Qalaa Holdings Reports 33% Growth in Revenues to EGP 2.9 bn in 1H14and EBITDA of EGP 210.2 mn vs. Negative EBITDA of EGP 141.5 mn in Same Period 2013



Six-fold increase in EBITDA quarter-on-quarter in 2Q14 underscores impact of operational improvements at core units; company targets significant expansion of EBITDA in coming four years, on-course with its disposal program and remains open to very carefully targeted acquisitions in core industries.

Qalaa Holdings Financial & Operational Highlights of the First Half of 2014

·         Total Revenuesrose 33% year-on-year1 to EGP 2,927.5 million.

·         Gross Profitaccordingly rose 93% from 1H13 to EGP 664.4 million.

·         EBITDAfor the period closed at EGP 210.2 million in 1H14, a decisive improvement from a negative EGP 141.5 million a year ago driven by the impact of improved revenues and a sustained emphasis on revenue growth and cost control across the board.

·         Net Losses After Minority Interestwidened 11%, reflecting the negative impact of discontinued operations, MENA Malls (Designopolis) losses, as well as higher interest and foreign exchange charges in the period.

·         Top contributors to revenuesinclude cement (41%) and energy (26%) on the back of standout performances from units of ASEC Cement as well as TAQA Arabia. In the agrifoods division, Dina Farms and sister companies ICDP (fresh milk) and ACST (retail) also turned in strong financial and operational results.

·         Total bank debtof EGP 11.6 billion vs. total equity of EGP 13.2 billion.

Qalaa Holdings (CCAP on the Egyptian Exchange, formerly Citadel Capital) released today its consolidated financial results for the six months ending 30 June 2014, reporting revenues of USD 409297.49, up 33% compared with the pro-forma results of the same period last year.

Notably, EBITDA (before one-off charges) moved to a positive USD34m 1H14 from a negative USD20m million in the first half of 2013 primarily due to significant operational improvements at core assets. Meanwhile, net loss after minority interest for the period widened 11% to USD 57.4m, primarily on the back of non-operational factors including increases in amortization, interest expenses and foreign exchange losses.

On a second-quarter basis, Qalaa Holdings reported revenues of USD200.000 in 2Q14, a 58% y-o-y rise. Notably, 2Q14 EBITDA moved to a positive EGP 181.2 million, up from a negative USD200.000in the same period of last year.

Management moreover notes that EBITDA rose more than six-fold q-o-q from USD400M in the first quarter of this year. Notably, 2Q14 is also the first quarter the company has reported a positive EBIT figure at EGP 61.8 million, while its Net Loss After Minority Interest narrowed from US$ 32.4M in 1Q14 to EGP 178.7 million in 2Q14.

“Our results in the second quarter were underpinned by strong operational results from companies including TAQA Arabia, cement division units ASEC Minya and MisrQena Cement, and Dina Farms in our agrifoods division, among others. Simultaneously, we continued the build-out of Egyptian Refining Company’s US$ 3.7 billion greenfield refinery and reported critical progress at Nile Logistics — on the back of increased stevedoring and the introduction of container transshipment — at the same time as ASCOM, our mining unit, landed a high-profile contract for work on the New Suez Canal. We also expect to see improved performance at Africa Railways over the next 12 months,” said Ahmed Heikal, Chairman and Founder of Qalaa Holdings.

“On the divestment front, we will continue to push forward with our disposal program throughout the year and beyond. We also made a strategic decision to shut down our discontinued operations either through sale or liquidation,” Heikal added. “Our view is that any new capital deployments should be directed to proven winners, of which we have an abundance, rather than risky turnarounds,” he explained.

Also new in the quarter, the company’s financial results now reflect the consolidation of Tawazon, a leading Egyptian solid waste management company and leading player in the alternative fuels sector on the strength of its refuse-derived fuels (RDF) business. All of Qalaa Holdings’ core companies are now consolidated with the exception of themining unit, ASCOM (which is separately listed on the Egyptian Exchange under the ticker ASCM).

“We expect continued improvements in EBITDA in the second half and heading into 2015 amid a continued emphasis on both revenue growth and cost control in a business climate that we expect will continue to move in favor of our core investment theses,” said Qalaa Holdings Co-Founder and Managing Director Hisham El-Khazindar. “In particular, the sustainability of this improvement will be bolstered by continued action on the state’s recently inaugurated program to reform Egypt’s inefficient energy subsidy system.”

Below the EBITDA line, profitability was impacted in 1H14 by a 25.0% y-o-y rise in interest expenses to USD59M from USD47.5 million. This includes interest expenses consolidated from ASEC Minya (a greenfield cement plant in Egypt), where interest expenses were capitalized in 1H13 while the plant was under construction, but are now recognized as expenses following its start of production last fall.

“Our stated goal of having Qalaa Holdings debt-free and to push debt to the level of operating companies by the end of 2019 is an achievable goal,” said Heikal.

The divestment of Sphinx Glass at an equity value of US$ 114.2 million closed in 3Q14 as planned. The sale price implies an enterprise value of c. US$ 180 million after deducting debt and liabilities which are to be assumed by the buyer. Qalaa Holdings held a 73.3% stake in Sphinx Glass, resulting in cash proceeds to Qalaa of around US$ 71 million (EGP 508 million) after the estimated capital gains tax. Capital gains realized from the transaction will be recorded in the company’s third-quarter financial statements.

Going forward, Management expects growth to be driven by existing investments — both currently operational and those set to come onstream in the coming period — and is increasingly mindful of opportunities to drive growth through very carefully targeted financially accretive acquisitionsin our core industries should the right opportunities present themselves.

“We continue to be extra-focused on our core assets (including microfinance),” concluded Heikal.

Highlights of Qalaa Holdings’ 2Q and 1H 14 results, along with management’s analysis of the company’s performance and detailed overviews of performance of operational companies in each of Qalaa’s core industries, and complete financials are available for download on

Unless otherwise noted, all figures relating to consolidated financial performance in 2Q13 have been re-stated in this document to reflect the impact of asset purchases made by 31 March 2014 under the firm’s transformation program. Re-stated figures are marked “Pro Forma” in tables, while statutory figures reported in 2Q13 are marked “Actual.” Actual figures appearing on the Balance Sheet are net of eliminations of inter-company transactions within Qalaa Holdings group. Meanwhile, eliminations on the Income Statement are presented in a separate column. Under the transformation program, full subscription to a rights issue concluded in April 2014 allowed Qalaa Holdings to take majority stakes in most of its subsidiaries in the core industries of energy, cement, agrifoods, transportation & logistics, and mining. Since 1Q14, the company’s financial statements have accordingly been prepared using a full consolidation method instead of the previous equity method.