Ezz Steel, Egypt's largest steel producer, said on Thursday its first-quarter net profit fell 85 percent on the back of declining steel prices and a challenging export market.

The company said it made a net profit of 66 million Egyptian pounds ($11.8 million) in the period as net sales dropped 33 percent to 3.4 billion pounds.

"Although the financial performance has been heavily impacted by the fall in steel prices and the weakness of the export markets we continued to enjoy sustained demand on our steel products in the domestic market," Paul Chekaiban, managing director of Ezz Steel said in a statement.

Long steel products accounted for 81 percent of sales as flat steel markets slowed, the company said. Flat steel volumes plunged to 209,000 tonnes in the quarter from 503,000 tonnes a year ago as the Ezz Flat Steel production facility shut down.

The facility is expected to remain shut for the second quarter of 2009. Ezz Steel said it remained optimistic about demand for long steel products in the Egyptian market.

"Long product demand is expected to remain on track for the rest of 2009 owing to the resilience of the private housing market and real estate projects and the impetus from the infrastructure schemes," the company said.

Ezz Steel had said on Monday it expected demand for rebars in the second half of 2009 to be 3.3 million tonnes, down from 3.9 million tonnes in the first half of the year.

The company also forecast its total production for the year would remain steady at 5.3 million tonnes. - Reuters