Egypt’s Ezz Steel said on Thursday its second-quarter net profit more than tripled and forecast that growing global demand for steel would push prices higher in the second half of 2010.
Egypt’s largest steel producer said net profit was LE 136 million ($23.8 million), compared with LE 37 million in the same quarter last year, beating analysts’ forecasts on strong domestic demand.
Five analysts polled by Reuters had forecast an average second-quarter net profit of LE 111 million.
Ezz Steel has raised prices to recoup soaring raw material costs, changing its pricing model in line with top global producers Vale and BHP Billiton.
The firm said a return to production at its flat-steel plant, suspended in late 2008 due to a collapse in the world market, also reflected positively on results.
Its upbeat forecast comes against a backdrop of strong domestic demand, fuelled by house building and new infrastructure, and a sustained recovery in global flat steel.
"As we go forward, despite a general context of sharp volatility, we expect demand and prices of steel products to improve gradually during the second half of 2010," said Paul Chekaiban, Ezz Steel’s managing director.
Beltone Financial analyst Omar Taha said Ezz Steel would continue to show signs of improvement quarter by quarter, mainly due to the resumption of flat steel output and higher prices.
"General economic optimism, when it does return, will allow for higher steel prices, which will translate into higher revenues and net income," Taha said.
He added that Ezz Steel’s expansion plans would increase the firm’s exposure to the domestic construction industry and improve its profit margins through increased direct reduced iron (DRI) production capacity.
The firm said last year it was investing $475 million to set up a new billet production line and a DRI plant.
Net sales for the quarter rose 36 percent year-on-year to LE 4.1 billion.
