SCGC Reports Q3 Results as at 30 September 2015
SCGC's Q3 2015 results at a glance
MEGP | 3Q 2015 | 3Q 2014 |
---|---|---|
CONSOLIDATED REVENUES | 1,177 | 1,442 |
RECURRING EBITDA | 2 | 165 |
NET PROFIT AFTER NON-CONTROLLING INTEREST | -50 | 52 |
Consolidated Jan-September 2015 results at a glance
MEGP | YTD 9m 2015 | YTD 9m 2014 |
---|---|---|
CONSOLIDATED REVENUES | 4,043 | 4,613 |
RECURRING EBITDA | 371 | 854 |
NET PROFIT AFTER NON-CONTROLLING INTEREST | 69 | 364 |
Cairo, November 2, 2015 – Today Suez Cement Group of Companies' (SCGC's) Board of Directors approved the consolidated financial report for the third quarter of 2015 (July- September).A much improved energy availability, driven by coal utilization and more steady supply of mazot, allowed Egyptian cement industry to boost its production +29% in the third quarter, as compared to the prior year, cumulating to a 23% gain year to date (9 months). During this period the market demand experienced a limited growth (2.1% for the quarter, 1,6% for the nine months) which combined with a steep reduction in exports resulted in a marked oversupply of cement products in the domestic market, causing prices to decline.
This overall trend was even more exacerbated in Q3 with a market demand slowed down by an unfavorable calendar (Eid holidays) and a strong production activity in contrast with summer 2014 when energy supply was at its lowest. Prices fell close to 10% as compared to the first semester of 2015, cumulating to -20% as compared to Q3 2014.
Simultaneously traditional energy prices have been increasing sharply (30%), with the implementation by the Government of the subsidy lifting program.
In this overall challenging conditions, SCGC was able to maintain its market leadership but saw its sales volumes decline slightly as it tried to defend its pricing.
Exports to regional markets, such as such as Libya and Yemen, remained limited because of political and economic instability.
SCGC reported an 18% decrease in revenues for the third quarter of the year versus the same period in 2014 and 12% for the first nine months.
The company continued to implement aggressively its action plans to improve internal efficiencies and modify its energy mix, with two plants now fully converted to coal and waste, both fuels representing 29% of the total needs. The resulting 70 EGP/t cost improvement from prior year proved unfortunately insufficient to offset the impact from pricing, energy price and cost of labor increases.
As a result, SCGC's EBITDA and net profits after non-controlling interest dropped significantly as detailed in the table above.
Outlook
Egypt's supply-demand imbalance and lower cement prices are likely to remain negative trends for the rest of 2015, as compared to 2014, but we expect to see market demand to improve and price to start rebounding, while the magnitude and speed of the price recovery is still difficult to assess.
SCGC maintains its optimistic outlook on cement production and sales in 2016 and onwards as the fundamentals are still good for the construction sector.
Egypt will move forward with the implementation of several large national projects under the auspices of government stimulation initiatives designed to boost demand for cement across the country. Implementation actually started even if some projects move slower than anticipated in a context when foreign currency issues may also be perceived negatively by foreign investors which participation will be critical.
SCGC is currently preparing for the implementation of coal conversion projects at the Helwan and Tourah Plants over the next two years similar to those already completed at the Kattameya and Suez Plants. SCGC’s energy diversification program is focused on increasing the use of waste-derived fuels, petroleum coke, coal and renewable energy in order to prevent fluctuating natural gas and mazut prices from negatively impacting the Company’s bottom line. SCGC anticipates that its innovative energy program will continue to improve the Company’s manufacturing capacity and decrease operational and production overhead. The launch of coal and petroleum coke energy generation goes hand in hand with SCGC's focus on reducing its environmental impact through the implementation of state-of-the-art dust filter technology and streamlined manufacturing processes. SCGC is also working to better serve domestic customers by shifting its strategy to service-oriented targets through customer satisfaction surveys, tailor-made product offerings, distribution centers, an SCGC customer call center and awareness sessions with customers about cement quality, technical assistance and partnerships with leading cement consultants and academic institutions.