Wednesday 4 October 2023

Ahmed Heikal

Qalaa returns to Q2 profit with $18.51m net income

CAIRO, September 29, 2022

Qalaa Holdings, a leader in energy and infrastructure, (formerly Citadel Capital), has returned to profitability in Q2 with a net income of EGP361.6 million ($18.51 million) in Q222 compared to a net loss of EGP401.5 million in Q221.
The group recorded a 165% y-o-y increase in revenue to EGP27.0 billion in Q222, and recurring EBITDA of EGP9.0 billion compared to EGP750.0 million in Q221. 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. 
Revenue growth
Excluding ERC, Qalaa’s revenue grew by 32% y-o-y to EGP5.5 billion in Q222, driven by improved performances across all its subsidiaries. Taqa Arabia’s revenue grew 13% y-o-y during the quarter to EGP2.5 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 Q222 as it reaped the rewards of its new El Baddar state-of-the-art facility. Additionally, higher volume and an optimised 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 EGP354.8 million in Q222, 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 EGP1.1 billion in Q222, driven by a strong performance at Al-Takamol which accounted for 79% of total revenue. And at Dina Farms’ holding company, revenue reached EGP343.0 million in Q222, 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 EGP67.9 million in Q222.
Strong topline
“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 EGP361.6 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 US 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.
Prudent strategies
“Qalaa continued building on a strong first quarter and carried that momentum into Q222, 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 optimised 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 $18.5 million with the Dokki Court, representing the total cheque amounts claimed in ongoing cases pertaining to 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.
Increase in EBITDA
Qalaa’s recurring EBTIDA increased substantially to EGP9.0 billion in Q222 compared to EGP750.0 million in Q221. 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 cognisant 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  dollar 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 optimising 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 EGP931.7 million in Q222. 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.-- TradeArabia News Service


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