Key operational highlights

• TAQA Arabia benefited from improving market conditions with increasing electricity distribution volumes and increased conversion from domestic natural gas to 2Q21, and increased its number of CNG filling stations to 23 during the period. , which made it possible to nearly triple the year-on-year natural gas consumption gas volumes sold for vehicles to 31.6 MCM in 1H21;
• National Printing has capitalized on the relaxation of port restrictions with a marked improvement in export volumes and is reaping the benefits of its new state-of-the-art facility;
• Dina Farms continues to benefit from its facility improvement initiatives;
• A key focus area over the next three years will be group-wide export growth, leveraging the advantage offered to local manufacturers due to rising global logistics costs and working to offset the concomitant increase in the price of imported raw materials;
• Qalaa continues to invest gradually in the companies in its portfolio;
• TAQA Arabia’s recently launched subsidiary, TAQA Water, is expected to provide considerable value in the future as the Group expands its presence in water treatment solutions;
• Restructuring the debt of Qalaa Holdings and ERC remains a top priority;
• Ongoing adherence to health, safety and business continuity measures to help manage COVID-19 risks and navigate the period of uncertainty ahead without layoffs.

Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange, formerly Citadel Capital), today released its consolidated financial results for the quarter ended June 30, 2021. Qalaa reported an increase of 37% year-on-year consolidated revenue to EGP 10.2 billion euros in 2Q21, while consolidated revenue excluding contributions from the Egyptian Refining Company (ERC) increased by 21% in year on year to 4.2 billion EGP. In terms of its net income, Qalaa recorded a net loss of EGP 401.5 million in 2Q21, compared to a net loss of EGP 712.1 million in 2Q20.

Excluding ERC, revenue growth during the period was primarily driven by TAQA Arabia, which recorded a 27% year-over-year increase in revenue to EGP 2.2 billion in 2Q21 . TAQA Arabia’s performance was supported by improving market conditions, leading to volume growth at TAQA Gas and TAQA Power. Meanwhile, Qalaa’s revenue growth was further supported by a 35% year-on-year revenue increase at National Printing in 2Q21 as it reaped the rewards of its new state-of-the-art facilities at its subsidiary. El Baddar. In addition, improved export sales and an optimized pricing strategy at Uniboard had a positive effect on National Printing’s results during the period.

“At TAQA Arabia, with improving market conditions, we captured growing demand for our services and booked increased conversions to domestic natural gas, provided higher electricity distribution volumes and quickly began to capitalize on the substation in the Sixth of October industrial zone recently inaugurated by TAQA Power. Additionally, we continued our expansion efforts in the compressed natural gas space and more than doubled our CNG stations to 23 in 1H21, with a plan to reach 42 stations by the end of the year. We are also ideally positioned to continue growing our domestic gas conversion business. In the meantime, we are confident that our recently launched subsidiary, TAQA Water, will provide considerable value in the future as we seek to expand the Group’s presence in the area of ​​water treatment solutions.

“At National Printing and ASCOM, improving the international business environment and easing port restrictions allowed both companies to record higher export volumes during the period. In total, the Group recognized export income of c. USD 22.7 million in 2Q21, while local currency income recorded c. $ 392.5 million *. At Dina Farms, our comprehensive facility improvement initiatives coupled with the successful launch of our new juice line had a positive impact on our performance in 2Q21. In addition, we capitalized on favorable cement prices in Sudan and recorded strong results at Al Takamol Cement, which supported the performance of ASEC Holding during the period.

“It is important to note that the true value of Qalaa’s performing assets is obscured due to the adoption of international accounting standards, which record assets at historical cost and adjust depreciations, without taking into account revaluation adjustments,” Heikal added. .

“At ERC, despite a 22-day shutdown due to scheduled maintenance in 2Q21, refinery revenues increased 52% year-over-year thanks to the resumption of market conditions. Additionally, I would like to note that ERC’s refining gross margin has gradually improved over the period but is currently hovering around half of its pre-COVID-19 levels. We hope to see further improvements to the refinery margins once market conditions stabilize, ”said Heikal.

It should be noted that ERC returned to full operational capacity in 2Q21 and recorded EBITDA of EGP 295.8 million in 2Q21 compared to EGP 6.1 million in 2Q20 due to improved refining margins. . Although ERC’s margins are improving dramatically, they remain at around 50% of their pre-COVID-19 levels. The technical management (O&M) of ERC is entrusted to the Egyptian Projects Operations and Maintenance company (EPROM), a wholly-owned subsidiary of the Egyptian General Petroleum Corporation (EGPC).

Excluding ERC, Qalaa would record a recurring increase in EBITDA of 26% year-on-year to 454.2 million EGP in 2Q21 thanks to strong EBITDA performances from TAQA Arabia, Dina Farms, ASCOM and ASEC Holding.

“Qalaa’s recurring EBITDA growth excluding ERC comes despite significant increases in global freight costs and an unfavorable commodity cycle,” said Hisham El-Khazindar, Co-Founder and Managing Director of Qalaa Holdings. “Improving profitability amid these global challenges is a testament to the strength of our operational efficiency, pricing and cost reduction strategies, as well as our restructuring efforts in our platform companies. Qalaa’s EBITDA performance continues to be supported by strong contributions from TAQA Arabia, notably from its electricity division following the commissioning of the new Six of October industrial substation. The EBITDA performance was also supported by the successful restructuring of ASEC Holding, which recorded a 58% year-over-year increase in EBITDA to 92.8 million EGP in 2Q21. Finally, the growth of exports and local volumes at National Printing and ASCOM also supported profitability for the period.

“On the debt restructuring front, we continue to make progress towards signing new agreements at Qalaa Holding and ERC levels, which remain a top priority for us. At the same time, Qalaa will continue to make additional investments in our portfolio companies with a view to unlocking more value in our large and diversified operations. “

“Finally, management remains committed to upholding Qalaa’s comprehensive health and safety measures to protect our c. 17,500 employees who are the main driver of success, and we hope that as market conditions continue to improve, and barring other material impacts from the pandemic, we expect to be able to close throughout the year on a positive note, ”concluded El-Khazindar.

The full review of Qalaa Holdings’ business for Q2 2021 and the financial statements on which it is based are now available for download at ir.qalaaholdings.com.

© Press release 2021