Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange), released today its consolidated financial results for the nine-month period ending 30 September 2023. The Group’s consolidated revenue grew by 11% y-o-y in 3Q23 to EGP 26.4 billion, primarily driven by ERC’s contribution. Meanwhile, Qalaa’s recurring EBITDA reached EGP 3.9 billion during the quarter, down from EGP 8.8 billion in 3Q22 as a consequence of lower margins at ERC.
ERC’s gross refining margins averaged USD 2.16 million per day in 3Q23, down on a y-o-y basis from the USD 4.98 million per day witnessed during 3Q22. The drop reflects a combination of higher feedstock prices, lower refined product prices, and a decline in the quality of feedstock received. It also partially reflects a normalization of oil prices following a significant spike that occurred in 2022.
Excluding ERC, Qalaa’s 3Q23 revenue rose by 19% y-o-y to EGP 7.0 billion, driven by strong performances across most subsidiaries. TAQA Arabia’s revenue grew 27% y-o-y to EGP 3.6 billion in 3Q23, compared to EGP 2.9 billion in 3Q22. Revenue growth was primarily driven by a strong performance at TAQA Gas, on the back of a rise in connection revenue, as well as an expansion in CNG volume sold following an increase in the number of CNG stations. Revenue growth was further supported by the positive contribution from foreign currency linked power generation prices, in addition to the implementation of new photovoltaic projects under TAQA Power. Additionally, the increase in the price and volume of both fuel and lubes at TAQA Petroleum further boosted revenue growth.
National Printing reported a 15% y-o-y increase in revenue during the quarter to EGP 1.3 billion, with the company witnessing mixed performances across its subsidiaries. El Baddar continued to capitalize on its new facility, delivering a 34% y-o-y top-line increase. Similarly, Shorouk for Modern Printing and Packaging achieved an 18% y-o-y increase in revenue in 3Q23, on the back of an increase in the average price per ton. Meanwhile, Uniboard reported a slight 4% y-o-y decline in revenue following a drop in sales volume. In parallel, ASEC Holdings recorded EGP 772.3 million in revenue in 3Q23, a 21% y-o-y decline owing to the negative impact of the turmoil in Sudan on the operations of Al Takamol Cement. It is worth noting that the staff and assets of Qalaa’s Sudan affiliate Takamol Cement are safe and continue to operate at a limited capacity. Qalaa continues to closely monitor the ongoing developments within the country.
In 3Q23, Dina Farms Holding Company recorded revenue of EGP 508.7 million in 3Q23, up 56% y-o-y from EGP 327.0 million in 3Q22. Top-line expansion was driven by improved operations at Dina Farms, as well as ICDP’s revenue benefiting from higher selling prices and new product launches. Meanwhile, ASCOM achieved a 33% y-o-y increase in revenue to EGP 475.2 million, as the EGP devaluation augmented the USD-denominated revenues of ASCOM’s two largest revenue generators: Ascom for Chemicals and Carbonates Manufacturing (ACCM) and GlassRock, an insulation material producer. Improved performances across both GlassRock and the company’s quarrying operations in Egypt further supported ASCOM’s top-line results. Finally, CCTO’s transportation and logistics business delivered a 39% y-o-y increase in revenue to EGP 124.7 million in 3Q23, on the back of improvements across all revenue streams of its Egyptian arm NRPMC.
“The global economy continues to navigate challenges as the world grapples with one of the most difficult macroeconomic periods in recent history. Although we are now seeing signs of global inflation coming down, countries continue to face unprecedented levels of debt, still elevated inflation rates, and tightening monetary conditions. As a result, there are continued expectations of suppressed economic growth in the long term, high borrowing costs, and an increased focus on debt reduction. Furthermore, the increasingly evident effects of climate change around the world, as well ongoing geopolitical tensions, which have been further exacerbated by the recent unrest, continue to place significant stress on the global financial system,” said Qalaa Holdings’ Chairman and Founder Ahmed Heikal.
“These difficulties have also created a challenging domestic environment. Inflation rates remain high, and the Egyptian Central Bank continues to implement a tightening monetary policy to rein in rising price levels. On the bright side, Egypt remains an attractive investment destination for regional and international investors, and I am confident that the country’s long-term economic prospects remain positive. That being said, Qalaa remains well-positioned to overcome prevalent challenges thanks to our resilience, flexibility, and efficiency, which are ingrained into the core of our DNA,” continued Heikal.
“I am proud of Qalaa’s positive results amidst the current operating environment,” added Heikal. “During the quarter, Qalaa’s top-line expanded by 11% y-o-y, with results at the Egyptian Refining Company supporting the Group’s performance. Despite this, Qalaa’s EBITDA contracted year-on-year due to the sharp decline in ERC’s margins, as well as the negative impact of the ongoing armed conflict in Sudan on Takamol Cement’s performance. Going forward, we remain committed to prioritizing the growth of our subsidiaries’ cashflows and carefully deploying them to make high yield incremental investments while adhering to our debt repayment plan.”
“Additionally, I am pleased to announce that APM Investment Holdings Limited (APM), a wholly owned subsidiary of Qalaa Holdings’ mining arm ASCOM, completed the sale of its c.35% stake in Ethiopia’s Kurmuk Gold Project to Canadian company Allied Gold Corp. The revenue from this transaction includes the receipt of around 11.5 million shares in Allied Gold in favor of APM Investment Holdings Limited, with a total value of c.USD 25.1 million as of 30 September 2023. The transaction will also include deferred payments totaling USD 65.6 million by Allied Corp in three installments starting 30 September 2024 and ending 30 September 2027. This comes as part of Qalaa’s strategy of divesting some of its non-core businesses and assets to settle the Group’s outstanding debts,” Heikal said.
“We will continue to push ahead with our growth strategies across our numerous platforms over the coming years, keeping a close eye on identified investment opportunities. Our portfolio companies remain resilient in the face of external pressures, and continue to benefit from Qalaa’s meticulous growth strategies. With the positive results achieved across our business segments during the quarter, I am confident that the outlook for the Group remains bright,” Heikal stated.
“Finally, I would like to reiterate that the true value of Qalaa’s performing assets is masked due to accounting for the assets at their historical cost and adjusting for impairments, while not taking into consideration any revaluation adjustments,” concluded Heikal.
“I am proud of the impressive results achieved by Qalaa for the third quarter this year,” said Hisham El-Khazindar, Qalaa Holdings’ Co-Founder and Managing Director. “The energy segment reported strong results, as TAQA Arabia saw its revenue expand following a robust performance at TAQA Gas, as well as the implementation of new photovoltaic projects under TAQA Power, and favorable drivers at TAQA Petroleum. Similarly, ERC top-line expanded year-on-year despite both the decline in refining margins during the quarter, and the implementation of a planned 17-day production shutdown for the execution of an overhaul and debottlenecking. Meanwhile, our position as an import substitute and export player across our mining and printing businesses continued to drive both consolidated growth, and valuable USD proceeds for the Group. Finally, our agriculture and logistics segments continued to record robust top- and bottom-line growth owing to their strong investment fundamentals.”
“We continue to place the reduction of Qalaa’s risk levels, primarily by deleveraging and expanding the Group’s cashflows, at the forefront of our priorities. ERC, as well as all other operating companies bar one, are current on all due principal and interest payments. In parallel, we continue to make satisfactory progress with regards to the restructuring of Qalaa’s holding level debt,” added El-Khazindar.
“Our performance for the third quarter of the year is a demonstration of our ability to push ahead during difficult times, and I am looking forward to another quarter of growth and strong results across our operations and markets,” concluded El-Khazindar.
