Qalaa Holdings' 1Q14 Results Reflect Positive Impact of Strategic Transformation and Recent Capital Increase.

1Q14 results show consolidated revenues of EGP 1.4 billion; a 46% surge in Gross Profit y-on-y; and EBITDA moving to the green with a positive EGP 29 million vs. a negative EGP 126 million in 1Q13. Management also expects continued improvement in performance metrics and profitability for the coming quarters of 2014.

Qalaa Holdings (CCAP.CA on the Egyptian Exchange, formerly Citadel Capital) reported today its financial results for the three months ending 31 March 2014, its first full set of consolidated financials since the closing of a capital increase to EGP 8 billion that marked the decisive step of its transformation into an investment company.

Full subscribed capital increase to EGP 8 billion allowed Qalaa Holdings to take majority stakes in most of its subsidiaries in core industries including energy, cement, agrifoods, transportation & logistics and mining. Accordingly, Citadel Capital’s consolidated financial statements are now prepared using a full consolidation method instead of the equity method used in previous years.

The company accordingly reports a 14% year-on-year rise in 1Q14 revenues to EGP 1,366.9 million, up from pro-forma[1] revenues of EGP 1,203.6 million in the same quarter the previous year. Notably, gross profit surged 46% to EGP 238.1 million while EBIDTA was a positive EGP 29.0 million against a negative EGP 125.9 million in 1Q13.

Net losses in 1Q14 widened 7% year-on-year to EGP 231.9 million on the back of increased charges related to discontinued operations at portfolio companies including ESACO (a company of ASEC Holdings) as well as El-Aguizy, Elmisrieen, Enjoy and Mom’s Foods (all at agrifoods company Gozour) and certain non-core companies. Management believes it possible that these charges could be recovered (in full or in part) upon the exit of the companies in question.

“The release of our first consolidated financials post the asset purchases made possible by our share issuance is a key milestone in our transformation into an investment company,” said Qalaa Holdings Chairman and Founder Ahmed Heikal. “Most of our highest-profile companies made very good progress in the first quarter and we expect similarly strong performances in the second quarter, particularly from energy division standout TAQA Arabia and cement division units ASEC Minya and Misr Qena Cement.

“Heading into the second half of the year, Qalaa Holdings will continue to maintain a sharp focus on driving operational improvements across our investments, divesting non-core holdings, and investing in governance systems at the company and portfolio levels. From energy to infrastructure, the macroeconomic outlook that has long informed our investment theses is increasingly being vindicated by developments across our footprint, from Egypt to East Africa.”

As part of Qalaa Holdings’ program to shed non-core assets, the company exited in April 2014 its full majority stake in a leading Sudan-based bank (Sudanese Egyptian Bank) in a US$ 22 million sale to the Islamic Solidarity Bank of Sudan; Qalaa Holdings remains a large-scale investor in Sudan. In addition, the company expects to complete its divestiture of Sphinx Glass, a leading Egyptian producer of float glass and portfolio company of non-core platform GlassWorks, by the end of August 2014. Qalaa Holdings and Saudi Arabia’s Construction Products Holding Co. (CPC) signed in June 2014 a sale and purchase agreement for the transaction, execution of which is scheduled for completion by the end of August 2014 upon satisfaction of all conditions precedent and the final transfer of shares.

Among those companies now fully consolidated are:

  • In Energy: TAQA Arabia, Egyptian Refining Company (ERC, pre-operational) and Mashreq (pre-operational);
  • In Cement: ASEC Holding;
  • In Agrifoods: Gozour and Wafra;
  • In Transportation & Logistics: Nile Logistics and Africa Railways;
  • Non-core platform companies including United Foundries (Metallurgy), Bonyan (Specialized Real Estate), Tanmeyah (a microfinance company under Finance Unlimited) and Sudanese Egyptian Bank (divested subsequent to 1Q14 on 27 April 2014 and thus fully consolidated this quarter).
  • Core platforms Tawazon (Energy) and ASCOM (Mining) as well as non-core platforms GlassWorks, Grandview, Pharos and Tanweer continue to be treated using the equity method (Share of Associates) on the basis that Qalaa Holdings does not have management control over them.

Operational Highlights

  • Energy division aggregate revenues[2] increased by 25% y-o-y to EGP 364.5 million in 1Q14 and aggregate EBITDA increased by 12% to EGP 35.7 million. Improved results in the quarter are attributable to better performance across platform companies TAQA Arabia and Tawazon.
  • The Cement sector includes a Cement division and a Construction and Management division. In 1Q14, the rise in aggregate revenues and EBITDA was primarily derived from the Cement division and largely from the inclusion of ASEC Minya for the first time in the consolidated statements.
  • The Agrifoods sector saw a 26% y-o-y decrease in 1Q14 aggregate revenues and a 46% y-o-y drop in 1Q14 EBITDA. The dip comes mainly on the back of underperformance at Gozour portfolio company Rashidi El Mizan and Enjoy’s facility stoppage. Also, Wafra currently faces difficulties in operations ranging from political and civil conflicts in South Sudan to technical problems in Sudan.
  • The Transportation & Logistics division posted aggregate revenues in 1Q14 of EGP 141.8 million, a 28% increase over the same period last year. Similarly, the sector witnessed a significant surge on the EBITDA level to a positive EGP 0.9 million as compared to a negative EGP 31.3 million in 1Q13. Although Nile Barges in Egypt and South Sudan completely stopped operations in 1Q14, Nile Logistics showed higher revenues y-o-y on the back of its stevedoring operations at sea ports. 
  • In 1Q14, the 13.1% y-o-y growth of ASCOM’s consolidated revenues to EGP 149 million and 109% increase in EBITDA to EGP 12.4 million was mainly due to proceeds from Egyptian quarrying operations’ new geology contract with Matz Holdings Ltd.

Full financial statements and management’s analysis of the performance of operational core platform companies as well as the firm’s standalone and consolidated financial results are available for download at http://ir.qalaaholdings.com.

—Ends—

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

Qalaa Holdings (CCAP.CA on the Egyptian Stock Exchange) is an African leader in infrastructure and industry. Formerly known as Citadel Capital, Qalaa Holdings controls subsidiaries in core industries including Energy, Cement, Agrifoods, Transportation & Logistics and Mining. 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 Citadel Capital 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.

[1] Unless otherwise noted, all figures in this document related to consolidated financial performance are pro-forma, having been re-stated to reflect the impact of asset purchases made by Qalaa Holdings by 31 March 2014 under the transformation program. Re-stated figures are thus marked “Pro-Forma” while statutory figures reported in 1Q13 are marked “Actual.”

[2] NB: Segment Revenues / EBITDA (Aggregate) in Operational Reviews refers to the mathematical total of 100% of the aggregate revenues or EBITDA of operational companies in the industry regardless of the consolidation method applied and without eliminating inter-company transactions. Aggregate revenues and Aggregate EBITDA accordingly do not correlate to the figures consolidated on Qalaa Holdings’ income statement, but rather are included here to provide a clearer view as to the performance of the underlying companies.

 

For more information, please contact:

Ms. Ghada Hammouda

CMO & Head of Corporate Communications

Qalaa Holdings

g...@qalaaholdings.com(click to reveal this email)

Tel: +20 2 2791-4439

Fax: +20 22 791-4448

Mobile: +20 106 662-0002

Twitter: @qalaaholdings