EBITDA records an eight-fold surge to US$36 Million and
Bottom Line Losses Continue to Narrow in line with Year-End Profitability
Target
Financial performance continues to improve
quarter-on-quarter reflecting merits of Qalaa’s strategic transformation that
is nearing completion. Management reiterates strategy going into 2015 with key
factors being financial and operational risk reduction.
Qalaa Holdings (CCAP on the Egyptian Exchange, formerly
Citadel Capital) released its
consolidated financial results for the period ending 31 March 2015, reporting
revenues of US$255million, up 42.5% from the same period last year. Topline
growth was driven mainly by operational improvements at ASEC Cement’s Sudan
subsidiary Al-Takamol, which recorded revenue growth of 157% or aUS$17 million
increase over 1Q14. Furthermore, Qalaa’s core platform company TAQA Arabia also
saw revenues increase by 57% to US$69million in 1Q15. Together the energy and
cement segments contributed 71% to consolidated revenues.
EBITDA meanwhile stood at US$36million, an eight-fold
increase compared to 1Q14’s figure of US$3.8 million, and well on-target to
meet management’s stated goal of closing FY15 with EBITDA in the vicinity of
US$157million.
“The year 2015 is off to a good start for Qalaa with our strategic
transformation and operational improvements continuing to be positively
reflected in the company’s financial performance,” said Ahmed Heikal, Chairman
and Founder of Qalaa Holdings. “As was the case in FY14, where Qalaa swung to a
positive EBITDA north of US$85million, up from a negative a year earlier, we
are on-track to meet our previously stated guidance of EBITDA of around
US$157millionby year’s end.”
“At the same time, our bottom line losses continued to narrow in 1Q15.
We are well on-track to return to profitability by the end of 2015 on the back
of asset sales, disposal of discontinued operations, and a decline in interest
expenses as we push through with our ongoing deleveraging program,”
added Heikal.
“More importantly, we are making significant progress toward the start
of operations at greenfield Egyptian Refining Company and raising financing for
greenfield Mashreq. At ERC, I am particularly pleased to announce a
construction milestone with the raising of the rerun column for the delayed-Coker
unit. ERC and Mashreq coming online will result in significant improvements to
our top line and sustain our bottom-line profitability.”
The company reported a net loss after tax and minority of
US$1.4 million in the first quarter, a 51.6% improvement from 1Q14’s figure of
US$30million. The improvement comes despite the impact of the devaluation of
the Egyptian pound against the US dollar which saw the USD:EGP rate climb 6.7%
to EGP7.63 to the dollar during 1Q15. This contributed to additional foreign
exchange charges of US$6.9million compared to a gain of US$1.7million in 1Q14,
and inflated interest expenses, as the company has some dollar-denominated
debt. Cement and Construction unit ASEC Holding recorded US$10.2 million in FX
losses in the quarter on the back of its dollar denominated ASEC Holding
Convertible.
Management reiterates its strategy going into 2015 with its
underlining factors being the mitigation of financial risk by significantly
deleveraging at the holding and platform company levels, and limiting
operational risk through the divestment of non-core and non-essential assets
while focusing resources on core business and ensuring they have the funding
needed to deliver on growth plans.
Key elements of its strategy
for 2015 include:
The company is in the process of finalizing a capital
increase that will see the firm capitalize liabilities arising from asset
purchases worth around US$222.8million of which US$131million have already been
capitalized and reflected on Qalaa’s increased stakes in its core assets, with
the remaining balance of US$91.7 million expected to close by July 2015. This
will see paid-in capital rise to US$1.2 billion through the issuance of an
additional 340 million shares, of which 85 million will be preferred shares and
255 million common shares.
Sale of Assets: Qalaa is in advanced stages of divestments
including Misr Glass Manufacturing, while negotiations are progressing for the
sale of ASEC Cement’s operations in Algeria, with an Algerian Holding Company
in the cement industry being the natural buyer for Zahana Cement as it already
owns 65% of the company, while greenfield plant Djelfa is being bid for by two
Algeria based industrial groups. Likewise, confectioner Rashidi El-Mizan and
the farm and fresh milk companies that operate under the Dina Farms brand are
also poised for sale by 3Q15 while the Tebbin land held by Nile Logistics is
expected to be sold sometime in 2H15. Qalaa remains watchful for other exit
opportunities including Tanmeyah.
Proceeds from these divestments will be utilized to deleverage, which in
addition to the resultant de-consolidation of debt, will have a powerfully
positive impact on the consolidated financial statements.
Share Buybacks: Management will create new value through
share buybacks, using proceeds from strategic exits and post deleveraging to
acquire Qalaa shares for so long as these trade at a significant discount to
their fair market value.
“Our strategy for 2015 will allow us to drive growth at current assets
and increase our ownership without resorting to additional capital increases
beyond the current (ongoing) capital increase to US$1.2 billion,” said
Qalaa Co-Founder and Managing Director Hisham El-Khazindar. “Proceeds from the
ongoing exits will be utilized to deleverage by reducing total consolidated
debt of some US$983million — excluding debt associated with its Greenfield
megaproject Egyptian Refining Company and Africa Railways — to below
US$655million by the end of FY15.”
“Moreover, our strategy will also help accelerate Qalaa’s return to
profitability by year’s end, a guidance that has been progressing quarter on
quarter as our transformation nears completion. Qalaa Holdings will then be
ideally positioned to seize the opportunity and capitalize on the macroeconomic
turnaround in our home market.” El-Khazindar concluded.
Qalaa Holdings’ full business review for 1Q 2015 and the
financial statements on which it is based are now available for download on www.qalaaholdings.com
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