Company Profile

• EZZ STEEL Virtually a steel monopolist in Egypt since 1999.

• EZZ STEEL (ES) became the largest player in the domestic market
with respective shares of 65% & 60% of rebars & flat steel local
sales during 9M08. Currently, ES owns 90.73% of Ezz Steel Mills
(ESM); 75.15% of EFS and 53.24% of EDZK.
• EZZ STEEL stands out as lowly rated and growing quickly. The
catalyst is the construction volumes as it controls its margins.
• EZZ STEEL cheaper than foreign competition. Benefits from any
rally in commodity prices, and more fundamentally from the
continued (non-housing) construction investment we think will
continue in Egypt.
 Ezz Steel Success History
• In the early 70’s of the last decade,
Haj Abdel Aziz Ezz the father of Ahmed
Ezz began the steel wholesale business
and then importing steel rebars
from Ukraine and former
Soviet Union.
Company Structure

53.24%
Market Share
 Steel Cost Structure
• Raw materials account for the highest
contribution to the total production cost 75%.
• Feedstock mixes is composed of:
• DRI (Direct reduced iron)
• Billet
• Scrap
• local manufacturers fully import their raw
materials.
• Steel Industry is an energy intensive industry
Energy costs contribution is 7%
 Ezz Steel Cost Structure
• EZDK uses a DRI/Scrap mix of 80/20
• ESR uses a DRI/scrap mix of 15/85
• EFS uses a DRI/scrap mix of 25/75
 Raw Material Prices
USD / Ton
Commodity Nov. 2007 Oct. 2008 Nov. 2008 Monthly
Change Rate
(%)

Iron (billet) 519.0 481.0 321.7** -33.1

Copper 6942.1 4863.3 3825.8 -21.3

Aluminum 2266.9 1660.6 1393.0 -16.1

 Energy Prices

• Electricity:
Million kwh

Oct. 2007 Sept. Oct. 2007 Monthly

Item 2008 change rate
(%)

Generated Electricity 10198 11732 10599 -9.7

Total Consumption 9221 10187 10021 -1.6

 Energy Prices
• Petroleum:
Item Sep. 2007 Aug. Sep. 2008 Monthly
change
2008
rate
(%)

Production of crude oil, 2707 3006 2891 -3.8

condensates and butane
(000 tone)
Domestic consumption of 2465 2430 2650 9.1
petroleum products
(000 tons)
Exports of crude oil and 396.0 481.0 424.0 -11.9
petroleum products
(USS m.n)
 Energy Prices
• Natural Gas:
Item Sep. 2007 Aug.
2008
Sep. 2008 Monthly
change
rate
(%)

Natural gas production 3490 3850 3766 -2.2

(00 tone)
Domestic consumption of natural 2424 2696 2660 -1.3
gas
(000 tones)
Electricity consumption as % of 5720 58.3 58.1 - 0.2
natural gas consumption
Exports of natural gas and its 230 325 368 13.2
derivatives
( Uss mn)
 Steel Market Demand
• Per/capita Consumption of Steel
• 20 kg. per person per year in Africa
• 340 kg in Europe.
• 420 kg in North America
• 635 kg in Japan.
• Singapore (1,200 kg/capita)
• Taiwan ROC (over 970 kg)
• Rep. of Korea (830 kg).
 Steel Market in Egypt
• Market Structure:
• 20 steel producers in the local market.
• Total capacity of 9.60 mn tons of steel products.
• Steel rebars 72.9% and flat steel 27.1%.
 Steel Market in Egypt
• Steel Market:

Item Sep. 2007 Aug. Sep. 2008 Monthly

change
2008
rate
(%)

Reinforcement steel production 256.4 284.1 239.7 -15.6

(000 tons)

Reinforcement steel sales 239.2 273.2 216.6 -20.7

( 000 tons)
Iron local prices (LE/ton) 3530 6630 5950 -10.3
 EZZ Steel Mission
• To continually build our capacity and knowledge
base to meet the growing and diverse needs of
customers across the region.

• To offer a full line of products, grades and

qualities that are perceived as equal to – or
better than – those of market-leading producers.

• To provide a service that meets or exceeds

customer expectations.
 EZZ Steel Vision
• To sustain our position as the leading steel
producer in the Middle East region and to remain
a global player in the international steel trade,
with a brand name that is synonymous with
quality and reliability.
 EZZ Steel Objective
• Increase our profit margins.
• To increase our growth rate through regional
expansions.
• To protect our environment.
• Optimizing operations
 WHY EGYPT ?
• Political Stability.
• Diverse Economy.
• Available Energy Resources w/competitive prices.
• Large local market, proximity to GCC, MENA, EU
• markets.
• Availability of qualified Labor force at competitive
cost.
• Developed infrastructure (telecommunications, roads,
• sea ports, airports)
 EGYPT land of opportunities
• PEST Analysis:
– Political & Legal Forces:
• Egypt has introduced to humanity the oldest political
system. Along the banks of the River Nile, there arose the
most ancient unified government which built the greatest
civilization in the world. Over ages, the bases of the
Egyptian political system were deeply entrenched.
• Modifying anti-monopoly law.
• Removal of export duties & export ban.
• Raising energy prices.
 EGYPT land of opportunities
7.2
• PEST Analysis: 7.1

– Economic Forces: 6.8

• Real GDP Growth Rate

5.1
4.2

3.4 3.2 3.1

2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

 Summary Macro Snapshot
Actual Forecast
2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12

Real GDP 6.8% 7.1% 7.2% 5.0% 4.4% 5.7% 6.3%

Growth (%)

Population 71,347 72,798 74,357 75,844 77,361 78,908 80,486

Avg. 35531 36253 37030 37770 38526 39296 40082

Population
(>15<45 yrs
old)

GDP/Capita, 1527 1792 2191 2305 2455 2698 3026

Current (US$)

Private Sector 5.3% 9.1% 13.4% 10.5% 9.0% 12.3% 14.0%

Credit Growth

Fiscal Deficit % 8.0% 7.3% 6.6% 6.5% 6.0% 5.7% 5.3%

GDP
 EGYPT land of opportunities
• PEST Analysis:
– Economic Forces:
• Inflation Rate

Inflation Oct. 2007 Sep. 2008 Oct. 2008 Change

Rate
Monthly 1.0 0.3 -0.01 -0.4

Annual 7.5 21.5 20.2 12.7

 EGYPT land of opportunities
• PEST Analysis:
– Socio-Cultural Forces:
• Egypt's population until May 1, 2008 reached 78.7 million
according to final results of this year's census as announced
Thursday by the Central Agency for Public Mobilization and
Statistics (CAPMAS).
• Of the population 37.2 million are males, up 22.6 percent from
the 30.4 million in 1996, and 35.6 million are females which is
22.9 percent more from their count in 1996 that was estimated
at 29 million.
• High rates of population growth has lead to a greater demand
for utilities and service
 EGYPT land of opportunities
• PEST Analysis:
– Socio-Cultural Forces:
• Population:
• 41% of the population are 58% of the population is part of
Between the age of (15-39) the work force age (15-64)

20%
13%

2000 2006 2000 2006

 EGYPT land of opportunities
• PEST Analysis:
– Technological Forces:
Item Sep. 2007 Aug. Sep. 2008 Monthly
2008 change rate
(%)

Land line telephones subscribers 11.03 11.40 11.42 0.2

(millions)
Mobile phones subscribers 26.40 37.62 38.00 1.2
(millions)
Internet users (million) 10.02 11.08 11.69 5.5
Internet international connection 14556 24522 27077 10.4
capacity (million bit/second)
Companies in the field of 2278 2600 2621 0.8
Information and communications
Technology (ICT) (company)
Corporate Value Chain Analysis
Firm Infrastructure
Human Resource Management
Technology & Product Development

MARGIN
Purchasing Production Distribution Marketing Service
& & Sales
Inbound
Logistics

Supplier Firm Channel Buyer

Value Value Value Value
Chains Chain Chains Chains
 Ezz Steel Value Chain Analysis

• With EZZ Steel Components, customers

can avoid capital investment and move
away from non-value-added primary
operations. Instead, they can rely on EZZ
to perform the initial operations, and
receive components at any value-added
level.
 Ezz Steel Value Chain Analysis
• Through EZZ supply chain system, they provide cost-
effective raw material for planetary gear sets, manual
gears, input/output shafts and other transmission
components.
• They consider the customer’s production capabilities or
requirements, our capabilities and those available from our
network of manufacturing partners. Then they develop an
optimal supply chain solution that provides the component
required by the customer, at the lowest possible per-unit
price. This enables a lean approach to supply chain
management for the customers.
Ezz Steel Value Chain Analysis
Porter’s 5 Forces
 Porter’s 5 Forces

• EZZ steel a monopoly in Egypt.

• Low Fixed Cost.
• High Capacity.
• High Exit Barrier from the market.
 Porter’s 5 Forces

• It’s very difficult to enter steel market due

to :
– Huge Capital requirement .
– Government policy that protect Egyptian
market from import.
 Porter’s 5 Forces

• Arising of new technique as spar block

technology.
• Minor Threat of retaining walls.
• Minor Switching cost.
 Porter’s 5 Forces

• Recommended by Engineering
Consultants
• As high market demand in Egypt .
• Monopoly status
 Porter’s 5 Forces

• Suppliers:
- Billet suppliers have power
- Power and Energy Suppliers have
power.
 SWOT Analysis
• Strengths :
– High market share .
– Political support
– Good working condition :
» Low turnover.
» Retain employees .
» Carrier path .
» Loyalty.
– Effective distribution channels.
– High turn over and working capital .
– Strong Strategic team .
– Strong Export market . ( Dekheila sea port ).
– Powerful R&D .
 SWOT Analysis
• Weaknesses:
– Working union.
– Working locations
 SWOT Analysis
• Opportunities :
– New regional market specially Algeria & Libya .
– Market growth
» Middle age growth of population.
– Construction backlog.
» As projects announced TMT ,ORASCOM Hotels and E3mar.
– Preferential among engineering consultant .
– Outstanding Quality Product than other competitors .
– El-Sokhna Plant
» Exempted from Custom Duties and Taxes (Free Zone) .
 SWOT Analysis
• Threats :
– Monopoly resistance
» Public opinion .
» Governmental . ( Anti-Monopoly law ).
– New Steel manufacture license for DRI/billet (4 licenses).
– Imports .
– High Energy Prices :
» Electricity .
» Natural Gas.
» MAZOT.
– Low corporate governance in the company.
– Environment regulations (1.9 ton Co2 / Ton steel)
 Ezz Family 70’s -
wholesale 90’s

1- Steel 1995
2-Flat Steel rebars
1996
sheets 3-Dekheila
Manufacturin 1999
factory
g
4- Private sea
1995
port
5- Algeria
Factory
2010
License for
Production of
2008
Raw materials
(DRI/billet)
BCG Matrix
 Directional Policy Matrix
Strong Business ,
Considerably High Market
Attractiveness
Market Attractiveness

Invest Grow
High

Harvest
Divest
Low

High Low
Business Strength
 Competitive Analysis
Market Attractiveness Maintain Specialty Outstanding Success
High

Maintain Cost
Advantage
Low

Hope for Market

Growth

High Low
Business Strength
 Ezz Steel Life Cycle

EZZ take the license to 2008

)produce bellit (raw material

EZZ acquires DEKHEILA 1999-2008

EZZ started the 1994-1999

business in the local market
 Marketing Mix

• Product
• Price
• Place
• Promotion
• Distribution strategies … see next slide
 Marketing Mix
DEMAND-PULL FORCES
• Steel consumption is closely tied to the mushrooming
construction activity. Construction activity in Egypt grew
by 7.4% over 2004-2007; triggering rebars consumption
to grow by 15.9% over the same time span.
• Consumer goods and the locally assembled vehicles
(Completely Knock down – CKD) are key consumers of
flat steel. Growing production levels in both industries
drove up the demand for flat steel which enjoyed a
13.3% over 2004-2007
 Financials
Key highlights
EGP 2006 2007 +/-
• Net sales 11.6bn 16.2bn +40%
• Gross profit 3.2bn 3.6bn +12%
• EBITDA* 3.6bn 3.9bn +8%
• Net profit before tax 2.6bn 2.9bn +11%
• Tax and deferred tax 611m 653m +7%
• Net profit after tax and minority interests 995m 1.1bn +12%
• EPS on a weighted average number of shares 5.85 6.26 +7%
• Net debt to Equity 1.26x 0.99x -21%
 ezzsteel
‫حــديـد عـــز‬
Strategic Recommendations
1- Introducing New grades of Advanced High Strength Steel AHSS, will
provide lighter, optimized body designs for car and truck body structure
industry that enable improved vehicle crashworthiness, improved fuel
economy and lower total greenhouse gas emissions.
2- Invest in Renewable Energy particularly through alliance with an
international developer in wind power generation to produce electricity
from wind farms and thus benefiting from selling carbon certificates
traded in the London Stock Exchange(1Ton Co2=$4.0).
3- Invest in Libya for a steel production line.
4- Implementing a waste heat recovery in the four production plants and
benefiting from EU grants and CDMA funds. (production cost efficiency)
5- Preparing a junk yard equipped with machinery for 30 yrs old car
recycling proposed new law.
ezzsteel
‫حــديـد عـــز‬

Q&A

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