| |
|
Read our latest brochures
and catalogues |
|
|
View our latest financial and
investor information |
|
|
View our latest company
documentaries |
|
|
|
 |
|
| CHAIRMANS STATEMENT |
|
2006 has been an eventful year, but one from which we emerge with an excellent outlook. Aligning our business structure with the underlying operations has reinforced our position as a leading steel producer, both in the Middle East region and internationally. We believe that this structure will enable us to optimise horizontal and vertical expansion opportunities.
Our production capacity reached record levels in 2006. Importantly, as one of only a small group of steel producers that can produce both long and flat steel products, we have diversified our product range and built in some protection from the effects of industry cyclicality.
During 2006, we have worked hard to optimise growing capacity utilisation at our modern facilities to capitalise upon local demand for steel which has increased by 32% since 2004. Our purpose-built plants in Alexandria, Suez, Sadat City and 10th of Ramadan City are using the latest technology and integrated production processes to manufacture a wide range of steel products, all to international quality standards. As a result, Ezz Steel has one of the highest levels of productivity in the world, at over 800 tons per employee per year.
This consistency and efficiency sets us apart from other operators, but is only made possible because of our investment in state-of-the art production facilities, the dedication of our highly-trained personnel and the leadership of our corporate management team. I thank them all for their valuable contribution.
While the restructuring process makes year-on-year comparisons with our previous performance very difficult, net sales of EGP 11.6 billion and a gross profit of EGP 3.2 billion achieved in 2006, provide an illustration of our business’ potential.
Global steel prices have strengthened again recently, as worldwide supply and demand have returned to a more balanced position. Price is an important factor in our sales result and while prices do vary between domestic and international markets, it is vital to recognise that our local steel prices remain directly pegged to the global steel industry.
Egypt remains our largest and most important single market, both in terms of sales and in terms of our positive contribution to the underlying domestic economy and employment. Furthermore, our products continue to support growth and technical advances in Egypt and the indications are that, with anticipated GDP growth of 8% in 2007 [Source: Egyptian Minister of Planning to Al-Ahram Newspaper 16-04-2007], local steel demand will continue to rise.
Despite the record levels of production achieved this year, there is no room for complacency. One of our priorities is to expand existing production capacity to enable us to satisfy existing and potential clients as their own markets and businesses expand.
As we move forward into 2007 and beyond, I would like to outline several key goals to you:
Further Integration
Integration is a key component of our future strategy because the prices for raw materials, or feedstock, our principal cost, are also impacted by global supply and can also be cyclical.
To manage our exposure to international feedstock prices, we have already started the process of establishing a new DRI facility as well as a new Electric Arc Furnace at our Suez plant to supply Ezz Steel and its subsidiaries with DRI and Billets.
It is this integration strategy, designed to protect gross profit, which has allowed us to record a gross margin of 27.5% in 2006.
EZDK, Egypt’s largest steel producer, is our flagship operation in this regards. Our aim in 2007 is to replicate the success of the group’s EZDK-Alexandria facility, which operates an integrated mini-mill which has been a test case for the group in terms of vertical integration, growth and capacity utilisation, at our other operations. Operating margins achieved at the Alexandria facility are the highest within the group.
Superior efficiency and quality
Despite our ambitious targets for growth in production and capacity and a robust programme of product development, we will not compromise on quality of product or on the development of our key personnel. These commitments take a priority in our investment decisions and are integral to our business plans.
The assurance of superior quality is enshrined in everything we produce. During 2006, my personal goal, and one shared by our corporate executives, has been to continue to provide a service and product that exceeds our customer’s expectations. This will not change. It is precisely because of our commitment to the highest standards and dependability of supply that our products have won the respect of the international steel industry.
Commitment to corporate responsibility
Globally, however, the expectations of business and industry are changing, with a heightened demand for corporate accountability. We recognise that investor and stakeholder confidence are closely linked to a company’s ability to demonstrate sound corporate responsibility practices.
At Ezz Steel, we have long held the view that our contribution to the communities that support and participate in our company’s growth, and the protection of the environment are fundamental to our business. Our duty to keep the environment clean is resolute, as is our commitment to the safety of our employees. The investments we have made in these two areas ensure that we are in accordance with international best practice.
Opportunities for international expansion
Anchoring the business in the domestic market, enables us to explore other, international opportunities from a solid base. We continue to evaluate possible cross border investments with high growth potential in the Middle East and North Africa region and where we will have a competitive edge. The first example of this is our venture to explore the potential to establish a steel making factory in Algeria to serve the booming Algerian construction industry.
Ezz Steel is set to benefit from the growing demand for steel, domestically, regionally and globally. In the Middle East region alone, booming economies are expected to fund projects exceeding one trillion dollars over the next five years. Such initiatives will be key targets for our products as we grow.
Our products are already being used in more than 30 export countries and this continues to grow. Our markets are constantly changing and there are opportunities and challenges ahead, but one constant remains - our position, as a standard-bearer for the quality of Egyptian business. We place great value upon this and it remains a priority for our team.
I feel confident that the steps we have taken this year, in strengthening our operational capability, increasing the breadth of executive management while demonstrating our dedication to customer satisfaction will enable us to deliver on our promise to both customers and shareholders in the coming year and beyond.
Eng. Ahmed Ezz
Chairman and Managing Director
|
|
|
|
|
|
