Investment banks: “Egyptian Refining” supports the results of “the castle” in the third quarter

Citadel Capital for financial investments managed to achieve an 85% jump in revenue in the third quarter of this year, supported by strong results from its associate Egyptian Refining Company, which contributed 75% of the parent company’s total revenue.

Castle revenues in the third quarter of 2022 were £23.7 billion, compared to £12.7 billion in the same period last year, and net profit of £16.7 million in the said period, compared to a loss of 440, 7 million pounds.

The main support for the performance of “Egyptian Refining” was the rise in oil prices and the decline in the value of the local currency, according to local investment banks.

Despite a good performance in the third quarter on a year-on-year basis, the quarterly performance was not what was expected as there was a decline that was smaller than the expectations of investment banks.

Research unit Al-Ahly Pharos said Citadel posted a total net profit of 17 million Egyptian pounds during the third quarter of this year, a three-month drop of 95%, compared to a net profit of 362 million pounds in the second quarter, and a net loss of 441 £1 million in the third quarter of 2021.

It added that consolidated revenues fell on a quarterly basis, recording 23.722 billion pounds in the third quarter of this year, after being 26.981 billion pounds in the second quarter of the year. However, revenues jumped 85% year-on-year, compared to EGP 12.796 billion in Q3 2021.

She explained that the revenues of “Egyptian Refining” represented 75% of Qalaa’s total revenues during the third quarter of the year, while “Taqa Arabia” contributed 12% of total revenues.

Al-Ahly Pharos Research attributes the annual increase in revenue mainly to several factors, including: a 121% annual increase in “Egyptian Refining” revenues supported by an increase in sales volume, along with an increase in petroleum product prices, as well as a 19% annual increase in “Egyptian Refining” revenues Arab Energy »supported by a stronger performance in all its accessories (gas, power and oil), with a 55% year-on-year increase in Ascom Mining Company’s revenues, supported by an increase in export revenues due to higher volumes and prices.

She pointed out that among the factors that supported the group’s revenues was a 67% year-on-year growth in Grand View revenues and a 42% year-on-year increase in agri-food revenues, in light of rising prices and business development.

She said that the annual financial results were mostly affected by the increase in product prices due to the rise in world prices of raw materials, as well as currency depreciation and consequent inflation, which followed the slowdown in crude oil prices.

The cost of revenue fell on an annual basis in the third quarter, which led to an increase in gross profit, and the gross profit margin in the third quarter of this year recorded 40.5%, compared to 12.2% in the third quarter of 2021 and 36, 1% in the second quarter of this year.

EBITDA and cost of debt grew 661% YoY to reach EGP 8.805 billion in Q3, down 1% QoQ, and EBITDA margin improved significantly to 37.1% in Q3 2022, after which was 9%. in the third quarter of 2021 and 33.1% in the second quarter of this year.

Financing costs increased by 29% year-on-year in the third quarter of this year, reaching EGP 1.636 billion, compared to EGP 1.265 billion in the third quarter of 2021, due to rising interest rates due to currency depreciation.

Qalaa also recorded higher foreign exchange losses during the third quarter of this year, at £236m, compared to £90m in the second quarter of the year, and compared to foreign exchange gains of £83m in the third quarter. quarter of 2021

Income taxes rose significantly from 85 million pounds in the third quarter of 2021 and 125 million pounds in the second quarter of this year to 1.127 billion Egyptian pounds in the third quarter of this year.

Al-Ahly Pharos said the Egyptian Refining Company’s quarterly performance reflected the slowdown in global oil prices, as the price of crude oil witnessed a 13% decline on a quarterly basis to an average of $98/barrel, compared to $112/barrel in the second quarter. , noting that, despite this, the annual performance is still much higher than the comparable quarter of 2021, as refinery margins recorded $5 million per day in the third quarter, compared to $1.2 million per day in the comparative period. since last year.

The price of crude oil rose 34% year-on-year during the third quarter, compared to $73 a barrel in the third quarter last year, and Egyptian Refining’s sales volumes rose 13% year-on-year to 954,928 tons in the third quarter of this year, compared to 847,954 tons in the third quarter.From 2021 to now, the company’s business has been operating as normal with no interruptions, slowdowns or shutdowns compared to long periods of slowdowns and shutdowns during 2021.

She touched on the results of Taqa Arabia, whose revenues rose 19% year-on-year to reach £2.864 billion in the third quarter of this year, supported by an increase in gas revenues due to the expansion of gas network facilities. as part of the “Dignified Life” initiative, as well as increasing the volume of gas distribution. Liquefied natural gas after expanding its stations and increasing prices.

TAQA added 30,300 gas connections for households, along with 13 new industrial customers during the third quarter of the year, bringing the total number of connections to more than 1.5 million.

The number of LPG stations increased from 30 stations in the third quarter of 2021 to 51 stations in the third quarter of this year, as the company added eight new stations during the last quarter, and the company also converted 2,338 vehicles to gasoline during the third quarter, bringing the total number of vehicles was converted into 28,989 vehicles.

She pointed out that “Grand View” contributed 5 percent of the castle’s total revenue in the third quarter, which is 4 percent more than the contribution of the cement sector.

She highlighted the expansion of Citadel’s printing and packaging sector, which saw revenue grow by 67% in the third quarter to £1.147 billion, as revenue growth was supported by higher volumes and prices of domestic and export sales.

And “Al-Ahly Pharos” came to the fact that Castle’s results during the first nine months are still in negative territory, as it recorded net accumulated losses of £206 million, compared to £1.321 billion, net losses accumulated in the corresponding period .

Total revenues rose 124% year-on-year to £69.385 billion in the first nine months of the year, compared to £30.975 billion in the same period.

“Egyptian Refining” revenues represent 76% of Qalaa’s total revenues, while “Taqa Arabia” contributed 11% of total revenues in the first nine months of 2022.

It attributed the growth in revenue in the first nine months of this year to the rise in global commodity prices and improved operational performance in many sectors, especially in the “Egyptian Refinery Company”, which witnessed an unexpected decline in business during 2021, and an increase in sales prices due to inflationary pressures following the devaluation of the pound. .

She pointed out that the unprecedented revenue generation was not reflected in net profit due to high financing costs, as interest expenses increased by 28% year-on-year in the first 9 months of the year due to rising interest rates and depreciation of the Egyptian currency, as exchange rate losses amounted to 1.55 . £1 billion over the first 9 months of this year, compared to gains of £155 million over the corresponding period and tax increases, as income taxes rose from £177 million over the first 9 months of 2022, to £1.383 billion over the corresponding period .

Al-Ahly Pharos said the castle is still in talks with its lenders to restructure the debt, however, Egyptian Refining is expected to pay its due debt installments and become effective by the end of the first quarter of next year, expecting the company to be able to meet your debt repayment plan in the future assuming normal business and healthy cash flow.

Citadel Capital announced a package of additional incentives for growth, which includes the announcement of a study of several small and medium-sized investment opportunities, as well as strategic investments that will be realized in the next two to three years.

The European Bank for Reconstruction and Development is funding an associate company “TAQA BV” with $5.5 million to build a 7 megawatt solar power plant in Minya, Soma Bay, Nabq and the 6th of October City industrial zone.

Al-Ahly Pharos added that Taqah Water Company started operations during 2022, and completed a water desalination project in the second quarter of the year, and the second will be completed in early 2023, and the company recorded 945 million pounds of revenue in the third quarter. this year.

She added that we recommended increasing the relative share in the investment portfolio when the share price was around EGP 0.80, and now that the stock has reached the target price we set, we are reducing the recommendation to neutral.

Al-Naeem Investment Bank said the castle’s third quarter 2022 consolidated results were mostly positive but fell short of expectations due to higher-than-expected interest and tax charges.

The bank added that net profit (after tax and property rights) was £16.7m, compared to profits of £362m in the second quarter of 2022, and net losses of £441m in the third quarter of 2021. is lower than our expectations for value of EGP 278 million (as a result of higher interest and tax expenses than we expected), as the company’s profit before deductions was EGP 8.5 billion in the third quarter of 2022, compared to our expectations of EGP 8.8 billion.

Gross profit margin recorded 39.8%, up 4.3 percentage points quarter-on-quarter and 27.3 percentage points year-on-year (mainly attributed to an increase in global refining margins that benefited the Egyptian Petroleum Refining Company).

It added that total revenues were EGP 23.7 billion, down 12.1% q/q but up 85.6% y-o-y, below our forecast of EGP 25.2 billion.

Egyptian Petroleum Refining Company’s (13.1% owned by Qalaa Holdings) net profit was £1.94bn, compared to a net profit of £2.77bn in the second quarter of 2022 and a net loss of £418m in the second quarter 2022 third quarter 2021

The investment bank said this was below its forecast of EGP 2.76 billion (resulting from a combination of lower-than-expected sales to the Egyptian Refining Company and higher taxes).

Gross profit margin recorded 45%, up 6.2 percentage points quarter-on-quarter and 35.1% year-on-year (as a result of higher refining gross margins).2Q2022 and $47 per ton in Q321 .

Total revenues were £17.86 billion, down 16.8% quarter-on-quarter, but up 2.2 times year-on-year. The figure is lower than expected by EGP 19.5 billion (as a result of a lower than expected sales mix).

And management has announced that it has reached the end of its restructuring and debt reduction journey, as the company plans to pay off all of its debt in the first quarter of 2023, with continued debt restructuring efforts as the company’s net debt is reduced. to £71 billion in Q3 2022, compared to EGP 74 billion in Q2 2022, despite an increase in working capital, as working capital reached EGP 6 billion, compared to EGP 4 billion in Q2 2022. 2022 ., and we continue to recommend buying the shares at a target price of EGP 2.07 per share.