Qalaa’s 1Q15 Revenues Rise 42.5%, EBITDA records an eight-fold surge to EGP 275.8 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 today its consolidated financial results for the period ending 31 March 2015, reporting revenues of EGP 1,947.5 million, 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 an EGP 131.7 million increase over 1Q14. Furthermore, Qalaa’s core platform company TAQA Arabia also saw revnues increase by 57% to EGP 526.5 million in 1Q15. Together the energy and cement segments contributed 71% to consolidated revenues .


EBITDA meanwhile stood at EGP 275.8 million, an eight-fold increase compared to 1Q14’s figure of EGP 29 million, and well on-target to meet management’s stated goal of closing FY15 with EBITDA in the vicinity of EGP 1.2 billion.


“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 EGP 650 million, up from a negative a year earlier, we are on-track to meet our previously stated guidance of EBITDA of around EGP 1.2 billion by 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 EGP 112.2 million in the first quarter, a 51.6% improvement from 1Q14’s figure of EGP 231.9 million. 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 EGP 53 million compared to a gain of EGP 13 million in 1Q14, and inflated interest expenses, as the company has some dollar-denominated debt. Cement and Construction unit ASEC Holding recorded EGP 78 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 EGP 1.7 billion of which EGP 1 billion have already been capitalized and reflected on Qalaa’s increased stakes in its core assets, with the remaining balance of EGP 700 million expected to close by July 2015. This will see paid-in capital rise to EGP 9.7 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 EGP 9.7 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 EGP 7.5 billion — excluding debt associated with its greenfield megaproject Egyptian Refining Company and Africa Railways — to below EGP 5 billion 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 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 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, 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.

For more information, please contact:
Ms. Ghada Hammouda

CMO & Head of Marketing Communications
Qalaa Holdings
ghammouda@qalaaholdings.com

Tel: +20 2 2791-4439
Fax: +20 22 791-4448
Mobile: +20 106 662-0002