ABU DHABI, 2nd August, 2022 (WAM) — Emirates Steel Arkan today announced its second-quarter results, reporting a net profit of AED207 million in the second quarter compared to a pre-merger loss of AED24 million in the same period of last year and a 184% gain from AED73 million in Q1, driven by higher sales volumes and prices, enhanced operational efficiencies, and a supportive commodity market environment.
Revenues rose to AED2.57 billion in Q2 compared to AED195 million in the corresponding quarter last year. Steel continued to contribute 90% of the Group’s revenues and building materials 10%.
Earnings per share for the quarter rose to AED0.03 per share compared to a pre-merger loss of AED0.014 per share in the same period last year. The Group’s net profit for the first six months of 2022 was AED280 million compared to a pre-merger loss of AED23 million in the first half of 2021, while revenues rose to AED4.61 billion versus AED418 million in the same time frame.
During the first half of 2022, the Group enhanced the efficiency of its plants and put in place a process of prudent raw materials inventory management and maintained finished product volumes at low levels to take advantage of and manage the risks associated with increasing price volatility.
In addition, the Group’s balance sheet improved at the end of the first half, marked by a reduction in bank borrowings, which has enhanced the Group’s net debt to equity ratio to 21% at the end of June compared to 32% at the end of December 2021.
Hamad Abdulla Mohamed AlShorafa Alhammadi, Chairman of Emirates Steel Arkan, said, “During the second quarter, the management continued the integration of Arkan and Emirates Steel, creating increased opportunities for growth and employment. The Group is also actively supporting ‘Operation 300 bn,’ the UAE’s Industrial Strategy, which will enhance prospects for new business. Emirates Steel Arkan continues investing in sustainable processes and harnessing the latest technologies to align with the Abu Dhabi Industrial Strategy.
“The strength of the results reflects how the creation of a national steel and building materials champion is supporting the UAE’s efforts to bringing about further economic diversification by nurturing the growth of the nation’s industrial base and increasing the competitiveness of Emirati goods and services in global markets. The measures the Group has taken in H1 to optimise its business will allow us to continue executing our strategy with increased confidence.”
On a stand-alone basis, the building materials business witnessed a robust turnaround in the first half, delivering EBITDA of AED70 million compared to AED39 million in the first half of 2021 as margins improved amid measures to increase sales volumes and prices across all product lines. The Group is currently preparing for its first exports of cement and clinker.
The Group’s steel business reported an EBITDA of AED524 million in the first half on a stand-alone basis, a substantial jump from AED246 million in H1 2021. The increase was boosted by strong demand from Europe and the Americas for rebars, sections and sheet piles as the number of export markets increased to 60 from 56. Rebar sales rose by 8% year on year to 904,000 metric tonnes in the first half. At the same time, first half sheet pile revenue grew by 400% year on year.
As part of its strategy to broaden its customer base, the Group is expanding its sheet pile range, including developing a range of U-shape piles, widely used in the construction industry. Work on a new U-shape range began during the second quarter and is expected to be brought to market in early 2023. During the quarter, the efficiencies of the current sheet pile production were enhanced, enabling the Group to capture full end-to-end margins.
In line with its commitment to minimising its carbon footprint, the Group plans in H2 2022 to launch ES600, a high tensile steel rebar that will support customers’ efforts to become more environmentally friendly. The new light-weight ultra-high-strength ES600 will also help reduce the Group’s carbon footprint for steel production, which is significantly lower than the global average carbon footprint of the Group’s peers. The Group continues working with partners to map out its comprehensive Net Zero plan, which aligns with the UAE’s carbon reduction targets. The building material business is also studying plans for green cement, which harnesses low-carbon production processes.
Saeed Ghumran Alremeithi, Group Chief Executive Officer, Emirates Steel Arkan, said, “The Group’s solid second-quarter earnings reflect favourable market conditions and demonstrate our greater operational efficiency as well as our ability to significantly reduce our debt and improve cash and inventory management. At the same time, an intensive marketing programme and prudent cost control during the quarter have also supported our profitability amid a backdrop of higher raw material prices.”