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Ahmed Heikal

Qalaa Q2 revenue up 25pc to $130m

CAIRO, October 4, 2017

Qalaa Holdings, an African leader in energy and infrastructure, has reported revenue growth of 25 per cent year-on-year in Q2 2017 to EGP2.3 billion ($130 million) as it capitalized on the favourable economic environment.

Revenue growth during the quarter was largely driven by improved performances at Qalaa’s energy and cement platforms.

Taqa Arabia turned in solid results for the period, recording revenue growth of 24 per cent y-o-y in 2Q17 as it benefits from gradual phase-out of energy subsidies. Meanwhile, Tawazon posted a solid 127 per cent y-o-y increase in top-line owing to higher demand for alternative fuels — including biomass and Refuse Derived Fuel (RDF) — as well as new contracts for the construction of sanitary landfills. At ASEC Cement’s Al Takamol plant in Sudan, improved productivity saw revenues grow 28 per cent y-o-y in 2Q17, while Aresco recorded a two-fold increase in top-line during the quarter as it began implementing work on new projects.

“As the country maintains a steady reform course, we remain increasingly confident in our position to capture the upside and capitalize on the new favourable economic framework,” said Qalaa Holdings chairman and founder Ahmed Heikal.

 “Almost a year in since the rollout of the government’s reform program, Qalaa has consistently delivered double-digit top-line growth as platforms across its portfolio reap the rewards of Egypt’s new macroeconomic environment. In 2Q17, we delivered growth as our energy plays Taqa Arabia and Tawazon benefitted from the phase-out of energy subsidies at both ends of the spectrum, while other portfolio companies are also finding strong footings as they leverage their ability to deliver efficiencies deemed ideal in today’s macroeconomic environment.”

“Our mining subsidiary ASCOM is gaining increased price-competitiveness both locally and regionally thanks to its position as a quality exporter and an import substitution play. And we are also pushing through higher operational efficiency at Dina Farms as we seek to cement its standing as one of the country’s leading agribusinesses. Meanwhile, our greenfield Egyptian Refining Company is at 95 per cent completion and is gearing up to deliver much needed energy resources to our national economy,” Heikal added.

“Our focus in the months ahead will be to bring ERC online and translate competitive advantages and operational efficiencies gained across our portfolio into bottom-line profitability and accretive returns to our investors.”

Qalaa Holdings continues to carry Africa Railways’ liabilities totalling EGP5.6 billion on its consolidated financial statements. Once Qalaa Holdings cedes control of Africa Railways, said liabilities will be deconsolidated and Qalaa will potentially book a substantial gain on its consolidated income statement in the coming period (net of FX reserves and minority interests).  

Following the impairment of Africa Railways, Qalaa’s losses from discontinued operations declined to EGP11.7 million in 2Q17, down from EGP149.0 million in 2Q16 and EGP225.6 million in 1Q17.

Qalaa recorded a net loss after minority interest of EGP2.8billion in 2Q17, compared to a loss of EGP277.5 million in 2Q16. Factoring out Africa Railways’ impairment net of minority interests, Qalaa’s bottom-line would have posted a loss of EGP20.6million in 2Q17.

“The quarter just ended saw us make important headway in our efforts to restructure our portfolio and streamline investments in a manner that accelerates Qalaa’s return to profitability by 2018,” said Qalaa Holdings co-founder and managing director Hisham El-Khazindar.

“We successfully divested from our Algerian greenfield cement plant Djelfa as part of our strategy to focus management bandwidth on operational and profit-generating platforms, and in parallel booked a gain from the transaction of c.EGP404 million in proceeds some of which will be partly earmarked for deleveraging at both the platform and Qalaa Holdings levels.”

“More importantly, in 2Q17 we took the difficult but necessary decision to fully impair Africa Railways’ assets in Kenya. While the decision took a heavy toll on our profitability for the quarter nearing EGP2.7 billion, the impairment effectively caps future losses from a discontinued operation that is facing increased operational difficulty and is otherwise a drain on resources and capital that could be deployed to other, more promising growth avenues. Additionally, we anticipate a substantial gain on our income statement once we cede control of Africa Railways’ and deconsolidate its EGP5.6 billion in liabilities in the coming period.”

 “With our investment portfolio becoming increasingly optimized for today’s economic realities, and with ERC now 95 per cent complete, we are reaching a watershed moment in our transformation into a lean and profitable company that maximizes value for shareholders,” El-Khazindar concluded. – TradeArabia News Service




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