TAQA’s ownership restructuring, with the Group retaining the option of repurchasing these shares in the future. Going forward, Qalaa may continue using a similar strategy with other assets as we reach agreements with our creditors on debt settlement and restructuring.”

“Finally, I would like to reiterate 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 cost and adjust for impairments, while not taking into consideration any revaluation adjustments,” concluded Heikal.

“Qalaa has kicked off the year with a positive and promising performance, amid a difficult operating environment,” said Hisham El-Khazindar, Qalaa Holdings’ Co-Founder and Managing Director. Over the past quarter, our energy segment delivered solid results as TAQA Arabia continued to expand its energy distribution network, adding new CNG and liquid fuel filling stations. Meanwhile, despite beginning to normalize in 2023, ERC’s refining margins remained strong on the back of higher oil product prices. It is of note that ERC continued to operate without any shutdowns or slowdowns during 1Q23. In parallel, our position as an import substitute and export play across our mining and printing businesses continued to drive both consolidated growth, and valuable USD proceeds for the Group. Finally, our agriculture and logistics segments have continued to record robust top and bottom line growth owing to their robust investment fundamentals.”

“The past period has seen us focus on reducing our risk levels, primarily by deleveraging and growing Qalaa’s cash flows. As a result, ERC has become current on all of its due interest and principal payments as scheduled this quarter. We are also continuing our efforts to restructure Qalaa’s holding level debt, which remains a priority.”

“Our performance in the first quarter of the year is a testament to our continued ability to push ahead during difficult times. We look forward to another quarter of growth and strong results across our operations and markets,” concluded El-Khazindar.

-Ends-

Previous Qalaa Holdings press releases on this subject and others may be viewed online from your computer, tablet or mobile device at qalaaholdings.com/newsroom

About:

Qalaa Holdings (CCAP.CA on the Egyptian Stock Exchange) is an African leader in energy and infrastructure. Qalaa Holdings builds responsible and sustainable businesses that add value to the economies and societies in which it does business. Formerly known as Citadel Capital, Qalaa Holdings controls subsidiaries in industries including Energy, Cement, Agrifoods, Transportation & Logistics, Mining and Printing & Packaging. To learn more, please visit qalaaholdings.com.

Forward-Looking Statements

Statements contained in this News Release that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Qalaa Holdings. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Certain information contained herein constitutes “targets” or “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Actual events or results or the actual performance of Qalaa Holdings may differ materially from those reflected or contemplated in such targets or forward-looking statements. The performance of Qalaa Holdings is subject to risks and uncertainties.

For more information, please contact
Ms. Ghada Hammouda
Chief Sustainability and Marketing Officer
Qalaa Holdings
ghammouda@qalaaholdings.com
Twitter: @qalaaholdings