Egypt Kuwait Holding Co. Releases Q2 2015 Earnings ...
EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
Egypt Kuwait Holding Co. Releases Q2 2015 Earnings Results EKH’s diversification strategy and improved operational efficiencies reflect positively on its bottom-line growth in the second quarter of 2015.
Key Highlights of Q2 2015 USD 106.3 mn
USD 64.1 mn
40%
USD 26.6 mn
in Revenues
in Gross Profit
Gross Profit Margin
in Operating Income
25%
USD 24.9 mn
USD 21.1 mn
USD 12.5 mn
Operating Margin
Attributable EBITDA
in Net Income
in Attributable Net Income
Key Highlights of H1 2015 USD 198.6 mn
USD 71.7 mn
36%
USD 46.9 mn
in Revenues
in Gross Profit
Gross Profit Margin
in Operating Income
24%
USD 50.6 mn
USD 34.5 mn
USD 27.5 mn
Operating Margin
Attributable EBITDA
in Net Income
in Attributable Net Income
Group Revenue
13 August 2015 | Cairo | Egypt Kuwait Holding Company (EKHO.CA on the Egyptian Exchange and EKHOLDING on the Kuwaiti Exchange), one of the MENA region’s leading investment companies, reported today its consolidated results for the second quarter of 2015.
(USD Millions) 275.3 198.6 128.2 106.3
Q2 2014
Q2 2015
H1 2014
H1 2015
The company reported Attributable Net Income of US$ 12.5 million in Q2 2015 — a 7.8% year-onyear improvement over US$ 11.6 million in Q2 2014, on Consolidated Revenues of US$ 106.3 million. Meanwhile, EKH reported Attributable Net Income of US$ 27.5 million in H1 2015, down 20.2% from US$ 34.5 million in H1 2014 — on Consolidated Revenues of US$ 198.6 million.
Comments from the Chairman, Mr. Moataz Al-Alfi Attributable Net Income (USD Millions)
34.5 27.5 11.6
12.5
Q2 2014
Q2 2015
H1 2014
H2 2015
Yet again, the soundness of EKH’s strategy and the quality of its diversified investment portfolio were clearly reflected on its performance during the second quarter of this year. EKH managed to maintain a solid performance despite the headwinds facing some of our operations. Our ability to continue turning positive results even while AlexFert — typically a core contributor to some 35% of revenue — is suffering from the nationwide natural gas shortage and consequently operating at less than c. 25% capacity, comes largely thanks to our world-class management. Improvement in operational efficiency, optimized use of resources and strides in cash management all helped bolster EKH’s performance even as the local market faces supply challenges and oil prices continue to hover in the US$ 40 range. In our petrochemicals business, Sprea Misr is fast becoming one of EKH’s winning horses, having reported strong growth quarter after quarter and with a promising market outlook. The company enjoys an ideal position where its main feedstock, methanol, faces no risk of supply interruptions, and its status as an import-substitution play sees it capture over 80% of the local market. We are also
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
equally excited about the Egyptian Hydrocarbons Corporation (EHC), which is currently undergoing reliability tests ahead of the expected handover from the EPC contractor by mid-September. Meanwhile, our NatEnergy business has witnessed a significant improvement in operational efficiency that has seen downstream operations record higher margins on newly connected clients. The gas sector’s net profit, which grew by some 41% y-o-y in Q2 2015, helped absorb the effect of declined oil prices, which continued to weigh on our business at Tri-Ocean. Overall, the Energy & Energy-Related segment saw both its bottom line and margins improve during the second quarter of this year. With regards to corporate developments, EKH recently concluded its acquisition of an additional 18% stake in NatGas. This falls directly in line with our strategy of cleaning up minorities and increasing our stakes in growing businesses. Looking ahead, we are increasingly optimistic about the prospects of economic recovery, and we are anxiously waiting for the materialization of the Egyptian government’s promises of consistent natural gas supply by the end of the coming quarter. We are also actively increasing our natural gas operations with plans to add new concessions to NatEnergy, in line with the government’s announced plan to double the number of grid-connected households and also as a hedging strategy against oil price volatility going forward. As always, I remain confident in our team’s ability to navigate these less than favorable market conditions, knowing that EKH is ideally positioned to capture the upswing once the macroeconomic jitters are behind us.
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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Fertilizers & Petrochemicals
41%
EKH has investments in two operational companies in the Fertilizer & Petrochemical Segment: Alexandria Fertilizers Company (AlexFert) and Sprea Misr for Production of Chemicals & Plastics Company. A third investment, the Egyptian Hydrocarbon Corporation (EHC), is a mining-grade ammonium nitrate manufacturing startup that began commissioning in early 2015. The company’s Fertilizer & Petrochemical investments encompass products ranging from urea, ammonium nitrate and melamine to formaldehyde and liquid and powder glue. With more than 10 years of nitrogen fertilizer operational expertise, EKH has targeted investments with access to key export markets including the United States and Europe, diverse products across several industries and strong cashflow generating businesses.
of Group Revenues in Q2 2015
Revenues (USD Millions) 145.3 67.1
88 43.8
Fertilizers & Petrochemicals Q2 Q2 2014 2015
H1 H1 2014 2015
in US$ ‘000 unless otherwise indicated Revenues
67.1
43.8
(35%)
145.3
87.7
(40%)
Gross Profit Margin
34%
19%
(15 ppt)
39%
18%
(21 ppt)
EBITDA Margin
28%
23%
(4 ppt)
35%
23%
(12 ppt)
9.1
1.35
(85%)
30.5
3.3
(89%)
14%
3%
(11 ppt)
21%
4%
(17 ppt)
6.3
2.4
(62%)
17.1
5.8
(66%)
Net Profit Net Profit Margin Net Profit attributable to EKH
Total Fertilizer Sales (Tons) 316,300
137,866
134,890 67,747
Q2 2014
Q2 2015
H1 2014
H1 2015
Q2 2014 Q2 2015 % Change H1 2014 H1 2015 % Change
The Fertilizer & Petrochemical segment continued to be weighed down by limited capacity utilization at AlexFert — c. 25% during Q2 2015 — on the back of the nationwide shortage in natural gas supply. The effect is clearly reflected on the segment’s performance, which saw revenues in Q2 2015 dip 35% y-o-y to US$ 43.8 million from US$ 67.1 million in the same period last year. On a half-year basis, revenues came in at US$ 87.7 million in H1 2015, down 40% compared to the US$ 145.3 million in H1 2014. AlexFert reported Q2 2015 revenues of US$ 17.3 million, down 58% y-o-y, and a net loss of US$ 1.62 million compared to a net income of US$ 3.7 million in the same quarter last year. Although the company narrowed its losses q-o-q, AlexFert continues to cope with a severe shortage of natural gas which saw the company operate at c. 25% utilization. Management, however, is optimistic about the tail end of the year as Egypt’s government has pledged to allocate supply from the new FSRU mainly for industrial use, with promises that higher utilization rates will be attainable. Meanwhile, prices of urea on the domestic market continued to hover around US$ 280-290 per ton, influenced by both domestic price controls and sagging global urea prices. Even as management copes with scarcity of supply, feedstock costs have risen from US$ 4 to US$ 4.50 per MMBTU following the July 2014 price hikes implemented as part of the government’s energy reforms. At the other end of the spectrum, Sprea Misr continues to outperform management’s expectations, reporting revenues of US$ 51.2 million in H1 2015, an 8% y-o-y increase. Starting in 2015, Sprea Misr saw its tax holiday expire, with the company incurring some US$ 4.9 million in income taxes during H1 2015 compared to only US$ 1 million in the same period last year. This had a direct effect on the company’s bottom line, which decreased by 18% y-o-y to US$ 7.3 million in H1 2015 compared to US$ 8.9 million in H1 2014. The company’s net income before taxes, however, recorded impressive y-o-y growth of 18% and 25% for Q2 and H1 2015, respectively. Sprea continues to exercise a beneficial pricing strategy and pursue increased market share given the barriers to entry to the methanol-based product market. With imports being particularly difficult due to the shortage of US dollars, Sprea’s placement as an import-substitution play and its ability to secure raw materials cheaply leave management optimistic that it will maintain and, potentially, improve margins going forward.
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Building on the success of this plant, Sprea has expanded into the wood sheets business, manufactured with Formica sheets and imported wood. This final product is higher up the value chain and will command strong margins. Sprea is exploring organic growth options for this business, with plans to add a third production line that will bring capacity to 2.7 million sheets per annum, up from the current 1.8 million sheets per annum. Furthermore, the launch of the sulfonated naphthalene formaldehyde production is on track to begin in Q1 2016. Sulfonated naphthalene formaldehyde is a key additive for ready-mix cement. This additive, which allows ready-mix to dry faster and smoother, is currently not produced in Egypt, and given the relatively low CAPEX required to start operations, Sprea will be positioned as a costeffective local supplier ready to capitalize on the growth of the cement and real estate industries. Other notable developments for the Fertilizer & Petrochemical segment include the Egyptian Hydrocarbons Corporation (EHC) reaching the final stages of provisional commissioning, with the EPC contractor currently performing reliability tests and with handover to EKH scheduled for midSeptember. The greenfield mining-grade ammonium nitrate plant — the second of its kind in Africa — will export 100% of its production, with off-take agreements for both production and feedstock for the next 17 years already in place. Management notes that the outlook for the sector is particularly promising, with EHC being ideally positioned to capture the strong global demand given its proximity to Sokhna Port and its access to markets in Europe and the Americas.
Energy & Energy-Related
47% of Group Revenues in Q2 2015
Revenues (USD Millions) 109.2
Egypt Kuwait Holding has investments in three companies in the Energy and Energy-Related Segment: NatEnergy, Tri-Ocean Energy (TOE) and the Egyptian Tanker Company (ETC). EKH builds and operates gas distribution networks in Egypt through its 100%-owned subsidiary NatEnergy, which covers a wide spectrum of activities including the transportation of natural gas to power stations and the independent production of power. The company’s energy investments also cover oil and gas exploration and production through TOE — which enjoys access to a significant reserve potential spread across Egypt and South Sudan — and local and global marine transport of crude oil and petroleum products through ETC. Tri-Ocean recently finalized an acquisition that sees it enter into the upstream gas sector as a developer and operator for the first time.
86.1 53.2
50.5
Energy & Energy-Related in US$ ‘000 unless otherwise indicated
Q2 2014
Q2 2015
H1 2014
H1 2015
Q2 2014 Q2 2015 % Change H1 2014 H1 2015 % Change 53,312
50,461
86,096
(21%)
Gross Profit Margin
46%
47%
1.6 ppt
42%
42%
-
EBITDA Margin
45%
33%
(13 ppt)
44%
33% (10.2 ppt)
6,595
8,346
27%
12,159
9,911
(18%)
12%
17%
4.2 ppt
11%
12%
0.4 ppt
5,727
7,243
26%
11,403
8,341
(27%)
Revenues
Net Profit % Margin Net Profit attributable to EKH
(5%) 109,157
Crude Production
Q2 2014
Q2 2015
H1 2014
711,837
577,380
307,859
245,338
(BOE)
H1 2015
In the second quarter of 2015, the Energy & Energy-Related segment reported a 5% decrease in revenues over Q2 2014. For the first half of 2015, the segment posted revenues of US$ 86.1 million, down 21% y-o-y, largely driven by difficulties at Tri-Ocean. Bottom line, on the other hand, posted a significant improvement in Q2 2015, with the segment registering a net profit of US$ 8.3 million, a 27% y-o-y increase over the Q2 2014 figure of US$ 6.6 million. The improved performance comes largely due to increased operational efficiencies at the segment’s energy distribution arm NatEnergy. In Q2 2015, NatEnergy recorded revenue and bottom line growth of 13% and 41%, respectively, while for the first half of 2015 the company’s net profit came in at US$ 12.1 million, a 30% y-o-y increase over the same period last year.
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NatEnergy’s recent management restructure as well the government’s newly implemented energy policy sees the company benefiting from optimized performance thus far in 2015. Specifically, despite connecting fewer households in H1 2015 compared to H1 2014 — 37,780 versus 50,263 clients — revenues remained somewhat flat at US$ 42.9 million and profitability improved markedly, with net profit margin climbing 5 percentage points y-o-y in Q2 2015 and 7 percentage points y-o-y in H1 2015. It is worthy to note that the company has also made strides in its management of the treasury function — generating interest income of US$ 3 million in 1H 2015 compared to US$ 500,000 in H1 2014. This was further complemented by a decrease in SG&A costs and consequently contributed to the improvement in margins. Management notes that while traditional industrial connections and delivery was the more profitable operation for the business, recent trends have seen household installations and services take the lead, especially considering decreased activity in the industrial market. In light of the government’s announced plan to double the amount of households connected to the natural gas grid within five years, NatEnergy is targeting growth of its household client base from the current 1 million customers as of H1 2015 in the future. Meanwhile, Kahraba continued to deliver an impressive performance, having recorded an almost twofold increase in revenues in 1H 2015 and a 17-fold growth in profitability. Kahraba’s results come despite the sector being tightly regulated by the state. Plans to triple capacity at this power plant to 90 MW are on track, with management having secured the necessary approvals, land and gas supply contracts, and commissioning scheduled for July 2016. Looking ahead, management is very optimistic about the electricity business in Egypt, the only sector in the country with a clear five-year pricing plan. Kahraba is very open to expansion opportunities higher up the generation chain, particularly if opportunities to lock in gas supplies directly from the private sector were to present themselves. Tri-Ocean continues to be weighed down by oil prices hovering in the US$ 40 range during H1 2015, which saw revenues drop 33% y-o-y to US$ 43.2 million. The impact of lower oil prices was somewhat offset by an improved gross profit margin in Q2 2015 at 65% compared to 55% in the same period last year. Consequently, gross profit dropped only 7% y-o-y to US$ 14.3 million in Q2 2015. Indeed, the oil and gas environment in Egypt in general has been sufficiently challenging, prompting Beach Energy to exit Egypt altogether. However, it is worthy to note that the downturn in oil prices has had a positive effect on Tri-Ocean’s downstream operations, where a widening contango has seen traders increasingly revert to storing oil in order to lock in profits. This has seen the Egyptian Tanker Company’s (ETC) two vessels being increasingly utilized for floating storage. In H1 2015, ETC’s revenues grew more than five-fold compared to the same period last year. Given that less than favorable oil prices are likely to persist, and with the overall volatility that characterizes the business, Tri-Ocean is actively seeking to increase its activity in the natural gas sector. Production at Tri-Ocean’s gas concession Offshore North Sinai (ONS) is on track to ramp up gradually, having already reached 45-48 million cubic feet per day (mmcf/d), with plans to rise nearly two-fold to approximately 80 mmcf/d by 4Q 2016. Looking ahead, the company is augmenting Tri-Ocean’s management team with international talent, in preparation for the ultimate liberalization of the energy industry and with regards to the inherent opportunities in such a development. Tri-Ocean is also actively shifting its focus to higher-quality assets, particularly toward its South Sudanese oil operations.
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Diversified
11% of Group Revenues in Q2 2015
Net Income (USD Millions) 13.4
6 3
-0.45 Q2 Q2 2014 2015
H1 H1 2014 2015
Egypt Kuwait Holding’s Diversified segment includes a wide array of strategic investments, from cement production, telecommunications and infrastructure to cooling systems and insurance. In line with the company’s strategy to invest in local businesses with large and defensible market positions, EKH owns c. 30% of the Building Materials Industries Company (BMIC) in Egypt, a country home to the largest cement market in Africa, with total consumption of c. 50 mtpa. Other group assets in the sector include Delta Insurance, Al-Shorouk for Melamine and Resins, Globe Telecommunications, Gas Chill and Bawabet Al Kuwait Holding Company. In H1 2015, the Diversified segment reported a net profit of US$ 13.4 million, up 124% compared to the US$ 6 million booked in H1 2014. The increase in bottom line comes despite the segment incurring increased financing and G&A costs during Q2 2015 to the tune of US$ 9.9 million. The boost in net profit helped shore-up the Group’s bottom line, with the improvement in the contribution of the Diversified companies to net profit underscoring the soundness of both our team’s investment picks and our underlying investment strategy. The segment’s US$ 280 million portfolio delivered strong performance in Q2 2015, with the Share in Associates contributing some US$ 1.9 million, up 44% y-o-y, while its Available for Sale investments distributed dividends of US$ 6.7 million. Meanwhile at BMIC, EKH’s investment in the cement sector, a country-wide drop in cement prices exerted pressure on the company’s top line, while increased prices of mazut fuel owing to the government’s energy policy applied in July 2014 continue to weigh on margins. To lock in its energy supply going forward, BMIC is on track to complete its conversion to coal-fired generation by Q2 2016. Like other participants in the market, BMIC views coal-fired power as likely to be more reliable in the medium-term.
Recent Corporate Developments Acquisition of an additional 18% stake in NatGas As part of EKH’s strategy to clean up minorities and increase its shareholding in growing businesses, the company recently concluded its acquisition of an additional 18% stake in NatGas, bringing EKH’s total ownership to 75%. Final Stages of Provisional Commissioning at Egyptian Hydrocarbon Corporation The Egyptian Hydrocarbon Corporation’s (EHC) greenfield plant is in the final stages of provisional commissioning. EHC is a mining-grade ammonium nitrate (MGAN) manufacturing start-up located in the Ninth Industrial Zone of the Ain Sokhna area, south of the Suez Canal. Developing Leaders Program In a nod to the fundamental importance of people to our businesses, our Human Resources Department has put into place a Developing Leaders Program for EKH and our subsidiaries that will better allow management to identify top performers and help them grow their careers with the Group. This program is a key step in our institutionalization drive, as we have simultaneously implemented a number of employee-relations initiatives and training programs.
Outlook For the remainder of 2015 and looking ahead to 2016, management believes that lower oil prices are likely to persist. However, with the recent uptick in natural gas production at ONS, and given that price adjustments could materialize in line with the new terms negotiated between the government and gas players ENI and Edison, Tri-Ocean’s natural gas operations could see a major turnaround and help offset the downturn in oil.
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Management considers it unlikely that urea prices will rise in the near future; however, the outlook for this segment is reasonably secure — provided that gas becomes available — as the allowable price for sales on the domestic market, while low, are quite close to international prices. In the meantime, management is confident that as Egypt’s economy continues to grow, the company’s performance will continue to reflect the benefits of diversification.
About EK Holding Egypt Kuwait Holding Company (EKHO.CA on the Egyptian Exchange and EKHOLDING on the Kuwaiti Exchange) is one of the MENA region’s leading investment companies, with a diversified portfolio of investments that spans the region in sectors that include fertilizers and petrochemicals, energy, cement production, insurance, information technology, transport and infrastructure. Established in 1997 by a consortium of prominent Kuwaiti and Egyptian businessmen including our former Chairman, the late Nasser Al-Kharafi, the company has flourished during the past decade as the countries of the Arab world began to liberalize their economies and open doors for private sector investments in strategic sectors that had once been off limits.
INVESTOR RELATIONS CONTACT For further information, please contact:
STOCK SYMBOL EKHO.CA
Haitham M. Abdel Moneim Egypt Kuwait Holding, Co. Senior Investor Relations Manager [email protected]
CAPITAL Issued and Paid-In Capital: USD 243.9 mn Number of Shares: 975.6 million shares Par Value: USD 0.25 per share
14 Hassan Mohamed El-Razzaz St. (Previously Nawal St.) Dokki, Giza Tel (Direct) : +20 2 333-633-00
Forward-Looking Statements Statements contained in this document that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Egypt Kuwait Holding Company (EKH). Such statements involve known and unknown risks, uncertainties and other factors; undue reliance should not be placed thereon. Certain information contained herein constitutes “targets” or “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Actual events or results or the actual performance of EKH may differ materially from those reflected or contemplated in such targets or forward-looking statements. The performance of EKH is subject to risks and uncertainties.
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Summary Income Statement (in US $) Energy & Energy Related Revenues % Contribution COGS Gross Profit % Margin
2Q 2014
2Q 2015
1H 2014
1H 2015
53,311,675 42% (29,026,622) 24,285,053 46%
50,460,725 47% (26,665,338) 23,795,387 47%
109,156,515 40% (63,656,889) 45,499,626 42%
86,096,413 43% (50,091,048) 36,005,365 42%
Fertilizers & Petrochemicals Revenues % Contribution COGS Gross Profit % Margin
67,051,405 52% (44,256,726) 22,794,679 34%
43,777,942 41% (35,632,228) 8,145,714 19%
144,890,470 53% (87,976,931) 56,913,539 39%
87,746,328 44% (71,983,417) 15,762,911 18%
7,881,235 6% (2,486,369) 5,394,866 68%
12,063,547 11% (1,835,238) 10,228,309 85%
21,295,061 8% (4,703,006) 16,592,055 78%
24,733,703 12% (4,823,372) 19,910,331 80%
Diversified Revenues % Contribution COGS Gross Profit % Margin Total Revenues1 COGS Gross Profit % Margin
128,244,315 (75,769,717) 52,474,598 41%
106,302,214 275,342,046 198,576,444 (64,132,804) (156,336,826) (126,897,837) 42,169,410 119,005,220 71,678,607 40% 43% 36%
Selling Expenses G&A Net Provisions Other Expenses
(3,173,991) (17,450,520) (46,439) (137,074)
(2,614,781) (13,004,940) (15,289) 39,561
(6,227,404) (30,235,490) (245,211) (153,837)
(4,557,761) (24,257,259) 4,124,163 (45,383)
Operating Income % Margin
31,666,574 25%
26,573,961 25%
82,143,278 30%
46,942,367 24%
Interest Net FX Gain / Loss Capital Gain Other Income
(4,642,734) (587,684) 112,071 220,725
(609,343) 704,973 21,583 288,374
(10,422,085) (146,880) 186,076 166,880
(3,863,164) (618,681) 37,787 927,401
Net Income before Tax Income Tax Deferred Tax
26,768,952 (6,031,796) (1,809,964)
26,979,548 (6,151,344) 266,731
71,927,269 (14,121,239) (1,369,375)
43,425,710 (9,566,022) 602,207
Net Income from Continued Operations Gain (Loss) from Discontinued Operations Net Income Non-Controlling Interest Attributable Net Income
18,927,192 -
21,094,935 -
56,436,655 -
34,461,895 -
18,927,192 (7,346,110)
21,094,935 (8,606,221)
56,436,655 (21,954,923)
34,461,895 (6,940,042)
11,581,082
12,488,714
34,481,732
27,521,853
Total revenues reported here differ from those in the company’s Consolidated Financial Statements in that they specifically exclude the results of EKH’s low-margin oil-trading business, which artificially skew margins if included. 1
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Summary Balance Sheet (in US$)
1H 2015
FY 2014
Fixed Assets (Net) & Projects under Construction
287 915 490
298 052 814
E&P Assets
262 510 339
225 234 044
Investments in Associates
155 842 004
134 474 361
Investments Available for Sale
123 754 831
140 048 833
Other long-term Assets
121 348 322
129 035 543
Total Long-Term Assets
951 370 986
929 845 595
Cash
266 148 052
372 675 357
Investments for Trading
240 231 153
204 722 147
Total Receivables & Other Debtors
211 952 939
187 130 178
79 089 800
81 133 078
1 700 002
1 700 002
Inventory & Work in Progress Assets held for Sale Due from EGPC
11 649 086
Investments in Treasury Bills
21 378 833
Total Current Assets Total Assets
18 965 439 -
832 149 865
866 326 201
1 783 520 851
1 793 171 796
Bank Overdraft and STL
238 634 903
216 530 511
Due to Suppliers and Sub-Contractors
117 723 692
97 678 197
Due to EGPC
1 038 976
1 040 057
11 419 890
16 324 698
Debtors and Other Credit Balances
223 896 472
186 760 891
Total Current Liabilities
591 674 957
517 294 297
Long-Term Loans
168 446 415
199 975 146
Other Long-Term Liabilities
1 001 055
1 008 832
Due to EGPC
4 178 331
8 813 029
Provisions
4 070 000
4 070 000
Provisions
Deferred Tax Liability
34 878 835
35 735 129
Total Long-Term Liabilities
212 574 636
249 602 136
Paid-in Capital
243 914 564
243 914 564
Reserves
188 292 291
188 292 291
(164 615 103)
(143 723 798)
Retained Earnings
425 409 483
447 928 182
Translation Adjustments
Fair Value Reserve
(50 654 872)
(43 719 971)
ESOP Reserves
12 195 728
-__
Treasury Stocks
(7 121 774)
(7 121 774)
Parent's Shareholders' Equity
647 420 317
685 569 494
Non-Controlling Interest
331 850 941
340 705 869
Total Shareholders' Equity
979 271 258
1 026 275 363
1 783 520 851
1 793 171 796
Total SHE + Total Liabilities
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
Summary Cash Flows (in US $)
1H 2015
1H 2014
Net profit for the year before income tax Adjustments for:
43 425 703
71 927 273
Depreciation & amortization of property, plant and equipment and other non-tangible assets
14 805 448
14 196 119
5 571 979
13 796 001
Cash flows from operating activities
Exploration & development assets depletion Company's share of profits of associates
(4 688 303)
-
Unrealized gain on held for trading investments
(3 148 869)
(3 037 002)
Financing expenses
(1 832 914)
(2 511 364)
Interest income
12 921 229
13 911 484
Gain on sale of fixed assets Provisions no longer required
(9 058 064) ( 37 787)
(3 489 403) ( 186 076)
Provisions other than depreciation Impairment loss on debtors and other debit balances
(4 179 174) 55 011
153 837
Operating profit before changes in assets & liabilities available from operating activities
53 879 642
105 006 081
(33 676 092)
100 761 792
3 736 118
27 181 244
Change in held for trading investments Change in trade & notes receivable Change in debtors & other debit balances
(26 708 177)
7 370 843
Change in inventories Change in work in progress
3 165 354 (1 122 076)
( 112 894) (3 451 249)
Change in suppliers & subcontractors Change in creditors & other credit balances
6 367 413 28 073 102
(49 786 656) 44 660 201
9 043 384 (28 899 969)
4 994 282 ( 6)
( 364 393)
( 80 000) ( 706 049)
Change in Egyptian General Petroleum Corporation Change in blocked deposits Change in derivative financial instruments Provisions used Blocked Cash
-
(109 090 909)
(13 431 468) 62 838
(13 346 009) 113 400 671
7 883 130 (5 022 150)
3 544 169 (8 588 952)
(42 848 274) 8 063
(2 977 037) 1 195 476
8 050 529 10 733 084
9 929 772 7 963 192
Payments for acquisition of available -for- sale investments
(14 354 197)
(12 223 112)
Payments for acquisition of investments in associates Payments for investments in Treasury bills more than three months Net cash used in investing activities
(18 379 135) (5 890 598) (59 819 548)
(1 156 492)
Interest & financing expenses paid Net cash available from (used in) operating activities Cash flows from investing activities Interest income received Payments for acquisition of fixed assets & projects under construction Payments for acquisition of exploration & development assets Proceeds from sale of fixed assets Proceeds from Egyptian General Petroleum Corporation Proceeds from sale of available-for-sale investments
Cash flows from financing activities Proceeds for increase in paid-in capital account
-
109 090 909
Repayment of long-term loans & bank facilities Proceeds from long-term loans & bank facilities
(68 505 775) 38 697 960
(72 917 320) 51 669 841
Proceeds from short-term loans & bank facilities
39 657 837
4 367 119
Repayment of short-term loans & bank facilities Proceeds from bank overdraft
( 181 772) (20 874 357)
(25 893 957) (61 956 570)
Repayments for minority interests Minority Interests
( 787 500) (15 181 853)
(57 209 181)
Dividends paid
(27 102 699)
(4 757 462)
Dividends paid to employees and board of directors Net cash used in financing activities
(10 568 815) (64 846 974)
(12 079 948) (69 686 569)
2 882 878 (121 720 806)
2 383 291 44 940 901
372 351 161 250 630 355
190 735 319 235 676 220
Foreign currency translation differences Net change in cash and cash equivalents during the year Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
10
Egypt Kuwait Holding Co. Releases Q2 2015 Earnings Results EKH’s diversification strategy and improved operational efficiencies reflect positively on its bottom-line growth in the second quarter of 2015.
Key Highlights of Q2 2015 USD 106.3 mn
USD 64.1 mn
40%
USD 26.6 mn
in Revenues
in Gross Profit
Gross Profit Margin
in Operating Income
25%
USD 24.9 mn
USD 21.1 mn
USD 12.5 mn
Operating Margin
Attributable EBITDA
in Net Income
in Attributable Net Income
Key Highlights of H1 2015 USD 198.6 mn
USD 71.7 mn
36%
USD 46.9 mn
in Revenues
in Gross Profit
Gross Profit Margin
in Operating Income
24%
USD 50.6 mn
USD 34.5 mn
USD 27.5 mn
Operating Margin
Attributable EBITDA
in Net Income
in Attributable Net Income
Group Revenue
13 August 2015 | Cairo | Egypt Kuwait Holding Company (EKHO.CA on the Egyptian Exchange and EKHOLDING on the Kuwaiti Exchange), one of the MENA region’s leading investment companies, reported today its consolidated results for the second quarter of 2015.
(USD Millions) 275.3 198.6 128.2 106.3
Q2 2014
Q2 2015
H1 2014
H1 2015
The company reported Attributable Net Income of US$ 12.5 million in Q2 2015 — a 7.8% year-onyear improvement over US$ 11.6 million in Q2 2014, on Consolidated Revenues of US$ 106.3 million. Meanwhile, EKH reported Attributable Net Income of US$ 27.5 million in H1 2015, down 20.2% from US$ 34.5 million in H1 2014 — on Consolidated Revenues of US$ 198.6 million.
Comments from the Chairman, Mr. Moataz Al-Alfi Attributable Net Income (USD Millions)
34.5 27.5 11.6
12.5
Q2 2014
Q2 2015
H1 2014
H2 2015
Yet again, the soundness of EKH’s strategy and the quality of its diversified investment portfolio were clearly reflected on its performance during the second quarter of this year. EKH managed to maintain a solid performance despite the headwinds facing some of our operations. Our ability to continue turning positive results even while AlexFert — typically a core contributor to some 35% of revenue — is suffering from the nationwide natural gas shortage and consequently operating at less than c. 25% capacity, comes largely thanks to our world-class management. Improvement in operational efficiency, optimized use of resources and strides in cash management all helped bolster EKH’s performance even as the local market faces supply challenges and oil prices continue to hover in the US$ 40 range. In our petrochemicals business, Sprea Misr is fast becoming one of EKH’s winning horses, having reported strong growth quarter after quarter and with a promising market outlook. The company enjoys an ideal position where its main feedstock, methanol, faces no risk of supply interruptions, and its status as an import-substitution play sees it capture over 80% of the local market. We are also
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
equally excited about the Egyptian Hydrocarbons Corporation (EHC), which is currently undergoing reliability tests ahead of the expected handover from the EPC contractor by mid-September. Meanwhile, our NatEnergy business has witnessed a significant improvement in operational efficiency that has seen downstream operations record higher margins on newly connected clients. The gas sector’s net profit, which grew by some 41% y-o-y in Q2 2015, helped absorb the effect of declined oil prices, which continued to weigh on our business at Tri-Ocean. Overall, the Energy & Energy-Related segment saw both its bottom line and margins improve during the second quarter of this year. With regards to corporate developments, EKH recently concluded its acquisition of an additional 18% stake in NatGas. This falls directly in line with our strategy of cleaning up minorities and increasing our stakes in growing businesses. Looking ahead, we are increasingly optimistic about the prospects of economic recovery, and we are anxiously waiting for the materialization of the Egyptian government’s promises of consistent natural gas supply by the end of the coming quarter. We are also actively increasing our natural gas operations with plans to add new concessions to NatEnergy, in line with the government’s announced plan to double the number of grid-connected households and also as a hedging strategy against oil price volatility going forward. As always, I remain confident in our team’s ability to navigate these less than favorable market conditions, knowing that EKH is ideally positioned to capture the upswing once the macroeconomic jitters are behind us.
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
Fertilizers & Petrochemicals
41%
EKH has investments in two operational companies in the Fertilizer & Petrochemical Segment: Alexandria Fertilizers Company (AlexFert) and Sprea Misr for Production of Chemicals & Plastics Company. A third investment, the Egyptian Hydrocarbon Corporation (EHC), is a mining-grade ammonium nitrate manufacturing startup that began commissioning in early 2015. The company’s Fertilizer & Petrochemical investments encompass products ranging from urea, ammonium nitrate and melamine to formaldehyde and liquid and powder glue. With more than 10 years of nitrogen fertilizer operational expertise, EKH has targeted investments with access to key export markets including the United States and Europe, diverse products across several industries and strong cashflow generating businesses.
of Group Revenues in Q2 2015
Revenues (USD Millions) 145.3 67.1
88 43.8
Fertilizers & Petrochemicals Q2 Q2 2014 2015
H1 H1 2014 2015
in US$ ‘000 unless otherwise indicated Revenues
67.1
43.8
(35%)
145.3
87.7
(40%)
Gross Profit Margin
34%
19%
(15 ppt)
39%
18%
(21 ppt)
EBITDA Margin
28%
23%
(4 ppt)
35%
23%
(12 ppt)
9.1
1.35
(85%)
30.5
3.3
(89%)
14%
3%
(11 ppt)
21%
4%
(17 ppt)
6.3
2.4
(62%)
17.1
5.8
(66%)
Net Profit Net Profit Margin Net Profit attributable to EKH
Total Fertilizer Sales (Tons) 316,300
137,866
134,890 67,747
Q2 2014
Q2 2015
H1 2014
H1 2015
Q2 2014 Q2 2015 % Change H1 2014 H1 2015 % Change
The Fertilizer & Petrochemical segment continued to be weighed down by limited capacity utilization at AlexFert — c. 25% during Q2 2015 — on the back of the nationwide shortage in natural gas supply. The effect is clearly reflected on the segment’s performance, which saw revenues in Q2 2015 dip 35% y-o-y to US$ 43.8 million from US$ 67.1 million in the same period last year. On a half-year basis, revenues came in at US$ 87.7 million in H1 2015, down 40% compared to the US$ 145.3 million in H1 2014. AlexFert reported Q2 2015 revenues of US$ 17.3 million, down 58% y-o-y, and a net loss of US$ 1.62 million compared to a net income of US$ 3.7 million in the same quarter last year. Although the company narrowed its losses q-o-q, AlexFert continues to cope with a severe shortage of natural gas which saw the company operate at c. 25% utilization. Management, however, is optimistic about the tail end of the year as Egypt’s government has pledged to allocate supply from the new FSRU mainly for industrial use, with promises that higher utilization rates will be attainable. Meanwhile, prices of urea on the domestic market continued to hover around US$ 280-290 per ton, influenced by both domestic price controls and sagging global urea prices. Even as management copes with scarcity of supply, feedstock costs have risen from US$ 4 to US$ 4.50 per MMBTU following the July 2014 price hikes implemented as part of the government’s energy reforms. At the other end of the spectrum, Sprea Misr continues to outperform management’s expectations, reporting revenues of US$ 51.2 million in H1 2015, an 8% y-o-y increase. Starting in 2015, Sprea Misr saw its tax holiday expire, with the company incurring some US$ 4.9 million in income taxes during H1 2015 compared to only US$ 1 million in the same period last year. This had a direct effect on the company’s bottom line, which decreased by 18% y-o-y to US$ 7.3 million in H1 2015 compared to US$ 8.9 million in H1 2014. The company’s net income before taxes, however, recorded impressive y-o-y growth of 18% and 25% for Q2 and H1 2015, respectively. Sprea continues to exercise a beneficial pricing strategy and pursue increased market share given the barriers to entry to the methanol-based product market. With imports being particularly difficult due to the shortage of US dollars, Sprea’s placement as an import-substitution play and its ability to secure raw materials cheaply leave management optimistic that it will maintain and, potentially, improve margins going forward.
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Building on the success of this plant, Sprea has expanded into the wood sheets business, manufactured with Formica sheets and imported wood. This final product is higher up the value chain and will command strong margins. Sprea is exploring organic growth options for this business, with plans to add a third production line that will bring capacity to 2.7 million sheets per annum, up from the current 1.8 million sheets per annum. Furthermore, the launch of the sulfonated naphthalene formaldehyde production is on track to begin in Q1 2016. Sulfonated naphthalene formaldehyde is a key additive for ready-mix cement. This additive, which allows ready-mix to dry faster and smoother, is currently not produced in Egypt, and given the relatively low CAPEX required to start operations, Sprea will be positioned as a costeffective local supplier ready to capitalize on the growth of the cement and real estate industries. Other notable developments for the Fertilizer & Petrochemical segment include the Egyptian Hydrocarbons Corporation (EHC) reaching the final stages of provisional commissioning, with the EPC contractor currently performing reliability tests and with handover to EKH scheduled for midSeptember. The greenfield mining-grade ammonium nitrate plant — the second of its kind in Africa — will export 100% of its production, with off-take agreements for both production and feedstock for the next 17 years already in place. Management notes that the outlook for the sector is particularly promising, with EHC being ideally positioned to capture the strong global demand given its proximity to Sokhna Port and its access to markets in Europe and the Americas.
Energy & Energy-Related
47% of Group Revenues in Q2 2015
Revenues (USD Millions) 109.2
Egypt Kuwait Holding has investments in three companies in the Energy and Energy-Related Segment: NatEnergy, Tri-Ocean Energy (TOE) and the Egyptian Tanker Company (ETC). EKH builds and operates gas distribution networks in Egypt through its 100%-owned subsidiary NatEnergy, which covers a wide spectrum of activities including the transportation of natural gas to power stations and the independent production of power. The company’s energy investments also cover oil and gas exploration and production through TOE — which enjoys access to a significant reserve potential spread across Egypt and South Sudan — and local and global marine transport of crude oil and petroleum products through ETC. Tri-Ocean recently finalized an acquisition that sees it enter into the upstream gas sector as a developer and operator for the first time.
86.1 53.2
50.5
Energy & Energy-Related in US$ ‘000 unless otherwise indicated
Q2 2014
Q2 2015
H1 2014
H1 2015
Q2 2014 Q2 2015 % Change H1 2014 H1 2015 % Change 53,312
50,461
86,096
(21%)
Gross Profit Margin
46%
47%
1.6 ppt
42%
42%
-
EBITDA Margin
45%
33%
(13 ppt)
44%
33% (10.2 ppt)
6,595
8,346
27%
12,159
9,911
(18%)
12%
17%
4.2 ppt
11%
12%
0.4 ppt
5,727
7,243
26%
11,403
8,341
(27%)
Revenues
Net Profit % Margin Net Profit attributable to EKH
(5%) 109,157
Crude Production
Q2 2014
Q2 2015
H1 2014
711,837
577,380
307,859
245,338
(BOE)
H1 2015
In the second quarter of 2015, the Energy & Energy-Related segment reported a 5% decrease in revenues over Q2 2014. For the first half of 2015, the segment posted revenues of US$ 86.1 million, down 21% y-o-y, largely driven by difficulties at Tri-Ocean. Bottom line, on the other hand, posted a significant improvement in Q2 2015, with the segment registering a net profit of US$ 8.3 million, a 27% y-o-y increase over the Q2 2014 figure of US$ 6.6 million. The improved performance comes largely due to increased operational efficiencies at the segment’s energy distribution arm NatEnergy. In Q2 2015, NatEnergy recorded revenue and bottom line growth of 13% and 41%, respectively, while for the first half of 2015 the company’s net profit came in at US$ 12.1 million, a 30% y-o-y increase over the same period last year.
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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NatEnergy’s recent management restructure as well the government’s newly implemented energy policy sees the company benefiting from optimized performance thus far in 2015. Specifically, despite connecting fewer households in H1 2015 compared to H1 2014 — 37,780 versus 50,263 clients — revenues remained somewhat flat at US$ 42.9 million and profitability improved markedly, with net profit margin climbing 5 percentage points y-o-y in Q2 2015 and 7 percentage points y-o-y in H1 2015. It is worthy to note that the company has also made strides in its management of the treasury function — generating interest income of US$ 3 million in 1H 2015 compared to US$ 500,000 in H1 2014. This was further complemented by a decrease in SG&A costs and consequently contributed to the improvement in margins. Management notes that while traditional industrial connections and delivery was the more profitable operation for the business, recent trends have seen household installations and services take the lead, especially considering decreased activity in the industrial market. In light of the government’s announced plan to double the amount of households connected to the natural gas grid within five years, NatEnergy is targeting growth of its household client base from the current 1 million customers as of H1 2015 in the future. Meanwhile, Kahraba continued to deliver an impressive performance, having recorded an almost twofold increase in revenues in 1H 2015 and a 17-fold growth in profitability. Kahraba’s results come despite the sector being tightly regulated by the state. Plans to triple capacity at this power plant to 90 MW are on track, with management having secured the necessary approvals, land and gas supply contracts, and commissioning scheduled for July 2016. Looking ahead, management is very optimistic about the electricity business in Egypt, the only sector in the country with a clear five-year pricing plan. Kahraba is very open to expansion opportunities higher up the generation chain, particularly if opportunities to lock in gas supplies directly from the private sector were to present themselves. Tri-Ocean continues to be weighed down by oil prices hovering in the US$ 40 range during H1 2015, which saw revenues drop 33% y-o-y to US$ 43.2 million. The impact of lower oil prices was somewhat offset by an improved gross profit margin in Q2 2015 at 65% compared to 55% in the same period last year. Consequently, gross profit dropped only 7% y-o-y to US$ 14.3 million in Q2 2015. Indeed, the oil and gas environment in Egypt in general has been sufficiently challenging, prompting Beach Energy to exit Egypt altogether. However, it is worthy to note that the downturn in oil prices has had a positive effect on Tri-Ocean’s downstream operations, where a widening contango has seen traders increasingly revert to storing oil in order to lock in profits. This has seen the Egyptian Tanker Company’s (ETC) two vessels being increasingly utilized for floating storage. In H1 2015, ETC’s revenues grew more than five-fold compared to the same period last year. Given that less than favorable oil prices are likely to persist, and with the overall volatility that characterizes the business, Tri-Ocean is actively seeking to increase its activity in the natural gas sector. Production at Tri-Ocean’s gas concession Offshore North Sinai (ONS) is on track to ramp up gradually, having already reached 45-48 million cubic feet per day (mmcf/d), with plans to rise nearly two-fold to approximately 80 mmcf/d by 4Q 2016. Looking ahead, the company is augmenting Tri-Ocean’s management team with international talent, in preparation for the ultimate liberalization of the energy industry and with regards to the inherent opportunities in such a development. Tri-Ocean is also actively shifting its focus to higher-quality assets, particularly toward its South Sudanese oil operations.
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Diversified
11% of Group Revenues in Q2 2015
Net Income (USD Millions) 13.4
6 3
-0.45 Q2 Q2 2014 2015
H1 H1 2014 2015
Egypt Kuwait Holding’s Diversified segment includes a wide array of strategic investments, from cement production, telecommunications and infrastructure to cooling systems and insurance. In line with the company’s strategy to invest in local businesses with large and defensible market positions, EKH owns c. 30% of the Building Materials Industries Company (BMIC) in Egypt, a country home to the largest cement market in Africa, with total consumption of c. 50 mtpa. Other group assets in the sector include Delta Insurance, Al-Shorouk for Melamine and Resins, Globe Telecommunications, Gas Chill and Bawabet Al Kuwait Holding Company. In H1 2015, the Diversified segment reported a net profit of US$ 13.4 million, up 124% compared to the US$ 6 million booked in H1 2014. The increase in bottom line comes despite the segment incurring increased financing and G&A costs during Q2 2015 to the tune of US$ 9.9 million. The boost in net profit helped shore-up the Group’s bottom line, with the improvement in the contribution of the Diversified companies to net profit underscoring the soundness of both our team’s investment picks and our underlying investment strategy. The segment’s US$ 280 million portfolio delivered strong performance in Q2 2015, with the Share in Associates contributing some US$ 1.9 million, up 44% y-o-y, while its Available for Sale investments distributed dividends of US$ 6.7 million. Meanwhile at BMIC, EKH’s investment in the cement sector, a country-wide drop in cement prices exerted pressure on the company’s top line, while increased prices of mazut fuel owing to the government’s energy policy applied in July 2014 continue to weigh on margins. To lock in its energy supply going forward, BMIC is on track to complete its conversion to coal-fired generation by Q2 2016. Like other participants in the market, BMIC views coal-fired power as likely to be more reliable in the medium-term.
Recent Corporate Developments Acquisition of an additional 18% stake in NatGas As part of EKH’s strategy to clean up minorities and increase its shareholding in growing businesses, the company recently concluded its acquisition of an additional 18% stake in NatGas, bringing EKH’s total ownership to 75%. Final Stages of Provisional Commissioning at Egyptian Hydrocarbon Corporation The Egyptian Hydrocarbon Corporation’s (EHC) greenfield plant is in the final stages of provisional commissioning. EHC is a mining-grade ammonium nitrate (MGAN) manufacturing start-up located in the Ninth Industrial Zone of the Ain Sokhna area, south of the Suez Canal. Developing Leaders Program In a nod to the fundamental importance of people to our businesses, our Human Resources Department has put into place a Developing Leaders Program for EKH and our subsidiaries that will better allow management to identify top performers and help them grow their careers with the Group. This program is a key step in our institutionalization drive, as we have simultaneously implemented a number of employee-relations initiatives and training programs.
Outlook For the remainder of 2015 and looking ahead to 2016, management believes that lower oil prices are likely to persist. However, with the recent uptick in natural gas production at ONS, and given that price adjustments could materialize in line with the new terms negotiated between the government and gas players ENI and Edison, Tri-Ocean’s natural gas operations could see a major turnaround and help offset the downturn in oil.
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Management considers it unlikely that urea prices will rise in the near future; however, the outlook for this segment is reasonably secure — provided that gas becomes available — as the allowable price for sales on the domestic market, while low, are quite close to international prices. In the meantime, management is confident that as Egypt’s economy continues to grow, the company’s performance will continue to reflect the benefits of diversification.
About EK Holding Egypt Kuwait Holding Company (EKHO.CA on the Egyptian Exchange and EKHOLDING on the Kuwaiti Exchange) is one of the MENA region’s leading investment companies, with a diversified portfolio of investments that spans the region in sectors that include fertilizers and petrochemicals, energy, cement production, insurance, information technology, transport and infrastructure. Established in 1997 by a consortium of prominent Kuwaiti and Egyptian businessmen including our former Chairman, the late Nasser Al-Kharafi, the company has flourished during the past decade as the countries of the Arab world began to liberalize their economies and open doors for private sector investments in strategic sectors that had once been off limits.
INVESTOR RELATIONS CONTACT For further information, please contact:
STOCK SYMBOL EKHO.CA
Haitham M. Abdel Moneim Egypt Kuwait Holding, Co. Senior Investor Relations Manager [email protected]
CAPITAL Issued and Paid-In Capital: USD 243.9 mn Number of Shares: 975.6 million shares Par Value: USD 0.25 per share
14 Hassan Mohamed El-Razzaz St. (Previously Nawal St.) Dokki, Giza Tel (Direct) : +20 2 333-633-00
Forward-Looking Statements Statements contained in this document that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Egypt Kuwait Holding Company (EKH). Such statements involve known and unknown risks, uncertainties and other factors; undue reliance should not be placed thereon. Certain information contained herein constitutes “targets” or “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Actual events or results or the actual performance of EKH may differ materially from those reflected or contemplated in such targets or forward-looking statements. The performance of EKH is subject to risks and uncertainties.
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
Summary Income Statement (in US $) Energy & Energy Related Revenues % Contribution COGS Gross Profit % Margin
2Q 2014
2Q 2015
1H 2014
1H 2015
53,311,675 42% (29,026,622) 24,285,053 46%
50,460,725 47% (26,665,338) 23,795,387 47%
109,156,515 40% (63,656,889) 45,499,626 42%
86,096,413 43% (50,091,048) 36,005,365 42%
Fertilizers & Petrochemicals Revenues % Contribution COGS Gross Profit % Margin
67,051,405 52% (44,256,726) 22,794,679 34%
43,777,942 41% (35,632,228) 8,145,714 19%
144,890,470 53% (87,976,931) 56,913,539 39%
87,746,328 44% (71,983,417) 15,762,911 18%
7,881,235 6% (2,486,369) 5,394,866 68%
12,063,547 11% (1,835,238) 10,228,309 85%
21,295,061 8% (4,703,006) 16,592,055 78%
24,733,703 12% (4,823,372) 19,910,331 80%
Diversified Revenues % Contribution COGS Gross Profit % Margin Total Revenues1 COGS Gross Profit % Margin
128,244,315 (75,769,717) 52,474,598 41%
106,302,214 275,342,046 198,576,444 (64,132,804) (156,336,826) (126,897,837) 42,169,410 119,005,220 71,678,607 40% 43% 36%
Selling Expenses G&A Net Provisions Other Expenses
(3,173,991) (17,450,520) (46,439) (137,074)
(2,614,781) (13,004,940) (15,289) 39,561
(6,227,404) (30,235,490) (245,211) (153,837)
(4,557,761) (24,257,259) 4,124,163 (45,383)
Operating Income % Margin
31,666,574 25%
26,573,961 25%
82,143,278 30%
46,942,367 24%
Interest Net FX Gain / Loss Capital Gain Other Income
(4,642,734) (587,684) 112,071 220,725
(609,343) 704,973 21,583 288,374
(10,422,085) (146,880) 186,076 166,880
(3,863,164) (618,681) 37,787 927,401
Net Income before Tax Income Tax Deferred Tax
26,768,952 (6,031,796) (1,809,964)
26,979,548 (6,151,344) 266,731
71,927,269 (14,121,239) (1,369,375)
43,425,710 (9,566,022) 602,207
Net Income from Continued Operations Gain (Loss) from Discontinued Operations Net Income Non-Controlling Interest Attributable Net Income
18,927,192 -
21,094,935 -
56,436,655 -
34,461,895 -
18,927,192 (7,346,110)
21,094,935 (8,606,221)
56,436,655 (21,954,923)
34,461,895 (6,940,042)
11,581,082
12,488,714
34,481,732
27,521,853
Total revenues reported here differ from those in the company’s Consolidated Financial Statements in that they specifically exclude the results of EKH’s low-margin oil-trading business, which artificially skew margins if included. 1
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Summary Balance Sheet (in US$)
1H 2015
FY 2014
Fixed Assets (Net) & Projects under Construction
287 915 490
298 052 814
E&P Assets
262 510 339
225 234 044
Investments in Associates
155 842 004
134 474 361
Investments Available for Sale
123 754 831
140 048 833
Other long-term Assets
121 348 322
129 035 543
Total Long-Term Assets
951 370 986
929 845 595
Cash
266 148 052
372 675 357
Investments for Trading
240 231 153
204 722 147
Total Receivables & Other Debtors
211 952 939
187 130 178
79 089 800
81 133 078
1 700 002
1 700 002
Inventory & Work in Progress Assets held for Sale Due from EGPC
11 649 086
Investments in Treasury Bills
21 378 833
Total Current Assets Total Assets
18 965 439 -
832 149 865
866 326 201
1 783 520 851
1 793 171 796
Bank Overdraft and STL
238 634 903
216 530 511
Due to Suppliers and Sub-Contractors
117 723 692
97 678 197
Due to EGPC
1 038 976
1 040 057
11 419 890
16 324 698
Debtors and Other Credit Balances
223 896 472
186 760 891
Total Current Liabilities
591 674 957
517 294 297
Long-Term Loans
168 446 415
199 975 146
Other Long-Term Liabilities
1 001 055
1 008 832
Due to EGPC
4 178 331
8 813 029
Provisions
4 070 000
4 070 000
Provisions
Deferred Tax Liability
34 878 835
35 735 129
Total Long-Term Liabilities
212 574 636
249 602 136
Paid-in Capital
243 914 564
243 914 564
Reserves
188 292 291
188 292 291
(164 615 103)
(143 723 798)
Retained Earnings
425 409 483
447 928 182
Translation Adjustments
Fair Value Reserve
(50 654 872)
(43 719 971)
ESOP Reserves
12 195 728
-__
Treasury Stocks
(7 121 774)
(7 121 774)
Parent's Shareholders' Equity
647 420 317
685 569 494
Non-Controlling Interest
331 850 941
340 705 869
Total Shareholders' Equity
979 271 258
1 026 275 363
1 783 520 851
1 793 171 796
Total SHE + Total Liabilities
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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EGYPT KUWAIT HOLDING COMPANY EARNINGS RELEASE Q2 2015
Summary Cash Flows (in US $)
1H 2015
1H 2014
Net profit for the year before income tax Adjustments for:
43 425 703
71 927 273
Depreciation & amortization of property, plant and equipment and other non-tangible assets
14 805 448
14 196 119
5 571 979
13 796 001
Cash flows from operating activities
Exploration & development assets depletion Company's share of profits of associates
(4 688 303)
-
Unrealized gain on held for trading investments
(3 148 869)
(3 037 002)
Financing expenses
(1 832 914)
(2 511 364)
Interest income
12 921 229
13 911 484
Gain on sale of fixed assets Provisions no longer required
(9 058 064) ( 37 787)
(3 489 403) ( 186 076)
Provisions other than depreciation Impairment loss on debtors and other debit balances
(4 179 174) 55 011
153 837
Operating profit before changes in assets & liabilities available from operating activities
53 879 642
105 006 081
(33 676 092)
100 761 792
3 736 118
27 181 244
Change in held for trading investments Change in trade & notes receivable Change in debtors & other debit balances
(26 708 177)
7 370 843
Change in inventories Change in work in progress
3 165 354 (1 122 076)
( 112 894) (3 451 249)
Change in suppliers & subcontractors Change in creditors & other credit balances
6 367 413 28 073 102
(49 786 656) 44 660 201
9 043 384 (28 899 969)
4 994 282 ( 6)
( 364 393)
( 80 000) ( 706 049)
Change in Egyptian General Petroleum Corporation Change in blocked deposits Change in derivative financial instruments Provisions used Blocked Cash
-
(109 090 909)
(13 431 468) 62 838
(13 346 009) 113 400 671
7 883 130 (5 022 150)
3 544 169 (8 588 952)
(42 848 274) 8 063
(2 977 037) 1 195 476
8 050 529 10 733 084
9 929 772 7 963 192
Payments for acquisition of available -for- sale investments
(14 354 197)
(12 223 112)
Payments for acquisition of investments in associates Payments for investments in Treasury bills more than three months Net cash used in investing activities
(18 379 135) (5 890 598) (59 819 548)
(1 156 492)
Interest & financing expenses paid Net cash available from (used in) operating activities Cash flows from investing activities Interest income received Payments for acquisition of fixed assets & projects under construction Payments for acquisition of exploration & development assets Proceeds from sale of fixed assets Proceeds from Egyptian General Petroleum Corporation Proceeds from sale of available-for-sale investments
Cash flows from financing activities Proceeds for increase in paid-in capital account
-
109 090 909
Repayment of long-term loans & bank facilities Proceeds from long-term loans & bank facilities
(68 505 775) 38 697 960
(72 917 320) 51 669 841
Proceeds from short-term loans & bank facilities
39 657 837
4 367 119
Repayment of short-term loans & bank facilities Proceeds from bank overdraft
( 181 772) (20 874 357)
(25 893 957) (61 956 570)
Repayments for minority interests Minority Interests
( 787 500) (15 181 853)
(57 209 181)
Dividends paid
(27 102 699)
(4 757 462)
Dividends paid to employees and board of directors Net cash used in financing activities
(10 568 815) (64 846 974)
(12 079 948) (69 686 569)
2 882 878 (121 720 806)
2 383 291 44 940 901
372 351 161 250 630 355
190 735 319 235 676 220
Foreign currency translation differences Net change in cash and cash equivalents during the year Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year
EGYPT KUWAIT HOLDING COMPANY – EARNINGS RELEASE Q2 2015
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