Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange), released today its consolidated financial results for the three-month period ending 31 March 2024. During the quarter, Qalaa recorded revenue of EGP 37.6 billion, a 45% y-o-y expansion, mainly driven by ERC’s USD-denominated revenue, and was further boosted by broad-based growth across most subsidiaries. On the profitability front, the Group’s EBITDA stood at EGP 7.7 billion, down from the EGP 9.7 billion reported in 1Q23. Meanwhile, net income reached EGP 7.2 billion compared to the EGP 73.0 million achieved during the same period last year. 1Q24 operating profitability was down mainly because of the normalized margins at ERC, as well as the negative impact of the war in Sudan on the operations of Al Takamol Cement. Meanwhile, the year-on-year increase in the Group’s bottom-line was a result of the substantial gains associated with the FHI settlement.
Excluding ERC, Qalaa’s 1Q24 revenue rose by 26% y-o-y to EGP 3.2 billion, driven by strong performances across most subsidiaries. ASEC Holdings recorded revenue of EGP 1.1 billion in 1Q24, a 10% y-o-y decline owing to the negative impact of the war in Sudan on the operations of its subsidiary Al Takamol Cement. Meanwhile, the rest of ASEC Holdings’ subsidiaries witnessed remarkable growth at both the revenue and profitability levels.
Dina Farms Holding Company recorded a 79% y-o-y increase in revenue to EGP 734.0 million in 1Q24, driven by improved operations at Dina Farms, as well as ICDP’s revenue benefiting from an uptick in sales volumes combined with higher selling prices and new product launches. In 1Q24, ASCOM recorded a 53% y-o-y increase in revenue to EGP 760.0 million, as the improved performance of ASCOM’s two largest USD-denominated revenue generators: ACCM and GlassRock was further augmented by the EGP devaluation.
CCTO’s transportation and logistics business delivered a 25% y-o-y revenue increase to EGP 163.4 million, on the back of improvements in the coal storage service of its Egyptian arm NRPMC. Finally, TAQA Arabia’s revenue grew 22% y-o-y to EGP 3.6 billion in 1Q24. Revenue growth for the quarter was primarily driven by a strong performance at TAQA Gas, fueled by an expansion in CNG volume sold due to additional CNG stations becoming operational, and further boosted by the company’s new operations in Africa, which have recently come online. Positive contributions from foreign currency-linked power generation prices and the implementation of new photovoltaic projects under TAQA Power, in addition to increases in fuel and lube prices and volumes at TAQA Petroleum, further supported growth. TAQA Arabia is accounted for as an investment in associate using the equity method and revenues are not included in Qalaa’s consolidated revenues.
“I am proud of the strong performance reported by Qalaa during the first quarter of the year, which saw the Group deliver impressive top- and bottom-line growth,” said Qalaa Holding Chairman and Founder Ahmed Heikal. “During the quarter, Qalaa’s revenue expanded by 45% y-o-y, with top-line growth coming largely on the back of the solid results achieved at the Egyptian Refining Company, and further supported by broad-based growth across most subsidiaries. Additionally, despite the year-on-year decline in EBITDA witnessed during the quarter, Qalaa achieved an exponential year-on-year increase in its bottom-line to EGP 7.2 billion during the quarter. Qalaa’s results during 1Q24 are a testament to the Group’s strength and resilience and reflect the considerable efforts undertaken to reduce the Group’s outstanding debts through several settlement and restructuring agreements.”
“Throughout 2023 and during the first half of 2024 we have taken huge strides and concluded a number of agreements aimed at bringing down the Group’s senior debt through various settlement and restructuring agreements. On that front, and with regards to our Egyptian lenders, we have successfully closed an in-kind settlement agreement with a group of four Egyptian banks to which Qalaa was indebted for the settlement of the entirety of Qalaa’s debt. Additionally, we were able to reach a 10-year restructure and settlement plan with another Egyptian bank (AIB), further bolstering our debt settlement and restructuring efforts. As for our debt to foreign lenders, we have established Qalaa Holding Restructuring I Ltd. (QHRI), a company set up by Qalaa’s shareholders for the purpose of purchasing that debt. The purchased debt will be extinguished in the form of a capital increase by Qalaa, where shareholders who purchased a share of Qalaa’s debt will be able to swap their debt for an equity stake in Qalaa. Our continued efforts in bringing down the Group’s debt levels have seen our overall liabilities come down during the quarter, placing Qalaa in a stronger and more favorable financial position,” Heikal added.
“While the domestic economy continues to go through a challenging period, where the difficulties faced at home are further exacerbated by the current state of global macroeconomic uncertainty as well as the armed conflicts taking place around us, Qalaa remains well-positioned to overcome these challenges, thanks to our resilience, flexibility, and efficiency, which are ingrained into the core of our DNA. Additionally, and despite the challenges, Egypt remains an attractive destination for both local and regional investors, and I am confident that the country’s long-term economic prospects remain positive,” Heikal stated.
“Across the board, our portfolio companies have continued to showcase their strength and resilience, with all but one of our business segments reporting top-line growth during the quarter. Supported by Qalaa’s carefully executed growth strategy, our portfolio companies continue to successfully take advantage of the new macroeconomic dynamics in play, capitalizing on a portfolio structure that shields against devaluation pressures, as well as the increased focus on local manufacturing and import substitution. While the positive performances of our portfolio companies remain dampened by the effects of extenuating events, such as the effect of the war in Sudan on Al-Takamol Cement’s performance, I am positive that once those effects start to wane, the true strength of our portfolio companies will be on full display,” Heikal continued.
“With this quarter setting the tone for what we expect to be a positive year, we will continue pushing ahead with our growth strategies across our platforms over the coming months. Despite the challenging market conditions, I am confident that the Group’s outlook remains bright, and going forward we will continue making small, incremental investments with the aim of continuously enhancing the Group’s overall investments portfolio,” Heikal noted.
“Finally, I would like to reiterate that the true value of Qalaa’s performing assets is masked due to holding them at their historical cost and, in some cases, adjusting for impairments, while not taking into consideration any revaluation adjustments,” Heikal concluded.
“The past period has seen us sign and complete a number of milestone settlement and restructuring transactions with Qalaa’s bank and non-bank creditors,” said Hisham El-Khazindar, Qalaa Holdings Co-Founder and Managing Director. “These include the settlement with FHI, reflected in our 1Q24 results, in addition to the purchase of Qalaa’s foreign bank debt, as well as the settlement and restructuring of its Egyptian bank debt, both of which will be reflected in subsequent quarters. Beyond the short term one-off gains resulting from these settlements, it is important to highlight the significant long term positive impact of deleveraging and derisking Qalaa’s balance sheet.”
“On the operational front, Qalaa kicked off the new year with a strong and promising performance, delivering impressive results across the board,” added El-Khazindar. “Over the past quarter, the Group’s results continued to be heavily driven by ERC’s USD-denominated revenue, which expanded strongly year-on-year despite the decline in refining margins witnessed during the quarter. Similarly, our position as an import substitute and export player across our mining business continued to generate strong consolidated growth, as well as valuable USD proceeds for the Group. Finally, our agriculture and logistics segments have continued to record strong top- and bottom-line growth owing to their robust investment fundamentals.”
“Our performance during the first quarter of the year is a testament to our continued ability to push ahead during difficult times. We look forward to other quarters of gains, growth, and strong results across our operations and markets,” concluded El-Khazindar.
