CAIRO: Ezz Steel, Egypt’s biggest steelmaker, posted a 79 percent drop in first-half net profit as it set aside a potential tax liability to cover measures introduced by the government in the wake of Egypt’s uprising.
The group has been rocked by the political and economic turmoil of the uprising that ousted Hosni Mubarak in February. Egypt’s public prosecutor jailed the company’s chairman Ahmed Ezz in February on charges of graft.
Shortly after the uprising, Egypt’s government raised the corporate income tax to 25 percent from 20 percent to help keep a rapidly expanding budget deficit under control at a time when civil servants were demanding higher salaries and the economy was falling into recession.
Ezz said on Thursday its first-half net profit after tax and minority interest dropped to LE 51 million ($8.5 million) from LE 241 million the same time last year.
Net sales climbed 24 percent to LE 9.33 billion, while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 3 percent to LE 1.24 billion.
"For a firm that spends more time in court than in the office and with a steel industry that had months of no work, growth in their revenue and EBITDA profit is impressive and unexpected," Omar Taha of Beltone Financial said.
Ahmed Ezz quit the board of Ezz Steel and its Ezz Dekheila Steel unit in May to fight the charges against him. A court jailed him in September and ordered the withdrawal of two of his firm’s licenses.
While overall revenues grew, flat steel sales volumes dropped 11 percent during the period to 573,000 tons.
"The revenue miss was mainly caused by lower than expected volumes at Ezz Flat Steel (EFS), resulting in a top line of LE 0.7 billion, versus our expected 1.8 billion," a note by Beltone Financial said.
Ezz Steel set aside a deferred tax loss of LE 158 million, mainly recognized during the first quarter of the year, which further pulled profits downwards, Beltone said. It also realized a foreign exchange loss of LE 66 million.
