Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange), released today its consolidated financial results for the first quarter ending 31 March 2023. The Group recorded a 62% y-o-y increase in revenue to EGP 30.3 billion in 1Q23, and recurring EBITDA of EGP 10.3 billion compared to EGP 3.9 billion in 1Q22. The positive performance reflects solid refining margins at ERC and strong performances across all subsidiaries.
Excluding ERC, Qalaa’s 1Q23 revenue was up 38 % y-o-y, recording EGP 6.9 billion, driven by improved performances across all subsidiaries. TAQA Arabia’s revenue grew 27% y-o-y in 1Q23 reaching EGP 2.9 billion compared to EGP 2.3 billion in 1Q22. The company’s revenue growth was primarily driven by a strong performance at TAQA Gas including the increase in CNG volumes sold as a result of the expansion in CNG station numbers. Revenues were also supported by the increase in fuel prices at TAQA Petroleum.
ERC’s gross refining margin averaged USD 3.7 million per day in 1Q23, up from USD 2.7 million per day in 1Q22, following higher oil product prices. Refining margins have started to normalise in 2023 after reaching a peak in 2022, declining to an average of USD 3.7 million per day in 1Q23 versus USD 4.9 million per day in 4Q22.
National Printing delivered a 54% y-o-y increase in revenue, reaching EGP 1.4 billion during 1Q23 from EGP 915 million in 1Q22, as it continued reaping the rewards of its new El Baddar state-of-the-art facility. Revenue was up across all three of the segment’s companies owing to a combination of increased volumes and higher prices. Meanwhile, ASCOM delivered a 74% y-o-y increase in top-line to EGP 498.3 million in 1Q23, mostly driven by the impact of the EGP devaluation on the USD denominated businesses such as ACCM and GlassRock.
In 1Q23 ASEC Holding’s revenue was EGP 1.3 billion, up 26% y-o-y compared to 1Q22, owing to the depreciation of the EGP against foreign currencies of which the revenues of some of the platform’s subsidiaries are denominated. Meanwhile, Dina Farms revenue reached EGP 409.8 million in 1Q23, up 49% y-o-y. The company’s performance was backed by improved operations and ICDP’s revenue benefiting from higher selling prices coupled with new product launches. Finally, CCTO delivered a 40% y-o-y revenue increase to EGP 130.7 million in 1Q23 driven by improvements across all revenue streams at its Egypt arm NRPMC.
“The global economic landscape continues to present significant challenges, with the world grappling with one of the most difficult economic periods in recent memory. With debt levels still at historic highs and inflation and interest rates yet to normalise, there are continued expectations of long-term depressed economic growth, higher long-term interest rates, and a heightened focus on reducing debt,” said Qalaa Holdings’ Chairman and Founder Ahmed Heikal.
“These challenges are equally daunting on a regional level. On the local front, inflation rates continue their upward trajectory. However, as global inflationary pressures begin to ease, the Central Bank has decided to maintain interest rates for the time being. Despite this difficult environment, we at Qalaa are well-positioned to successfully navigate these challenges,” continued Heikal.
“With resilience, flexibility and efficiency ingrained into the core of our DNA, Qalaa continues to be well-positioned to capitalise on this global transition. Egypt’s positioning as an attractive hub for European markets and an entry point to African and Middle Eastern markets paves the way for unique investment opportunities for Qalaa,”
“I am increasingly proud of Qalaa’s continued positive topline performance, driven by the Group’s resilience,” Heikal continued. “The Group delivered a nearly twofold y-o-y topline growth and nearly three-fold y-o-y EBITDA increase amid this highly uncertain operating environment, thanks to our robust investment and growth strategies across our portfolio companies. Furthermore, Qalaa managed to achieve a positive net income during the quarter, turning a bottom-line profit following the net loss recorded in the previous quarter. Growing our subsidiaries’ cashflows before making investments and carefully deploying our cashflows in a way that balances between high yield incremental investments on the one hand, and debt repayment on the other, remains our main focus.”
“We will continue to push forward our growth strategies across our platforms this coming year, keeping a keen eye on investment opportunities. Our portfolio companies remain resilient in the face of pressures and continue to benefit from Qalaa’s meticulous growth strategy. All our business segments have recorded solid performances this quarter, setting the tone for what is expected to be a year of continued positive results. Qalaa’s outlook remains bright as a result, despite the ongoing challenges,” Heikal Added.
“I am also excited by the recent listing of TAQA Arabia on the Egyptian Stock Exchange, which commenced on the 9th of July. The listing of TAQA Arabia enables Qalaa to follow through on its plan to settle some of its debt obligations through the sale of some of its assets. Qalaa is now in the process of settling some debt obligations through the sale of 20% of TAQA Arabia shares as part of phase one of TAQA’s ownership restructuring, with the Group retaining the option of repurchasing these shares in the future. Going forward, Qalaa may continue using a similar strategy with other assets as we reach agreements with our creditors on debt settlement and restructuring.”
“Finally, I would like to reiterate that the true value of Qalaa’s performing assets is masked due to the adoption of international accounting standards, which account for assets at their historical cost and adjust for impairments, while not taking into consideration any revaluation adjustments,” concluded Heikal.
“Qalaa has kicked off the year with a positive and promising performance, amid a difficult operating environment,” said Hisham El-Khazindar, Qalaa Holdings’ Co-Founder and Managing Director. Over the past quarter, our energy segment delivered solid results as TAQA Arabia continued to expand its energy distribution network, adding new CNG and liquid fuel filling stations. Meanwhile, despite beginning to normalise in 2023, ERC’s refining margins remained strong on the back of higher oil product prices. It is of note that ERC continued to operate without any shutdowns or slowdowns during 1Q23. In parallel, our position as an import substitute and export play across our mining and printing businesses continued to drive both consolidated growth, and valuable USD proceeds for the Group. Finally, our agriculture and logistics segments have continued to record robust top and bottom line growth owing to their robust investment fundamentals.”
“The past period has seen us focus on reducing our risk levels, primarily by deleveraging and growing Qalaa’s cash flows. As a result, ERC has become current on all of its due interest and principal payments as scheduled this quarter. We are also continuing our efforts to restructure Qalaa’s holding level debt, which remains a priority.”
“Our performance in the first quarter of the year is a testament to our continued ability to push ahead during difficult times. We look forward to another quarter of growth and strong results across our operations and markets,” concluded El-Khazindar.