Ezz Steel Regains 1 of 2 Court-Withdrawn Production Licenses
Ezz Steel (ESRS), Egypt’s biggest publicly traded manufacturer of the metal, has regained one of two production licenses withdrawn by court order last year and is in advanced talks to secure the second, a company spokesman said.
The company has paid 50 million pounds upon signing the Nov. 14 agreement with the Industrial Development Authority and will pay the government 330 million pounds more in five equal annual installments after an 18-month grace period, Kamel Galal, head of investor relations, said by phone today. The license is for Ezz Rolling Mills, a 99 percent unit of the company.
“The company has enough liquidity to pay this off so this is very positive for them,” said Heba Sherif, analyst at Prime Securities SAE who has a buy recommendation on the stock with a 12.8 pound price estimate. “It brings down their cost per ton because it reduces their reliance on imported scrap metal.”
An Egyptian court in September 2011 stripped Ezz of two direct-reduced iron and billet production licenses on grounds that they weren’t paid for when awarded by the government. It also sentenced its former chairman Ahmed Ezz, a prominent member of Hosni Mubarak’s dissolved ruling party, to 10 years in jail for irregularities in obtaining the licenses.
The company will now restart construction on a $400 million direct-reduced iron and billet plant that is 80 percent complete, Galal said. The factory, which will produce steel from iron-ore instead of scrap metal, is set to boost the company’s profit margins, he said.
Ezz is also close to completing talks with IDA to regain the second DRI-billet license for its Ezz Flat Steel unit, at the same cost, Galal said.
The shares retreated 4.1 percent to 9.22 pounds at 12:39 p.m. in Cairo, bringing its decline this quarter to 24 percent. The benchmark EGX 30 Index (EGX30) dropped 2.7 percent today, taking its loss over the same period to 5.4 percent.
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