In a bid to restructure its debt, Egypt’s biggest steel maker, Ezz Steel, had agreed to a long-term financing contract with the National Bank of Egypt and Arab African International Bank in a deal valued at $236 million, it emerged late on Monday.
The credit line will be refunded in quarterly payments for a period of seven years beginning this year. The transaction is part of the company’s strategy to reorganise its credit facilities by paying back some of its existing debt, according to Reuters.
Ezz Steel operates four factories in the North African country and has market share covering half the country’s steel market. In Egypt, Ezz profitability had in recent years been battered by fragile exports and a prolonged gas shortage because the government diverted supplies toward electricity production to ease regular blackouts, according to Reuters.
Late last year, Ezz said its profits slipped 94 percent in the third quarter as energy shortages and price increases took their toll during the period under review. Ezz’s net profit for the period under review sagged to LE55.6 million ($7.7 million) from LE962 million ($134.5 million) during the comparable period last year. revenues during the period under review for Egypt’s steel maker plunged 8 percent to LE9.5 billion.
“The company had to import scrap, an essential raw material in manufacturing steel, to compensate for a complete stop to the production of direct reduced iron manufacturing for a month and a half due to the suspension of gas supplies,” Ghada Alaa, steel analyst at Beltone Financial, told Al Ahram Online.
Meanwhile, production and profitability have been hurt dramatically by a sharp natural gas shortage, which has forced the government to cut supplies of heavy industries to run power plants to reduce semi-daily blackouts, especially during the summer.
Ezz Steel recorded a 142.5 million EGP net loss during the first half of 2014, compared to a net profit of 621.6 million EGP in the same period in 2013.