Emirates Steel Arkan posts third-quarter net profit of Dh103m on sales and efficiencies

Revenue rose 29% annually to $681m in the three-month period

Emirates Steel Arkan's third-quarter revenues rose 29 per cent to Dh2.51bn, compared with Dh1.94bn in the same period last year. Bloomberg

Emirates Steel Arkan, the largest public steel and building materials company in the UAE, has reported a net profit of Dh103 million ($28m) for the third quarter.

The company, formed after the merger of Emirates Steel and Arkan Building Materials last year, made the profit for the three-months to the September, compared with a Dh79m loss during the same period last year, it said in a statement on Tuesday to the Abu Dhabi Securities Exchange, where its shares are traded.

Quarterly revenues rose 29 per cent to Dh2.51bn. The group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) gained 224 per cent year-on-year to Dh269m.

Emirates Steel Arkan attributed the turnaround to higher sales volumes, enhanced operational efficiency and a supportive market environment.

“The group has been reporting strong results since the merger, driven by our strategy to diversify revenues through increased exports, cost control and an increase in operational efficiencies,” group chief executive Saeed Alremeithi told The National.

For the nine-month period, the company reported to a net profit of Dh383m compared with a pre-merger loss of Dh119m during the same period last year. Revenue for the January-September period rose about 15 per cent to Dh7.12bn.

The group’s Ebitda for the period rose to Dh863m, a yearly increase of 134 per cent.

Emirates Steel Arkan exports its products to 70 markets. With the UAE economy forecast to maintain robust growth, despite macroeconomic headwinds, the company expects to maintain revenue and profit growth momentum.

“Our steel and building materials businesses have been resilient to market turmoil caused by the war in Ukraine and economic slowdown in various markets. We expect the strong economic growth in the UAE, Middle East and the subcontinent to support our revenue and profit growth,” Mr Alremeithi said.

The group’s steel business contributes 90 per cent of revenue while building materials account for 10 per cent.

Revenue from the steel business during the nine-month period rose to Dh6.45bn with an unconsolidated pre-merger revenue of Dh5.6bn during the same period last year, boosted by strong sales into Europe and the Americas and increased volume of orders in the UAE, the company said.

The building materials business, meanwhile, continued to perform robustly on higher average sale prices and enhancements to the group’s low-cost production base.

The division generated a nine-month net profit of Dh48.9m compared with a loss of Dh29.2m in the same period last year, it said.

During the first nine months of the year, Emirates Steel Arkan significantly reduced its debt burden by bringing down the net debt-to-equity ratio to 21 per cent, from 32 per cent at the end of last year.

The group’s balance sheet also significantly improved with net borrowings declining 41 per cent to Dh1.34bn at the end of September compared with Dh2.28bn as of December 31, 2021.

“Very tight working capital control and inventory management helped us to achieve significant cost efficiencies to reduce our debt ratio,” company's chief financial officer Stephen Pope told The National.

Despite the global economic uncertainty amid a coronavirus resurgence in China, high inflation around the world and elevated energy prices, Emirates Steel Arkan forecasts a more robust outlook for sales and profitability, both in the region and in its export markets.

“Even though the outlook for raw material markets and the global economy remains uncertain, the growth prospects for the UAE are encouraging and our increasingly diversified business model will allow us to take advantage of opportunities as they arise,” Mr Alremeithi said.

To expand the company’s customer base and product reach to more markets, it is undertaking product diversification to suit demand dynamics, he added.

Emirates Steel Arkan is also expanding its sheet pile range, including the development of a range of U-shape piles, widely used in the construction industry.

During the third quarter, the group also partnered with ITOCHU Corporation and JFE Steel Corporation to study the construction of a ferrous raw material production facility in Abu Dhabi.