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

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

USD / Ton

Energy Prices

• Electricity:

Item Oct. 2007

Sept. 2008

Oct. 2007 Monthly change

rate (%)

Generated Electricity 10198 11732 10599 -9.7

Total Consumption 9221 10187 10021 -1.6

Million kwh

Energy Prices

• Petroleum:Item Sep. 2007 Aug.

2008Sep. 2008 Monthly

change rate (%)

Production of crude oil, condensates and butane (000 tone)

2707 3006 2891 -3.8

Domestic consumption of petroleum products (000 tons)

2465 2430 2650 9.1

Exports of crude oil and petroleum products (USS m.n)

396.0 481.0 424.0 -11.9

Energy Prices• Natural Gas:

Item Sep. 2007

Aug. 2008

Sep. 2008

Monthly change

rate (%)

Natural gas production (00 tone)

3490 3850 3766 -2.2

Domestic consumption of natural gas (000 tones)

2424 2696 2660 -1.3

Electricity consumption as % of natural gas consumption

5720 58.3 58.1 - 0.2

Exports of natural gas and its derivatives ( Uss mn)

230 325 368 13.2

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. 2007Aug. 2008

Sep. 2008

Monthly change

rate (%)

Reinforcement steel production (000 tons)

256.4 284.1 239.7 -15.6

Reinforcement steel sales ( 000 tons)

239.2 273.2 216.6 -20.7

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

• PEST Analysis:– Economic Forces:

• Real GDP Growth Rate

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

3.4 3.2 3.1

4.25.1

6.8

7.17.2

Summary Macro SnapshotActual Forecast

2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12

Real GDP Growth (%) 6.8% 7.1% 7.2% 5.0% 4.4% 5.7% 6.3%

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

Avg. Population (>15<45 yrs

old) 35531 36253 37030 37770 38526 39296 40082

GDP/Capita, Current (US$)

1527 1792 2191 2305 2455 2698 3026

Private Sector Credit

Growth 5.3% 9.1% 13.4% 10.5% 9.0% 12.3% 14.0%

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

EGYPT land of opportunities

• PEST Analysis:– Economic Forces:

• Inflation Rate

Inflation Rate

Oct. 2007 Sep. 2008 Oct. 2008 Change

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)

13% 20%

2000 2006 2000 2006

EGYPT land of opportunities• PEST Analysis:

– Technological Forces:

Item Sep. 2007Aug. 2008

Sep. 2008

Monthly change rate

(%)

Land line telephones subscribers (millions) 11.03 11.40 11.42 0.2

Mobile phones subscribers (millions) 26.40 37.62 38.00 1.2

Internet users (million) 10.02 11.08 11.69 5.5Internet international connection capacity (million bit/second) 14556 24522 27077 10.4

Companies in the field of Information and communications Technology (ICT) (company)

2278 2600 2621 0.8

Corporate Value Chain Analysis

SupplierValue

Chains

FirmValueChain

ChannelValueChains

BuyerValue

Chains

Firm Infrastructure

Human Resource Management

Technology & Product Development

Purchasing&

InboundLogistics

Production Distribution Marketing& Sales

Service

MA

RG

IN

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

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.– Cost Advantage

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 :

– Monopoly.– 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 wholesale

Manufacturing1995

1- Steel rebars

2-Flat Steel sheets3-Dekheila factory

4- Private sea port

5- Algeria Factory

License for Production of Raw materials

(DRI/billet)

1999

1995

1996

70’s - 90’s

2010

2008

BCG Matrix

Directional Policy MatrixStrong Business ,

Considerably High Market Attractiveness

Invest Grow

Harvest Divest

High Low

Market Attractiveness

High LowBusiness Strength

Competitive Analysis

Maintain Specialty Outstanding Success

Hope for Market

Growth

Maintain Cost Advantage

High Low

Market Attractiveness

High LowBusiness Strength

Ezz Steel Life Cycle

1994-1999 EZZ started the business in the local market

1999-2008 EZZ acquires DEKHEILA

2008 EZZ take the license to produce bellit (raw material)

Marketing Mix

• Product• Price• Place• Promotion• Distribution strategies … see next slide

Marketing MixDEMAND-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

FinancialsKey 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%

Strategic Recommendationsezzsteel

عـــز حــديـد

1- Introducing New grades of Advanced High Strength Steel AHSS, willprovide lighter, optimized body designs for car and truck body structureindustry that enable improved vehicle crashworthiness, improved fueleconomy and lower total greenhouse gas emissions.2- Invest in Renewable Energy particularly through alliance with aninternational developer in wind power generation to produce electricityfrom wind farms and thus benefiting from selling carbon certificatestraded 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 andbenefiting from EU grants and CDMA funds. (production cost efficiency)5- Preparing a junk yard equipped with machinery for 30 yrs old carrecycling proposed new law.

ezzsteelعـــز حــديـد

Q & A

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