Cairo – Mubasher: Ezz Steel is forecast to report a sizeable FX loss in Q4-16 as net foreign denominated debt stood at $515 million, said Pharos in a research note on Wednesday.
Although gross profit margins (GPM) expanded in Q3-16 on higher selling prices and slight decrease in raw material cost per ton, GPM is likely to decline in Q3 unless the company raise prices further, the research firm added, explaining that margins are highly contingent on further price hikes and EFS utilization rates.
“While retail steel prices climbed from EGP4,470/ton to EGP9,500/ton, prices in USD declined 1.5% YTD. In addition, scrap and iron ore prices soared 44% and 84% YTD in USD terms. Even though iron ore curve is trading in backwardation, forward contracts are still trading at a USD17 premium above 9M16 average iron ore prices. Additionally, post the EGP floatation, natural gas prices will soar in EGP terms,” said the research firm.
The company reported Q3 consolidated revenue of EGP4,207 million, up 93% y/y and 55% q/q.
The GPM stood at 13.3% in Q3 versus -2.1% and 3.4% in Q3-15 and Q2 16, respectively, while it recorded 8.6% in the first nine months of 2016 compared with 2.3% for the year-ago period.
