Strategic Management: Dr. Ashraf Abdel Khalek

STRATEGIC MANAGEMENT
Dr. Ashraf Abdel Khalek
Ezz Steel Strategic Plan
DALIA SEDRA
EMAD FOUAD
MAI SALEM
OLA SOLIMAN
SAMEH FAHIM
April 4, 2020
SL60A - Group A 1 Final Project: ezzsteel Case Study

TABLE OF CONTENTS
1. Company profile.
• Ezzsteel Profile
• Vision.
• Mission.
• Objectives
• Products.
• Competition Analysis
• Corporate Structure.
• Corporate Governance.
2. SWOT Analysis.
3. PESTEL Analysis.
4. Porter’s Five Forces.
5. IFAS matrix, EFAS matrix, Competition Key Success Factor &
SFAS matrix
6. Strategic Alternatives & Recommended Strategies (TOWS Analysis)
7. Internal, External & Space Matrix.
8. Strategic Alternatives & Quantitative Strategic Planning Matrix
(QSPM)
9. Recommended Strategy.
10.Strategy Formulation.
11.StrategyImplementation
10. 11.Evaluation &
Control.
12.COVID-19 virus Effect & Continuity Plan (Recommendations)
13.References.
14. Annex
Annex I. Detailed Steel Industry Analysis
Annex II. Financial Statements & Analysis

1.Company Profile:
ezzsteel Profile:
ezzsteel is the largest independent steel producer in the Middle East and North Africa,
exporting high-quality steel products to many countries on four continents around
the world. It is becoming firmly established as a global player in the steel industry,
and leads the way by adopting the most advanced steelmaking technology.
The company’s state-of-the-art plants, strategically located close to major road links and
international ports, produce 5.8 million tons of flat steel, rebar and wire rod in a wide range
of grades to meet many challenging international standards and customer specifications.
The ezzsteel brand is synonymous with quality. High-grade raw materials, highly
automated processes and continuous monitoring deliver steel quality that is second to none.
A skilled and dedicated workforce of more than 8,000 people puts the ezzsteel stamp of
quality on every product. A spirit of excellence and continuous improvement pervades the
ezzsteel culture, embodied by its founder and president Mr. Ahmed Ezz and upheld by the
company’s exceptionally trained and highly motivated professionals.
Expansion and development never cease at ezzsteel. Investments of more than $4 billion
in the latest technology have ensured that the quality and accuracy of the company’s
products is continuously refined and improved, along with the environmental performance
of its plants.
ezzsteel’s new Direct Reduced Iron (DRI) mega module at Ain Sokhna is a significant
investment in vertical integration, and further strengthens the company’s position in the
steel industry. Such an investment in upstream operations increases the efficiency of
ezzsteel and consequently enhances its competitiveness, both regionally and
internationally. With this addition, ezzsteel has become the second largest DRI producer
worldwide, with a capacity of 5.1 million tons per year.
Certification and Management systems

More than 300 grades of steel produced to customer and international standards.
• Safety Management System (OHSAS 18001:1999)
• Environmental Management System (ISO 14001:2004)
• Quality Management System (ISO 9001:2000)

Vision:
To maintain our position as a leading fully integrated steel producer in the region,
a company admired worldwide for its principles, people, partnerships,
performance and passion for excellence.
Mission:
Entering new markets and expanding existing markets through continuous

product development.
Aligning products and processes to the evolving needs of our markets, aiming to
maximize customer satisfaction.
Maintaining strict compliance with all national and international competition
standards, guidelines and legislation.
Building superior capabilities among our people and organizations through
ongoing learning and development programs.
Establishing a strong commitment to efficient, benchmarked manufacturing
processes and investing in the most up-to-date technology.
Creating a culture that focuses on cost-effectiveness and adding value for
customers.
Developing distinguished associations with business, governmental and social
development partners.
Winning the continued support of investors, customers, suppliers, employees,
governments and communities through our achievements, clear vision and
realistic goals.
Objectives:
Increase our profit margins. To increase our growth rate through regional
expansions.
Continued investment is at the heart of Ezz steel's plans for ongoing improvement
in its steel products. Ezz steel is committed to investing in only the best new
technology, processes and people to ensure that quality remains at a high level.
• Ezz steel’s new Direct Reduced Iron (DRI) mega module at Ain Sokhna is a
significant investment in vertical integration, and further strengthens the
company’s position in the steel industry. Such an investment in upstream
operations increases the efficiency of Ezz steel and consequently enhances its
competitiveness, both regionally and internationally. With this addition, Ezz steel
has become the second largest DRI producer worldwide, with a capacity of 5.1
million tons per year.

Corporate Governance
Board of Directors: executive and non-executive members.

All executive officers are internal employees
• Hassan Ahmed Noah – CEO - Co-Managing Director
Mr. Nouh was appointed Co-Managing Director of ezzsteel in March 2014. Prior
to this appointment, he served as the General Manager of ezzsteel from February
2005.
Farouk Ibrahim - Corporate Technical Officer
Mr Ibrahim was appointed the Technical Corporate Officer of ezzsteel in 1994.
He is the Chairman of EZDK, a position he has held since May 2011. He is also
General Technical Manager of EZDK, a position he has held since 2000.
Samir Naaman, Corporate Sales Officer
Mr. Naaman was appointed the Sales Corporate Officer of ezzsteel in 1999.
George Matta, Corporate Marketing Officer
Mr. Matta was appointed the Marketing Corporate Officer of ezzsteel in 1997
Nabil El Khatib, Corporate Procurement Officer
Mr. El Khatib was appointed the Procurement Corporate Officer of ezzsteel in
1994.
Ezz steel stocks are publicly traded. Stocks ownership structure:

Al-Ezz Holding Group for Industry and Investment (38.41%)
Banque du Caire (30.00%)
Egyptian International Commercial Investment (11.29%)
HSBCBCL (8.40%)
Egyptian International for Industrial Investment (7.44%)
Mineral Investment Development (7.44%)
National Metal Industries Development (1.13%)
Investment Documents Fund EGX 30 index (0.011%)
Cairo National Investment & Securities (0.0074%)
Mohammed Raed Mahmoud Nour Al-Din Al-Beblawi (0.0006%)
Golden Pyramids Plaza (Unknown percentage).

2.SWOT ANAYLSIS
• Strengths
• Market leader in MENA Region.

• Ezz Steel acquisition to EZDK
• Wide portfolio (DRI, Billet, Rebars, Wire mesh, Wire Rod, Flat Steel).
• Backward integration by establishing their own DRI Plant (Main Raw
Material) for the steel industry.
• Economies of scale benefits.
• Market Share domestically 45%.
• Weaknesses
• Large Debt-to-equity ratio.
• Over Staffed
• No Second Line Leaders.
• Opportunities
• Mega projects by the government in Egypt
• Demand is higher than the supply
• Future emerging markets.
• Market growth.
• High Export potentials due to the regional restructuring.
• Very High Entry Barriers.
• Anti-dumping Laws.
• Threats
• High exit barriers.
• The governmental interference in the industry
• Currency fluctuations & tax laws changes.
• Changes in the power prices (electricity and gas).

3.PESTEL ANALYSIS
Political & Legal Forces:

o 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.
o Modifying anti-monopoly law.
o Removal of export duties & export ban.
o Raising energy prices.
o There is governmental interference in the industry as the Egyptian
government thinks of building its own plant. On the other hand, they are the
regulators of the industry as a whole and will be a competitor at the same
time.
Economic Forces:
o Currency fluctuations affected very much the steel industry as all the raw
material and most of the additives are totally imported which will lead to
increasing the cost of products.
o Changing in Tax laws specifically the VAT affected very much the end
user as the price jumped 14% with no reason.
o Increasing the fare of electricity, water, gas affected the price.
Socio-Cultural Forces:
o 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 led to a greater
demand for utilities and service. 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.
o The revolution of 2011 affected the whole Egyptian culture and
sociocultural environment. the nature of employees changed after the
revolution as all the Egyptian citizens which affected the company in a
negative way as they started to do strikes.
Environmental:
o Environmental protection is a passion at ezzsteel. Investing in sustainable
development is as much a priority as investing in steel production
improvements.
o The company's environmental management system is ISO 14001 accredited
and its safety management system is OHSAS 18001 certified – both
recognized as among the highest certification standards in the world. Each

year the Germanischer Lloyd Certification GmbH (GLC) monitors
ezzsteel's environmental management systems (EMS).ezzsteel's team
upholds EMS principles with an eye for constant adherence to excellent
standards. ezzsteel's efforts in educating and communicating to employees
its environmental policies and issues is an everyday process. All of its
employees are trained appropriately concerning environmental issues.
o ezzsteel has invested extensively in environmental protection at its plants,

ranging from filters to purify emissions to the maintenance of large green
spaces at all sites. All of its steel plants meet internationally recognized
environmental and occupational health and safety standards, with very tight
controls over gaseous, dust and other airborne emissions, as well as liquid
effluents, noise levels and even electrical pollution that could affect
domestic supplies. Solid waste is recycled at all plants, and each has its own
sophisticated water treatment facility for recycling all water used on site.
o Along with its environmental policy, ezzsteel adheres strictly to its pollution
abatement policy, which states, “Prevent production of pollutants through
optimum design operation and control to simultaneously maximize
productivity and minimize energy consumption”. Always environmentally
conscious, ezzsteel seeks to minimize emission of pollutants, recycle and
reuse materials and execute safe disposal of any and all non-recyclable
materials.
Technological Forces:
As a leading company in MENA Region, Ezz Steel is equipped with the latest
technology in the industry and is always updated with the new technological trends.
Legal Environment:
Changes in the laws every now and then have a very negative impact on an industry
like the steel industry. Also, laws like anti-dumping, anti-trust and competition
compliance has impacts on the company.

4.Porter’s 5 Forces
New Market Entrants (High)

The Barriers of entering in the steel industry is very high. This industry needs a very big
investment in order to operate as it has to build a plant with very expensive equipment.
There is also legal or political barrier which is the license, you have to pay to the
government to take the license which provides you with the electricity and gas for
operation. This license costs a fortune.
Supplier Bargaining Power (Low);

In the steel industry, the bargaining power of the supplier is low as they will always try to
sell you the raw material and other supplies with a high cost but as Ezz Steel is a market
leader, and they operate with a very big volume in the market, so all the suppliers are trying
to make business with them in order to sustain a long-term contract with Ezz Steel.
Competitive Rivalry (Medium);

The Number and size of firms competing in the Steel industry in Egypt is not very big.
Competitors are not big in number or in size, but this doesn’t ignore the fact that there is
competition in the market and Ezz Steel has to keep its market share growing and they have
to keep thrie competitive advantages.
Buyer Bargaining Power (Low);

As the Steel product is a strategic one, Buyers do not have influence on the manufacturer.
Usually the price of steel is governed by the foreign market and their prices, economic
status (floating, devaluation) and the raw material prices worldwide. So, buyers do not have
influence on the manufacturer in this industry.

Substitutes (Medium);
Sometimes the government opens the importing from Turkey and China and allows the
agents to import. This has a very negative impact on the industry as a whole as those
countries sells to Egypt with low prices (due to their own taxes and country regulations)
and this harms the industry a lot. But on the other hand, the government does not open this
importing all the year; it depends on the economical case at the country as a whole.
5. Strategic FactorsAnalysis
5.1 External FactorAnalysis Summary(EFAS)
Weighted
External Factor Analysis Weight Score
Score
Opportunities
Mega projects by the government in Egypt .15 4 0.6
Demand is higher than the supply .10 4 0.4
Future emerging markets. .10 4 0.4
Market growth. .05 3 0.15

High Export potentials due to the regional
.05 3 0.15
restructuring.
Very High Entry Barriers. .10 4 0.4
Anti-dumping Laws. .05 2 0.1
Threats
High exit barriers. .10 4 0.4
The governmental interference in the industry .10 3 0.3
Currency fluctuations & tax laws changes. .15 2 0.3
Changes in the power prices (electricity and gas). .05 2 0.1
Total 1 3.3

5.2 Internal FactorAnalysis Summary(IFAS)
Weighted
Internal Factor Analysis Weight Score
Score
Strengths
Market leader in MENA Region. 0.1 5 0.5
Ezz Steel acquisition to EZDK 0.15 4 0.6

Wide portfolio (DRI, Billet, Rebars, Wire mesh,
0.1 4 0.4
Wire Rod, Flat Steel).
Backward integration by establishing their own
DRI Plant (Main Raw Material) for the steel 0.2 4 0.8
industry.
Market Share domestically 45%. 0.1 4 0.4
Economies of scale benefits.
0.15 4 0.6
Weaknesses
Financial position (Large Debt-to-equity ratio.) 0.05 2 0.1
Over Staffed 0.1 3 0.3
No Second Line Leaders (one man show) .05 2 0.1
Total 1 3.8

5.3 Competitors Key Success Factor
The steel sector in Egypt constitutes of 22 producers, with an annual capacity of 13.5 mn
tons of long products and 2.7mn tons of flat products. Since most of the demand on steel
in Egypt comes from infrastructural and housing projects, the majority of the production
is dedicated to long products.
The total capacity for the main three competitors 8 MN tons (49%) long products.
Ezz Steel Suez Steel Beshay Steel

Key Success Factor Weight
Weighted Weighted Weighted
Rate Rate Rate
score score score
Brand 0.2 5 1 3 0.6 4 0.8
Distribution Channels 0.2 5 1 3 0.6 3 0.6
Quality 0.1 5 0.5 4 0.4 4 0.4
Financial Position 0.1 3 0.3 3 0.3 3 0.3
Ability to export 0.1 5 0.5 2 0.2 2 0.2
Prices 0.1 4 0.4 4 0.4 4 0.4
economic of scale 0.1 3 0.3 3 0.3 3 0.3

Highly skilled
0.05 5 0.25 2 0.1 2 0.1
workforce
Strategic locations 0.05 4 0.2 3 0.15 2 0.1
Total 1 4.45 3.05 3.2

5.4 Strategic FactorAnalysis Summary(SFAS)
Weighted
Factor Weight Score
score
O1. Mega projects by the government in Egypt 0.15 4 0.6
O2. Demand is higher than the supply 0.10 4 0.4
O3. Future emerging markets. 0.05 4 0.2
O.4 Very High Entry Barriers 0.10 4 0.4
T1. Changes in the power prices (electricity and gas). 0.10 2 0.2
S1. Market leader in MENA Region. 0.05 5 0.25

S2. Wide portfolio (DRI, Billet, Rebars, Wire mesh, Wire
0.10 4 0.4
Rod, Flat Steel).
S3. Backward integration by establishing their own DRI
0.10 4 0.4
Plant (Main Raw Material) for the steel industry.
S4. Market Share domestically 45%. 0.05 4 0.2
S5. Economies of scale benefits. 0.15 4 0.6
W1. No Second Line Leaders (one man show) 0.05 2 0.1
Total 1 3.75

6.Strategic Alternatives & Recommended Strategies
(TOWS Analysis)
TOWS Matrix Strengths Weaknesses
• S1 Market leader in MENA Region. • W1 Financial position

• S2 Ezz Steel acquisition to EZDK (Large Debt to equity
• S3 Wide portfolio (DRI, Billet, ratio.)
Rebars, Wire mesh, Wire Rod, Flat • W2 Over Staffed
Steel). • W3 No Second Line Leaders.
• S4 Backward integration by
establishing their own DRI Plant
(Main Raw Material) for the steel
industry.
• S5 Economies of scale benefits.
• S6 Market Share domestically 45%.
Opportunities S1, O1 Take the opportunity of acquiring W1, O1 Exploit the

the new projects supply opportunity of the mega
• O1 Mega projects by the projects available to
S6, O3, O4 Take the opportunity of the compensate the debt to equity
government in Egypt
market growth and future emerging markets
• O2 Demand is higher than to keep our position and market share in the
ratio weakness.
the supply new markets
• O3 Future emerging W2, O3, O1 Exploit the
markets. S4, O2 the power of backward integration opportunity of new projects and
• O4 Market growth. could help control of raw materials supply future emerging markets to use
• O5 High Export potentials and allow us to take the opportunity of high the over staffed HR to
due to the regional demand versus low supply of products counteract the weakness
restructuring.
S1, O5 being market leader in the region
• O6 Very High Entry allow us to take the exportation
Barriers. opportunities in the region
• O7 Anti-dumping Laws.
Threats S5, T4 by using our economies of scale W1, T1 the high exit barriers as
to counteract the threat of price changing a threat to push the weakness of
• T1 High exit barriers. of energy in Egypt high debt to equity ratio as it
• T2 The governmental must be fixed as the exit from
interference in the industry S1, S5, T3 Using The high volume of the market is too costly.
• T3 Currency fluctuations & sales and market share to deal with the
tax laws changes. currency fluctuation with financial
• T4 Changes in the power institutions.
prices (electricity and gas).
S6, T2 the domestic market share of
45% support the company bargaining
power against the governmental
interference.

7.Internal, External & Space Matrix
Based on the previous analysis:

Internal Factor analysis 3.8
External Factor Analysis 3.3
Then our Company will be located on the first quadrate, this mean that the best choice is
to Grow & invest through one of the following strategies;
Backward, forward integration.
Market penetration.
Market Development
Product Development.

Now we will study the space matrix to be able to know the best strategy type to use
(defensive, competitive, aggressiveness or conservative)
Internal Analysis: External Analysis:

Ratin Ratin
Financial Position (FP) gs Stability Position (SP) gs
Return on Investment (ROI) 5 Rate of Inflation -3
Leverage 6 Technological Changes -2
Liquidity 3 Price Elasticity of Demand -3
Working Capital 4 Competitive Pressure -2
Cash Flow 3 Barriers to Entry into Market -2
Stability Position (SP)

Financial Position (FP) Average 4.2 Average -2.4
Internal Analysis: External Analysis:

Rati Ratin
Competitive Position (CP)
ngs Industry Position (IP) gs
Market Share -1 Growth Potential 6
Product Quality -1 Financial Stability 4
Customer Loyalty -2 Ease of Entry into Market 4
Technological know-how -1 Resource Utilization 4
Control over Suppliers and
Distributors -1 Profit Potential 4
Competitive Position (CP) - Industry Position (IP)

Average 1.2 Average 4.4

8.Strategic Alternatives and Recommended Strategy
Alternatives Corporate Strategies

▪ Vertical Integration Strategy
▪ Horizontal Integration Strategy
1. Vertical Integration Strategy
Ezz Steel deploys the latest in modern steel making technology and committed to further
increasing vertical integration across its plants, to boost operational flexibility. The co.
should invest in adding additional EAF with suitable capacity to supply the current two
rebars rolling lines. This will help the company to operate with the least cost in market.
Pros:
▪ Increase the production capacity.
▪ High performance and full utilization of the resources.
▪ Increasing market share.
▪ Satisfying the market demand from rebar’s domestically to seize any
opportunities in the market.
▪ Will give the company good opportunity to export their products.
Cons:
▪ Governmental regulations to issue new licenses.
▪ The investment cost for EAF request new debt burden.
2. Horizontal Integration Strategy:

The company may invest in acquiring a competitor (Suez Steel or Arco Steel) obtaining
DRI Plant.
Pros:
▪ Increase in market share and new and acquire new assets and plants
▪ The new acquired company will have its own DRI Plant, so this might help in
reducing the cost of the product and obtaining new market share.
▪ Increase the market power over suppliers and distributors.
Cons:
▪ Legal implications as horizontal integration can lead to a monopolistic attitude,
which is highly discouraged by the Egyptian government and laws.
▪ The difficulty to fund this acquisition.

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Vertical Horizontal
Internal Factor analysis
Integration Integration
Weight
Weighted Weighted
Strength
Score score Score score
Market leader in MENA Region. 0.1 5 0.5 5 0.5
Quality 0.15 4 0.6 4 0.6
Wide portfolio of products 0.1 4 0.4 4 0.4
Establishing their own DRI Plant 0.2 4 0.8 4 0.8
Market Share domestically 45%. 0.1 4 0.4 4 0.4
Economies of Scale Benefits 0.15 4 0.6 4 0.6
Weaknesses
Financial position (Large Debt-to-equity ratio.) 0.15 2 0.3 2 0.3
Over Staffed 0.05 2 0.1 2 0.1
No Second Line Leaders. 0.05 3 0.15 1 0.05
Opportunities
Mega projects by the government in Egypt 0.1 3 0.3 2 0.2
Demand is higher than the supply 0.15 2 0.3 2 0.3
Future emerging markets. 0.1 4 0.4 5 0.5
Market growth. 0.1 3 0.3 2 0.2
High Export potentials due to the regional restructuring 0.05 3 0.15 2 0.1
Very High Entry Barriers. 0.1 4 0.4 3 0.3
Anti-dumping Laws. 0.05 4 0.2 3 0.15
Threats
High exit barriers. 0.05 5 0.25 4 0.2
Governmental interference in the industry 0.1 4 0.4 3 0.3
Currency fluctuations & tax laws changes. 0.05 4 0.2 5 0.25
Changes in the power prices 0.05 5 0.25 5 0.25
Total 7.0 6.5
as per the below finding the best is to do a Vertical Integration Strategy.

9.Recommended Strategy
Corporate Strategy
▪ Vertical Integration Strategy
Business Strategy:
▪ Cost Leadership Strategy:
Through increasing the DRI raw material, 80 % of the raw material will be
manufactured internally by the company. This will help Ezz Steel to pursue
the Cost Leadership Strategy as they can reduce their cost accordingly.
Functional Strategies
▪ Operation Strategy:
1. Prepare for the usage of the EAF as an in-house manufactured main raw
material.
2. Study the ultimate main raw material mix for production depending on
the DRI.
▪ Financial Strategy:
Search for funding the project with the least interest percentage and terms
from either Egyptian or Foreign banks.
▪ HR Strategy:
1. Designing the structure of the new plant and the manpower needs.
2. Recruiting the best calibers in the market to join in the new line of
production.
3. Training and development for the current employees and the newly joined
to assist in full capacity utilization.
4. Rotating current employees and open chances for them to learn this new
technology.
5. Design succession plans for the company.
6. Designing MBO Performance Management System to synergize with the
strategic objectives of the company.
7. Updating the salary structure annually.
8. Motivate the current employees through conducting job rotation,
enlargement and enrichment.
▪ Marketing strategy:
1. Conduct market research to open new markets worldwide for exporting.
▪ Procurement strategy:
1) Conduct long term deals with the suppliers to offer the company with its
needs with the best price.
▪ Logistics Strategy:
1) Prepare the transportation strategy to transport the Iron and ore from the
port to the plant as it has special conditions in the transportation.

10.Strategy Implementation
Programs
1. Feasibility study for the establishment of new plants
2. integrated mini-mill techniques and strong operating margins across existing
and future investments
3. The management will set timeframe for executing the expansion plan initiated
earlier to take into consideration the current market circumstances and the cash flow
availability as the cost of projects will be financed through debt and equity.
4. The management will start negotiations on the required fund for establishing the new
plants from banks to check the available fund
5. It is expected that that the expansion scheme is anticipated to further
strengthen the group’s position and to intensify the synergies, which will
reflect positively on the group’s overall business and financial performance on
the medium to long term basis
6. Project management team will check the strategic locations for the new plants
7. The designed expansion plan will introduce flexible technology, which will
accommodate the existing melt shop with a capacity of 1.2mn tons per annum
– to produce flat as well as rebars products
8. Focus on employees training and development to lead to full efficient
utilization of capacities
9. Creating healthy environment to keep the employees healthy statuses
10. Investing in new people, technologies and processes will achieve the
ambitious targets.
11. Training and development for employees will be upon the results of
employees performance
12. New marketing campaign to inform customers with the quality and
competitive advantage of products yielded from DRI plants
13. Develop new contracts with customers with new strategy
Budgets
1. The budget of new EAF will be financed from a mix of the co. cash and a
syndicate debt from large Egyptian banks
2. The training budget will increase to train employees on efficient performance
and how to deal with new equipment
3. Increase the budget of investing in new technologies to get better performance
and full utilization
4. Assign new expenses for the new locations of new plants
5. Maximize the budget for technology development

Procedures
1. Send a portfolio of documents of the company current performance to the

potential banks to sign the new facility
2. Searching for competitive offers from advertising companies to launch new
marketing campaign
3. Set training schedules for training and development programs for the new
fiscal year.
4. Enhance the technology systems in the organization especially in the plants
5. Develop facilities and sales offers for the heavy marketing positions
wholesalers and retailers
6. Regular meeting for board of directors to check the updates of growing
strategy
7. Take offensive action with the competitors to increase the market share
11.Evaluation and Control
The process of evaluation and control differs from one organization to another based on
the organization's size, strategy and industry. Ezzsteel co. could confirm applying
evaluation and control criterion as below:
1. To evaluate and monitor the aforementioned alternative strategies to be adopted by

the company, the group will need the support and upgrade their MIS system. That
will easy and facilitate monitor of all business aspects through providing sufficient
data that helps decision and policy makers in the company.
2. Increase in production can be confirmed by the increase of annual sales figures and
accordingly associated profitability margins which should increase over the years
due to increase in production
3. Evaluating the performance through the periodical financial analysis
4. Check the co. financial performance through ROI and operating cash flow
5. Ensure employee satisfaction through periodical surveys
6. Investigate the results of KPI's and KRA'a for accurate performance evaluation
7. measures the difference between the market value of a corporation and the capital
contributed by shareholders and lenders through MVA
8. developing a balanced score card to measure the co. innovation and improvement
in financial, customer, and internal activities
9. evaluating the performance of top management and board of directors though the
financial statements analysis, strategic audit, management audit and the company
performance
10. Analyze the stock performance during the financial year
11. Measure customer satisfaction
12. Using Radio Frequency Identification to measure the efficiency in the supply
chain
13. Set predetermined and corrective actions for any violation of the strategy

14. The risk management should has a control on and periodical audit on the
performance of new plants
15. If there is a gap between the actual and expected production, a corrective action
should be there to achieve the targeted production
16. Assigning a complete Audit team conducting periodical checks to ensure
compliance with the group's policies and strategies
17. Set Risk Control Assessment policy for every department and should be reviewed
by the risk management on annual base
12. COVID-19 virus Effect & Continuity Plan (Recommendations)

Ezzsteel must take business continuity and the health and safety of its employees
seriously. Given the rapid spread of COVID-19 we want to share with you the Ezzsteel
business continuity plan.
Infrastructure
1. All Ezzsteel data should be backed-up in real-time on two different regions of a
cloud infrastructure. The system should have automatic failover between regions.
2. All Ezzsteel offices should have two diverse routed internet connections and
automatic failover. These connections should be upgraded.
3. Ezzsteel should take the approach that employee should be able to work from
anywhere at any time. Consequently, all systems should be accessible through
secure connections.
People
1. Ezzsteel should maintain staffing levels that allow for all roles to have
overlapping coverage by one or more employees. They should constantly review
the organisation for single points of failure and taking corrective actions.
2. During a situation such as the COVID-19 virus, Ezzsteel sholud operate on
alternate shift basis which protects the business from a single catastrophic event.
They should also have the capability of delivering all services with all of the
workforce working remotely.
3. In the case of an extreme regional crisis, Ezzsteel should have the plan to move
critical work to other offices in other regions.
4. Managers are to coordinate and approve their staff requests to work from home
according to business need and the nature of the job.
5. Maximum of 3 staff members in one lift while each one is giving back to the other
according to WHO recommendations.

Work Procedures
1. Supply chain managers are committed within maximum of two weeks to submit
reports recommending local and/or international suppliers for raw materials
replacing those located in the most affected countries like china, italy & USA
2. Travel should be sharply curtailed at this time. All employee travel and the travel
of their cohabitants is reported to minimize the risk of exposure.
All offices should implement elevated hygiene processes. These include extra
cleaning offices, additional social distancing and training for employees.
3. In the event of possible exposure to the COVID-19 virus, an employee should be
immediately quarantined for 14 days. Additionally, any other employee who has
come in contact with the potentially exposed employee should also be quarantined
for 14 days.
4. If someone who is exposed to COVID-19 enters a Ezzsteel office, depending on
the potential exposure, procedures are in place for the entire office to be closed
and sanitized.
Cleaning & Sanitizing Procedures

1. Re-allocating number of workers in each shift to minimize risk of infection
2. Sanitizers and soap being available for administrative staff where workers around
furnaces area are prohibited to use alcohol or sanitizers, however, soap is ensured
to be available all the time.
3. Seniors are responsible to ensure that all workers are wearing disposable masks
and gloves that are to be distributed on daily basis on all workers.
4. Kitchen area is prohibited unless for related staff and groups above 5 are not
allowed for meal breaks together
5. Using disposable cups for water and hot drinks instead of glass
12.References:
http://www.hoovers.com/
http://www.ezzsteel.com/
www.slideshare.net
www.merisratings.com
http://www.reuters.com
www.google.com.eg
www.investing.com

Annex I. Steel Industry Analysis
STEEL INDUSTRY
The steel sector is a The steel sector is a mature and cyclical sector; whereby its performance is positively correlated
mature and cyclical with the economic activity. Steel as a raw material is an essential component and is heavily relied
sector
on by most industries such as construction, infrastructure development, and transport, power,
World crude steel
and machine goods and automotive. World crude steel production reached 1,691.2 million tons
production reached (Mt) for the year 2017, up by 3.75% compared to 2016 with a total production of just over 1,630
1,691.2 million tons
(Mt) for the year million tons (Mt). Crude steel production increased in all regions in 2017 except in the CIS (The
2017, up by 3.75% Commonwealth of Independent States – or Russian Commonwealth), which has remained stable.
compared to 2016.
Manufacturing process:
Steel is manufactured by the chemical reduction of iron ore which is an energy intensive proce
follows:
1- Basic Oxygen Furnace (BOF): Accounts for 70% of world steel production1. In the
conventional integrated steel manufacturing process, this method relies on iron ore, coke, coal
and limestone as raw materials. This mix is then introduced into a blast furnace, producing
molten iron, which passes through an oxygen furnace with a very small amount of scrap added
to produce either billets or slabs.
2- Electric Arc Furnace (EAF): This method either fully relies on scrap or a mix of it with Direct
Reduced Iron (DRI), which are later introduced to the Electric Arc to finally produce billets or
slabs for further development. The Electric Arc method is generally accepted as the more
efficient process as it adheres better to the global environmental regulations and saves on
energy.
Basic Oxygen Furnace Process Electric Arc Furnace Process
Source: World Steel
Types of Steel Products:

Finished steel products are categorized as either:
1- Long products, which are manufactured using billets (a semi-finished product of steel).
Examples of long products are wire rods, rebars and sections which are all primarily used in
construction, building and reinforcement activities.
2- Flat products, which are manufactured using slabs (semi-finished steel) that is sold as a
base product for the manufacture of flat steel products. Examples include plates and hot rolled
coils (HRC), where plates are used to create large pipelines and HRC products are used in
making car bodies, cans and household appliances such as washing machines and refrigerators

Global Overview
I.A. World Steel Supply (Crude Steel Production):
World crude steel production reached 1,691.2 million tons (Mt) for the year 2017, up by 3.75% compared to 2016.
Annual production for Asia was 1,162.5 Mt of crude steel in 2017, an increase of 5.4% compared to 2016. China’s
crude steel production in 2017 reached 831.7 Mt, up by 5.7% on 2016. China’s share of world crude steel production
increased from 49.0% in 2016 to 49.2% in 2017. Japan produced 104.7 Mt in 2017, down by -0.1% compared to 2016.
India’s crude steel production for 2017 was 101.4 Mt, up by 6.2% on 2016. South Korea produced 71.1 Mt of crude
steel in 2017, an increase of 3.7% compared to 2016.
In 2017, the EU (28) produced 168.7 Mt of crude steel, an increase of 4.1% compared to 2016. Italy produced 24.0
Mt in 2017, up by 2.9% on 2016. Spain produced 14.5 Mt of crude steel in 2017, an increase of 6.2% compared to
2016.
Crude steel production in North America was 116.0 Mt, 4.8% higher than in 2016. The US produced 81.6 Mt of crude
steel, up by 4.0% on 2016.
World steel’s estimation of 2017 crude steel production in the CIS based on available data was 102.1 Mt, the same
amount as in 2016. Russia* produced 71.3 Mt of crude steel in 2017, up by 1.3% on 2016. Ukraine* recorded a
decrease of -6.4% with a year-end figure of 22.7 Mt.
Annual crude steel production for South America was 43.7 Mt in 2017, an increase of 8.7% on 2016. Brazil produced
34.4 Mt in 2017, up by 9.9% compared to 2016.
Source: World Steel Figures 2017

I.B. World Steel Consumption(Apparent Steel Use):
Total Global steel consumption reached
1,587MT in Dec17 vs 1,224MT back in Dec16
representing an increase of almost 30% y-o-y.
Total Global steel Chinese steel consumption recorded 46.4% of
consumption
reached 1,587MT in total global steel use as of Dec17. The Chinese
Dec17 vs 1,224MT economy has grown better than expected in
back in Dec16
2017. While consumption remains the
primary driver of growth, deceleration of
investment was contained. Reduced housing
inventories and strong Infrastructure
investment bring a mild boost to construction
activities. China’s global steel consumption
reached 736 MT in Dec17 vs 681 MT back in
Dec16. EU consumed 10% of total global steel Source: World Steel Figures 2017
in Dec17 vs 9% back in Dec16.
I.C. Production-Consumption Balance:

Global steel demand growth is expected to slow to 3.84 percent in 2018, after strong growth in
2017 driven by demand from top consumer China, the World Steel Association (world-steel)
Demand will reach announced.
1,648 million tones in
dec18, up from 1,587
million tons in 2017 Demand will reach 1,648 million tones in dec18, up from 1,587 million tons in 2017, world steel
announced. The 2017 figure corresponds to nominal growth of 7 percent. The steel industry,
worth about $900 billion a year, is a reflect of the world’s economic health.
China this year closed most of its outdated and in many cases illegal induction furnaces. World
steel expects demand in China to reach 765.7 million tons by end of 2018. The 2017 figure
corresponds to nominal growth of 8 percent. Next year, however, China’s demand will be flat.
Demand in India, the world’s third-largest steel consumer and the industry’s best hope after
China, is expected to grow just 4.4 percent by end of 2018 and 5.7 percent next year. On the plus
side, excess capacity is being reduced, thanks largely to China’s cuts, according to world steel
organization. Official figures from China show it has cut nearly 100 million tons of legal steel
capacity and 120 million tons of illegal induction furnace capacity since the start of 2017.
The average
capacity utilization I.D.: Global steel capacity utilization
in May 2018 was
77.7% compared to World crude steel production for the 64 countries reporting to the World Steel Association
69.4% back in Dec (world-steel) was 154.9 million tons (Mt) in May 2018, a 6.6% increase compared to May
2017.
2017.
The average capacity utilization in May 2018 was 77.7% compared to 69.4% back in Dec 2017.

Iron ore, steel
scrap, electricity,
and natural gas are
the main Inputs
used to produce Source: World Steel Figures 2018
steel
I.E: Inputs:
Iron ore, steel scrap, electricity, and natural gas are the main Inputs used to produce steel
i. Iron ore
According to BMI Iron Ore Report Q2 2018, the global Iron Ore production reached 3,257.3MM tones by end 2017
vs 3,197.9MM tones back in 2016, representing an increase of 1.86%. The largest iron ore producers Australia, Brazil
and China, producing 73% of total global iron ore at almost 2,380 MM Tons in 2017. Iron ore’s pricing mechanisms
are either spot purchases or long-term supply contracts. The current pricing mechanism is based on the average
spot price for iron ore supplied to China, quoted in a regularly published iron ore index, price dynamics generally
have experienced shorter cycles and greater volatility.
Iron ore prices

reached USD 70.6
M/T vs USD 58.0 M/T
in 2016

According to BMI report Iron Ore Q2 2017, Iron ore prices reached USD 70.6 per Ton in 2017 vs
USD 58.0 per Ton in 2016; BMI expects the prices to decrease to reach USD60/ton in 2018. BMI
still expect prices to lose steam over the coming months as Chinese authorities continue to shift
economic growth from heavy industries into services, slowing demand for industrial metals going
forward. The cooling of fiscal stimulus that started in H217 will continue, capping new demand
for iron ore as steel production slows due to a thinning pipeline of new infrastructure and
construction projects.
Source: USGS
Australia is the ranked first in the world that holds an average 35,000 million Metric tons of Iron Ore reserve. Second
in place is Brazil with total reserve of 29,000 million Metric tons. India is fifth with 7,000 million Metric tons as of
Dec 2017.
ii. Steel Scrap
According to Statista website, Steel scrap prices recorded USD 221 per metric ton in Dec17 vs
USD 204 per metric ton in Dec16 representing an increase of 8.3%.
Source: Statista, July 2018
The Henry Hub spot

price reached

$2.88/MMBtu on the
20th of Jun18 Versus
$3.77/MMBtu as of Global usage of scrap for steelmaking rose in dec17 on higher crude steel output, the Bureau of
Dec17
International Recycling said in a report published at its annual convention. Global steel
production grew 3.75% on the year in 2017 to 1.69 billion metric ton, mainly due to higher
production through scrap-intensive electric arc furnaces. While production of crude steel
through basic oxygen furnaces (BOF) rose 2.3% to 1.228 billion metric ton, output from EAFs grew
8% to 445 million metric ton. Steel scrap consumption in the EU grew 5.6% on the year to
93.35 million, while US consumption grew 3.7% to 58.8 million Metric Ton. Demand for steel
scrap in Korea grew 11.3% to 30.3 million Metric Ton and Japan was reported up 6.6% on the
year to 35.8 million Metric Ton. But the biggest surge was in Turkey, up 17% to 30.3 million Metric
Ton.
iii. Natural gas:

Natural gas is used as an input especially in
DRI production, consuming 80% in the
whole process. According to CIA World
Fact Book, the major natural gas producing
countries are USA & Russia, Iran & Qatar
producing 32%, 25%, 8% and 7%
respectively of total world produced natural
gas. Major exporting countries are Russia
and Qatar respectively with major
importing countries Japan, Germany &
Henry HUB, Jun18
United states.
The Henry Hub spot price reached
Steel Rebar Market is $2.88/MMBtu on the 20th of Jun18 Versus
expected to reach $3.77/MMBtu as of Dec17; as production
USD 170 billion by
2024 outpace demand.
I.F: Relation between input prices & FG steel prices:
The steel industry is exposed to price volatility due to its positive correlation with raw material
prices and availability. Rapid response of steel prices in a downward trend and with the global
oversupply of steel has negatively affected steel makers by not fully benefiting from it and their
inability to pass through cost escalations. In addition, a relatively more consolidated raw
materials industry has been swifter in its opportunistic reactions to demand-supply imbalances,
therefore steel producers often face margin squeeze without any protection. However,
steelmakers have largely responded to the challenge of raw material volatility and supply
security by vertically integrating their operations.

I.G: Rebar Global Prices:
As of the 2nd July 2018, rebar recorded USD 548 per ton compared to only USD 526 per ton as of
the 2nd of Nov 17, representing an increase of 4.2%, according to world steel.
Steel Rebar Market is expected to reach USD 170 billion by 2024; according to a new research report by Global
Market Insights, Inc. The increasing infrastructural development to build & remodel homes will drive steel rebar
market growth. Rising demand from real estate projects due to increased population will support product
penetration. As per National Association of Home Builders, the U.S home building and remodeling investment
accounted for over 3% share of GDP in 2017.
Higher investment in housing projects owing to improved lifestyle and rising disposable income will drive product
demand. Positive government support by facilitating subsidies and implementing new construction laws will propel
construction industry. Rising awareness regarding construction of earthquake resistant structures will augment steel
rebar market size.
I.H. Global Steel Outlook:

The World Steel Association projected that global steel demand will reach 1,648 million tons in
2018, an increase of 3.84 % over 2017. The association also estimated demand will stabilize to
reach 1,630 million tons in 2019, compared to 2018. High confidence, strong investment levels,
and recovery in commodity prices generated steel demand globally in 2018. On another note,
global steel production is expected to increase by almost 1.8% in 2018 and 1.03% in 2019;
according to BMI report.
II. Egyptian Steel Market

II.A. Macroeconomic overview:
Egypt’s Gross
Domestic product Egypt’s real economic growth is picking up, though moderately, benefits are becoming apparent
registered a strong across the whole economy reinforcing the investment aggregate, but the consumer remains
real growth of 4.1%
during 2017 quite challenged. Egypt’s Gross Domestic product registered a strong real growth of 4.1% during
2017, as a result in the growth in several sectors, including communication, tourism and
manufacturing and supported by the gradual implementation of business climate reforms and
improved competitiveness. Looking ahead growth is expected to gain further momentum,

driven by a recovery in consumption and private investment and a continued positive
contribution from net exports.
Egypt external position has witnessed a relative improvement in the first months of 2017 when
compared to the previous year’s performance, as the current account deficit has been cut by
half, mainly on the back of a surge in services balance and a decline in trade deficit supported
by a contraction in non-oil imports within the context of a weak Egyptian pound against the US
dollar and improved export competitiveness. Accordingly, Egypt’s balance of Payments
registered a significant surplus of US$ 11.8 bln in the first nine months of 2017 compared to a
smaller surplus of US$ 2.5 bln during the previous year’s corresponding period.
The fiscal position has benefited from a firm commitment by the government to fiscal reforms
under the IMF program, such as the introduction of the value added tax, subsidy reforms, and
the government wage reforms. As such, the general government fiscal deficit reached 10.9% of
GDP in FY 2017, compared with 12.5% in FY 2016. Total budget revenues went up by a solid
34.1% in local currency terms while budget expenditures were up by 26.2%. Egypt parliament
Subsequently passed the State budget for the FY 2018 with an ambitious budget deficit target
of 9.0% of GDP.
Source : CBE
Following the November 2016 currency floatation, the Egyptian pound has shown very modest
appreciation following devaluation. Within this context, monetary authorities maintained a tight
monetary policy throughout the year, before cutting rates by 100bps in Feb18 as inflation eased.
The central bank of Egypt, which benefited from strong inflows tied to improving fundamentals
and the US$ 12 billion loan agreement with the IMF, was able to replenish its FX reserves to
reach currently 44.03bln in April 2018.
According to the CBE, during the first Q1 of the FY 2017-2018, total FDI reached an amount of
US$ 3bln. Around 84 percent of FDI in Q1 were directed to the petroleum sector.
II.B. Egyptian Steel Sector Overview & Main Market Players:

Industries such as construction, housing, infrastructure, consumer goods and automotive, all
rely heavily on the steel industry and accordingly the Egyptian steel industry represents one of
the cornerstones of Egypt’s economic growth and development.

The iron and steel business is an important and strategic industry for any given community as it
The steel sector plays a key role in developing the industry and the economy as a whole. The Egyptian steel
COGS/Sales in
2016/2017 range
sector is the second largest steel market in the Middle East and North Africa region in terms of
from 85%-95% production and the third largest in terms of consumption. The Egyptian steel industry represents
depending on the
company’s degree of one of the cornerstones of Egypt’s economic growth and development, due to its linkages to
integration almost all other industries that stimulate economic expansion such as construction, housing,
infrastructure, consumer goods and automotive. All these industries rely heavily on steel
industry and so the importance and development of the steel sector is imperative for the
progress of the Egyptian economy in general.
The government is eager to protect its local production by imposing regulatory reforms in the
market, through imposing tariff on imported steel (Mainly from Turkey, Ukraine and China) to
protect its local producers’ market share. Consequently, a temporary import tariffs imposed by
Egypt on rebar steel from China, Turkey and Ukraine to protect local manufacturers came into
effect. The ministry published a decree stating that, the tariffs came into effect on the 6th of
June 2017 and would remain in place for four months. Moreover, the Ministry of Trade and
Industry decided back in dec17, to maintain tariffs on steel rebar imported from China, Turkey
and Ukraine for five years.
The steel sector COGS/Sales in 2016/2017 range from 85%-95% depending on the company’s
The steel sector in
Egypt constitutes of degree of integration, accompanied with relatively low SG&A Sales. The industry requires huge
almost 23 producers, spending on maintenance capex to maintain the efficiency of its production and high quality of
with an annual
production of its end products.
11.5MM tons
reached in Dec17 vs
11.7MM tons in On another note, it’s expected a rise in demand for building materials ahead for many
Dec16
megaprojects that are planned to be launched by the government. Egypt plans to build 1 million
homes for poorer people at a cost of almost $20 billion over the next five years, the housing
minister announced before, so as to ease a crunch that has seen slums and unlicensed buildings
spread since the 2011 uprising.
Steel Production Facilities

The steel sector in Egypt constitutes of almost 23 producers, with an annual production of
11.5MM tons reached in Dec17 vs 11.7MM tons in Egyptian Production Methods
Dec16; representing a slight decrease of almost 2%.
The Egyptian Iron and Steel (HADISOLB) – which is
the only public owned iron and steel facility
Ezz Steel Group, operating in the sector (from local iron ore ,
which on a
consolidated basis imported coal using Blast furnaces techniques ,
dominates about
50% market share
produces long & flat rolled products). An integrated
plant - EL Ezz Aldekhela Steel - (from imported iron
ore, local N.Gas using Electric Furnaces to produce Source: WSA
long, flat and rolled products). 6 semi- integrated
plants (from scrap to long products). More than 15 modern rolling mills for long products (from
billets). Many small, semi-automatic rolling plants for small cross-sections rolled bare for fences'

and decorations uses. It should be noted that the EAF method of production dominates the
Egyptian Production with 92% versus 8% using BOF, which is mainly employed in Egyptian Iron
and Steel plant.
Market Players
Steel industry in Egypt is concentrated among few market players, out of which the main market
player is Ezz Steel Group, which on a consolidated basis dominates about 50% market share2.
Suez Steel, along with Beshay Steel have combined market share of 27%. Such ratios clearly
indicate that the market is highly concentrated and that a small number of steel producers have
tremendous influence on the market, and in turn on prices.
Ezz Steel Group considered the largest steel manufacturer
in Egypt; its long products consist of rebars and wire rods,
while its flat products consist of hot-rolled coil. Capacity
currently around 5.8 million tons per annum (mntpa), 3.5 mn
tpa of which is in longs, with the remaining 2.3mntpa in flats
due to the production capacity flexibility of its plants. Long
products destined for the domestic markets and flat products
mainly directed for export.
The horizontal integration of Ezz Steel's activities - particularly
in rebar - help improve the company's profitability margins,
flexibility and productivity. This should enable it to use liquid
steel for the production of both flats and longs as the market
dictates.
BMI Metal Report 2018
Beshay Steel Group International Steel Rolling Mills: The rebar mill at the International Steel
Rolling Mills in Sadat City acquired from Bethlehem Steel’s Steelton plant in the USA with the
re-commissioning taking place in 1995. Beshay Steel group is the largest privately owned steel
producer in Egypt and the Middle East with an annual liquid steel capacity of up to 2.2MM tons
pa (1.8MM tons of D-bars and 0.4MM tons of Steel sections pa). Currently, the company is
focused on producing Direct Reduced Iron (DRI), Billets, Re-bars, Wire Rods and Light Sections
for the domestic and global markets. The group employs more than 3,500 handpicked
personnel, qualified at the highest levels to continue to exceed the standards of the industry.
Moreover, the company produces 1.8MM tons pa of DRI and 3.6MM tons pa of Billets.
Suez Steel "SSC” is part of Solb Misr which is an Egyptian Steel Group producing a wide range of
steel by-products, semi-finished, finished and downstream steel, in keeping with International
Standards. Currently SSC has two new rolling mills in addition to their existing rolling mill that
they acquired from their operational merge with Misr National Steel. The existing melt-shop at
Suez Steel is one of the largest in Egypt, in addition to DRI Production plant. Accordingly, the
company has a fully integrated production complex. SSC produce 0.938MM tons of its products
are transformed to D-bars, while 2.057M tons are sold as billets and 1.95M tons pa of DRI. Worth
mentioning, that the company was sold in Dec16 to National Service Project Organization
(NSPO).

Egyptian Steel founded in 2010 by Ahmed Abou Hashima and Qatari investor Shiekh Mohamed
Abou Suhaim Al Thani. Under the holding company, there are four companies, Industrial
Investment Company (IIC) for Steel Plants Management, National Port Said Steel (NPSS),
Egyptian Steel for Building Materials Trading, operating four primary factories in addition to Al
Khaleeg Trading for Building Material. The group targeted annual capacity is 1.1MM t/y of rebar
production, 750M t/y of billet production and 250M t/y of wire rods which all shall fully come
on course in 2018.
Steelmaker Egyptian Steel plans to open two new factories in Egypt, to raise its annual steel
production capacity to 3.5mn tons and boost its market share, according to Chairman Ahmed
Abou Hashima, the firm expects to launch a EGP3.5bn (USD460mn) plant, with an annual
production capacity of 1.36mn tons, in Beni Suef with its full production capacity by Q4 2017.
The steelmaker launched another factory in Ain- Sukhna by dec-2017. Egyptian Steel is also
carrying out a feasibility study for a fifth coal-powered factor.
I.C. Egyptian Steel Supply:

Egypt’s
consumption of Egypt’s steel industry did not suffer as expected after the 25th of Jan revolution; this was due
steel reached
almost 10 - 11MM to the stability in local demand, which was stimulated by the mass illegal constructions due to
tones in Dec 2017
the absence of the security power. Even in the years followed the revolution with all the
political unrest in Egypt, steel production was almost stable. Things really got bad for
production due to the energy crisis especially in Jun15, when many factories had to stop
production because of the shortage in natural gas supplied by the government. But the problem
was nearly solved and most plants went back to operation.
resident Donald
Trump announced on
March 2018 he
would impose hefty
tariffs on imported
steel and aluminum
to protect U.S.
producers
Source: World Steel Figures 2017
The steel sector in Egypt constitutes of almost 23 producers, with an annual production of
11.5MM tons reached in Dec17 vs 11.7MM tons in Dec16; representing a very slight decrease
of 2%.

II.D. Egyptian Steel Demand:
According to BMI Metal Report 2017, Egypt’s consumption of steel reached almost 10 - 11MM
tones in Dec 2017 and 700M tones are being imported mainly from Turkey, Ukraine and china.
The key driver for this consumption is real estate sector since Egypt is one of the heavy
populated countries in the MENA region with population that will reach more than 100MM
people by December 2017.
It’s is expected that demand will witness moderate growth rates, or worst case to be flat. Egypt
witnessed a strong demand in the past years, although political and economic unrest.
II.E. Import Export Metrics
One of the main and persistent criticisms that has always been directed to the steel making
industry in Egypt, is that even though the industry has sufficient and adequate finishing
facilities, it lacks intermediate capabilities. As a result, Egypt is a net importer of steel making
raw material, namely iron ore and scrap in addition to billets. The main reason for this is that
iron ore in Egypt has an iron concentration of 53%, while the industry requires, at least, an iron
concentration of 73% to produce steel with an acceptable quality.
Billets are a primary raw material/semi-finished good input for steel manufacturing in Egypt. Ezz
Group and Egyptian Iron & Steel (Beshay) are Egypt’s main manufacturers of billets, but the
producers use these internally. Egypt imports much of its iron and steel from Ukraine and
Turkey, which explains why movements in Egyptian steel prices resemble those in Turkey and
Egypt Exports of Iron
and steel was
Ukraine.
US$859.4 Million
during 2017
Regarding imports, President Donald Trump announced on March 2018 he would impose hefty
tariffs on imported steel and aluminum to protect U.S. producers, risking retaliation from major
trade partners like China, Europe and neighboring Canada. Trump said the duties of 25 percent
on steel and 10 percent on aluminum would be formally announced later. Trump believes the
tariffs will safeguard American jobs but many economists say the impact of price increases for
consumers of steel and aluminum, such as the auto and oil industries, will be to destroy more
jobs than they create.
The US is the world’s largest steel importer, buying about 35 million tons of foreign steel in 2017.
The decision could harm the Egyptian steel industry, where Egypt does not export aluminum to
the US but it exports steel. Egypt exported 170,000 tons of steel to the US in 2017, according to
the deputy head of the Metallurgical Industries Chamber (MIC) at the Federation of Egyptian
Industries. This represented a large increase over 2016, he said, adding that if Egypt was not
exempted from the new tariffs, it would likely lose these exports.
He also added that the figure had been expected to increase as Egypt has good production
capacities and several Egyptian steel companies have potential regarding possible steel exports

to the US. Only two Egyptian companies currently export steel to the US, Ezz Steel and Kandil
Steel, he said. Egypt should push for asking the US for an exemption on the new tariffs,
explaining that were this to be granted it could represent an opportunity for Egypt to boost its
steel exports to the US by filling the gap created by other countries not likely to be exempted,
including Turkey. Al-Marakby said that Turkey had exported 2.5 million tons of steel to the US
in 2017.
The decision to exempt Egypt from the new tariffs would likely be a “political” one, Al-Marakby
said. If Egypt did not receive the exemption, it could lose up to 170,000 tons of exports and the
potential to boost its steel exports to the US in the coming years, he said. Egypt’s steel exports
to the US were worth some $102 million last year, according to figures from the General
Organization for Import and Export Control.
. Egypt Exports of Iron and Steel in USD:
Egypt Exports of Iron and steel was US$859.4 Million during 2017, according to the United
Nations COMTRADE database on international trade, vs US$415 Million during 2016,
representing an increase of 107%; more than doubled. Most of the steel exported is rebars.
II.F. Egyptian Steel Prices:

▪ Raw Materials and Intermediate Prices:
With regard to Iron Ore, the only company that mines iron ore is Egypt Iron & Steel Co. where
it uses such supply for its own billet production. As mentioned earlier, Egypt’s iron ore
characterizes with lower iron concentration; consequently, Egyptian steel manufacturers resort
to importing iron ore; in addition to, scrap for production. On another note, according to World
Steel Association, Brazil and Australia are considered the main exporters of iron ore throughout
Almost 70% of the past few years.
electricity power is
fueled by natural
gas, 20% from oil, The market is responding to the increases in supply and a decline in demand in China, the
and 10% from
renewables world’s biggest buyer, as their economy showed signs of losing momentum amid an expanding
global surplus. Iron ore price reached $70.6 per ton in Dec 2017 vs $58 per ton only in Dec16

Previously, Egyptian steel industry was exposed to price volatility of the imported production
inputs and in turn, local prices indexed international raw materials prices with a minor premium.
The continuous increase in energy costs that contribute to increase in idle capacity, suggest a
premium of 10-20% compared to international prices according to Metal Bulletin Research.
Global billet prices showed a slight decrease of almost $347.62 per ton as of 30th of June 2018
compared to an average of $367 per ton as of 31st of Dec 2017; representing a decrease of 5%.
▪ Finished Steel Prices:
The Egyptian steel market had witnessed a surge in prices as of June 2018. The average steel
price had reached EGP 12,700 per ton as of the 30th of June 2018 vs EGP 12,200 per ton as of
31st of Dec17.
Source: BMI Metal Report

Egypt is expected to
double its natural gas
production by end
2018 Steel Industry encounters:
I. Energy prices hikes
Electricity:
After the Egyptian revolution 7 years ago, Egypt Kilowatt-month June 2018 August 2017
suffered from repeated power cuts, especially 50 22 piasters 11 piasters
during the summer months. Almost 70% of
electricity power is fueled by natural gas, 20% 51-100 30 Piasters 22 piasters
from oil, and 10% from renewables (Mostly 101-200 36 piasters 27 piasters
hydropower generation). Throughout the last
decades, electricity has been subsidized for both 201-350 70 piasters 55 piasters
the industrial and residential sectors; however, 351-650 90 piasters 75 piasters
the government started to release subsidies and
prices surged sharply. In June 2018, another 651-1000 135 piasters 125 piasters
increase was declared by the government.
1000+ 145 piasters 135 piasters
Source: Ministry of Electricity 2018

Natural Gas:
Throughout the last period, Egypt suffered from a decline in natural gas production although it
possesses significant reserves of natural gas. The shortage in natural gas supply has negatively
affected the steel industry as a whole, especially local producers of DRI as they rely heavily on
the supply of such energy to complete their operations as about 80% of natural gas consumption
is directed to the DRI. All producers depend on such energy supply to operate their EAFs;
therefore, shortage in supply will increase idle time leading to undesirable stoppage time and
reduction in capacity and production.
Accordingly, the government started to remove energy subsidies to industry, also accelerating
their due payments in order to keep foreign oil and gas companies in the local market. The lack
of supply of natural gas towards the industrial sector also came on the back of directing the
natural gas to the residential industry in order to downscale the power and energy cuts. Also,
as the cement sector is shifting to other energy sources, coke, the resulted excess of natural gas
from that shit can be directed towards the steel industry.
The government increased natural gas prices in accordance to the use of natural gas in the
industry, whether it is a feedstock or an intake. Below table shows increase in Natural Gas prices:
Business Sector Old Pricing June 2018 Variance

1. Natural Gas
The steel industry is (USD /mmbtu)
expected to maintain
a relative growth Steel 4.0 7.0 75%
counting on the Cement 6.0 7.0 16%
country’s reform
plan.
On March 2016, the Egyptian government declared that it will reduce the price of natural gas to
steel and iron factories to $4.5 per 1m thermal units from the current $7, Industry Minister,
Tarek Kabil, informed, according to Reuters, and till current date, the prices are still maintained.
The new reduced price will be offered only to those factories that currently operate at full
capacity according to the minister. But in Mid-2016, the government had cancelled this decision
returning to old prices (1m thermal units @ $7). It is good to mention that 1 produced ton of
steel consume 63 mmbtu.
Worth mentioning, It should be noted that with the Italian Eni’s supergiant gas discovery at its
Zohr Prospect holds a potential of 30 trillion cubic feet of lean gas, that when production starts,
would be able to meet Egypt’s own natural gas demands for decades to come. The field is
located in the Shorouk concession, a concession with an area of 3,765 square kilometers, which
was won by Eni in 2013. The field is estimated to lie in an area of 100 square kilometers and it
is located at a depth of 1,450 meters. The field was discovered in 2015 by the Italian energy
company Eni and it is supposed to be the largest ever natural gas find in the Mediterranean Sea.
The total gas in place of the Zohr gas field is around 850 billion cubic meters (30 trillion cubic

feet). Zohr will almost double Egypt's gas reserves. According to the agreement between the
government and Eni company, it is has already started its production in Dec17.
According to first estimates, thanks to the Zohr field, Egypt is expected to double its natural gas production by end
2018 and it will likely add an average of 2.7 bcf/d of natural gas to its production levels by 2019, as a study by the
Egyptian Center for Economic Studies (ECES) forecasted.
Energy Costs Implication on Steel Producers:

The process of steel manufacturing is more costly following the devaluation of the EGP/USD,
increasing the natural gas price value by 75%, in addition to an effective increase of electricity
prices. Per ton cost increases will vary based on the method of production (scrap or iron ore) in
addition to the degree of iron ore production relative to scrap in plants where both are used.
Generally, energy costs constitute 9-10% of COGS for scrap production and reach up to 22% of
COGS for DRI production.
II.G. Recent Developments:
A. New Steel licenses
Capacity expansion is ongoing with Port Said National Company for Steel, IIC for Steel Plants Ma
Marakbi.
On another note, Al-Wataniya granted licenses approval for steel plants with combined capacity
steel –
rebar (2mntpa) and billet (1mntpa) - requiring investments worth EGP3.2bn (US$561.9mn).
B. Egyptian Steel – Ain El Sokhna Plant

Egyptian Steel was granted the license to build its second plant in Ain Al Sokhna Plant (under
construction). The plant uses the latest Danieli technology by rolling the billets to rebars through
endless rolling. This technology is distinguished for saving time and energy in reheating billets,
making it among the first plants in the world to apply this technology. Al Ain Al Sokhna is
scheduled commenced its operations in Q4 2017. Production Capacity Expected: 530,000
tons/yr steel rebars- 830,000 tons/yr steel billets.
C. A New Army Plant

As of September 2016, President El Sisi has ordered the inauguration of two new Steel plant to
enter the local market, to be built and managed by the Egyptian Army. That’s mainly to increase
steel productivity in the local market and overcome the monopoly problem. Good to mention
that the National service project organization (NSPO) acquired Suez steel on Dec16.
D. El Garhy Group for Steel to establish USD 200 mn billet manufacturing plant
El Garhy Group for Steel is building a USD 200 mn iron ore billet plant, Chairman Gamal El Garhy announced. Once
completed, the plant will have a production capacity of 1.5 mn tons of billets annually, covering the needs of the
group’s steel rolling mills. New production lines will also increase the Group’s steel production to 3 mn tons per
year from a 1 mn tons currently.
E. Gioushi Steel plant: Tariq Qabeel, the Minister of Trade and Industry, had inaugurated the Geoushi Steel
Factory for the rebar steel production in 6th of October City; with a total production capacity of 240 thousand

tons per year. Moreover, it employs 500 technicians and employees. Its current investments are 500 million
pounds. The aim is to inject 250 million pounds to create a new production by Q3 2018.
Local Market Outlook:
The industry is expected to experience relatively growth supported by the ever increasing demand driven by mega
infrastructure projects, needed urbanization expansions and political stability. On the other hand, new Suez canal,
growth in the tourism sector along with the escalation in the FDI will increase the availability of FCY. The increase
in produced natural gas along with the opportunity to import liquefied natural gas (LNG) directly by companies will
enhance production efficiency, as the three main market players will run on fully integrated production complexes.
A strategy that is expected to increase the industry profit margin although prices are anticipated to be exposed to
a slight increase.
The steel industry is expected to maintain a relative growth counting on the country’s reform
plan.

Annex II. Financial Statements & Analysis
Balance Sheet (1/2)
Ezz Steel ‫حديد عز‬

Desc 2015 2016 2017 2018
Assets
Non - Current assets
Fixed Assets (Net) 11,210,886,000 28,144,636,000 26,625,490,000 26,456,608,000
Projects Under Implementation 4,908,387,000 609,178,000 943,234,000 361,503,000
Investments in Subsidiaries and Associates 115,000 115,000 115,000 115,000
Other Investments 109,880,000 109,880,000 109,880,000 109,880,000
Deferred Tax Assets - 2,719,242,000 2,046,026,000 1,778,346,000
Long - term lending 34,675,000 37,419,000 43,210,000 51,011,000
Other assets 30,315,000 30,315,000 24,785,000 22,306,000
Amortization 315,214,000 315,214,000 315,214,000 315,214,000
Total Non - Current assets 16,609,472,000 31,965,999,000 30,107,954,000 29,094,983,000

Current assets
Inventory 4,264,858,000 6,131,422,000 7,462,007,000 12,903,759,000
Accounts Receivable 14,849,000 287,324,000 188,295,000 371,877,000
Checks Under Collection - - - -
Due From Related Parties - - - -
Debitors and Other Debit Balances (Net) 2,267,645,000 2,595,637,000 3,491,198,000 4,293,285,000
Due To Related Parties 274,918,000 168,831,000 616,246,000 697,060,000
Treasury Bills 19,468,000 11,974,000 8,414,000 10,580,000
Cash and Cash Equivalents 4,784,403,000 5,104,712,000 4,729,816,000 2,621,422,000
Total Current Assets 11,626,141,000 14,299,900,000 16,495,976,000 20,897,983,000
Total Assets 28,235,613,000 46,265,899,000 46,603,930,000 49,992,966,000
Equity
Issued and Paid-Up Capital 2,716,325,000 2,716,325,000 2,716,325,000 2,716,325,000
Additional Paid-In Capital - - - -
Reserves 182,090,000 182,090,000 182,090,000 182,090,000
The results of the Asset's Cost Adjustment - 2,297,341,000 2,125,452,000 1,965,084,000
Retained Earnings 360,013,000 (1,967,635,000) (3,382,059,000) (5,037,010,000)
Loss / Profit of the year (418,031,000) - - -
Treasury shares (71,921,000) (71,921,000) (71,921,000) (71,921,000)
Translation provision differences of foreign entities 529,438,000 4,061,344,000 3,870,920,000 3,945,964,000
Dividends - - - (98,212,000)
Adjustments - - - -
3,297,914,000 7,217,544,000 5,440,807,000 3,602,320,000
1,483,758,000 2,979,278,000 3,377,642,000 2,661,410,000
Total Equity 4,781,672,000 10,196,822,000 8,818,449,000 6,263,730,000

Balance Sheet (2/2)
Desc 2015 2016 2017 2018
Liabilities
Non - Current Liabilities
Long Term Loans 6,971,255,000 9,234,971,000 9,767,010,000 11,233,811,000
Notes Payables - - - -
Long - Term Credit Balances 457,208,000 831,238,000 1,548,021,000 1,601,397,000
Due To Shareholders - - - -
Pension and similar provisions - - - -
Deferred Tax Liabilities 589,353,000 3,700,847,000 3,781,992,000 3,853,011,000
Total Non - Current Liabilities 8,017,816,000 13,767,056,000 15,097,023,000 16,688,219,000
Current Liabilities
Banks - Overdraft 181,797,000 60,070,000 6,646,000 35,918,000
Banks - Credit Facilities 10,267,838,000 14,916,461,000 13,898,058,000 15,431,817,000
Installments of long-Term Loans Payable during the Year 168,300,000 - - -
Suppliers and Notes payable 2,641,939,000 4,467,327,000 4,775,187,000 6,607,327,000
Customers - Advance payments 1,008,428,000 1,243,424,000 2,131,111,000 1,938,125,000
Creditors and Other Credit Balances (Net) 942,913,000 1,390,308,000 1,423,259,000 2,086,599,000
7,275,000 3,267,000 133,394,000 703,829,000
Short Term Borrowing - - - -
Accrued Expenses - - - -
Due To Sister Companies - - - -
Dividends Payable - - - -
Provisions 213,888,000 216,491,000 311,790,000 224,278,000
Other Adjustments 3,757,000 4,673,000 9,013,000 13,124,000
Total Current Liabilities 15,436,135,000 22,302,021,000 22,688,458,000 27,041,017,000
Total Liabilities 23,453,951,000 36,069,077,000 37,785,481,000 43,729,236,000
Total Equity and Liabilities 28,235,623,000 46,265,899,000 46,603,930,000 49,992,966,000
Increase in current assets over current liabilities (3,809,994,000) (8,002,121,000) (6,192,482,000) (6,143,034,000)
Total investment 12,799,478,000 23,963,878,000 23,915,472,000 22,951,949,000

Income Statement
Desc 2015 2016 2017 2018
Sales (net) 16,641,179,000 23,189,275,000 41,741,880,000 49,161,647,000

: (Deducted)
Cost of Goods Sold (COGS) (15,533,209,000) (20,676,787,000) (37,406,751,000) (43,583,506,000)
Gross Profit (EBITDA) 1,107,970,000 2,512,488,000 4,335,129,000 5,578,141,000
Add (deduct):
Other Operating Income 142,311,000 61,730,000 76,306,000 231,332,000
Selling and Marketing Expenses (164,200,000) (193,806,000) (287,215,000) (330,343,000)
General and Administrative Expenses (682,324,000) (756,390,000) (1,069,406,000) (1,314,565,000)
Other Operating Expenses (60,441,000) (21,616,000) (152,179,000) (335,297,000)
FX Loss - - - -
Depreciation - - - -
EBIT 343,316,000 1,602,406,000 2,902,635,000 3,829,268,000
Add (deduct):
Financing income 175,669,000 295,609,000 516,123,000 409,996,000
Financing Costs (1,211,162,000) (1,825,770,000) (3,703,212,000) (4,206,350,000)
Returns on investments in treasury bills - - - -
Reversal of impairment in assets - - - -
Provisions with no purpose - - - -
Impairment of inventories - - - -
Provisions - - - -
Capital gains / losses - - - -
Loss / Profit of Balance's Translation and Transactio (89,587,000) 815,910,000 86,828,000 37,162,000
Other Expenses - - - -
Net Financing Costs (1,125,080,000) (714,251,000) (3,100,261,000) (3,759,192,000)
Dividends From Subsidiaries - - - -

Net Loss / Profit Before Tax (781,764,000) 888,155,000 (197,626,000) 70,076,000
(Deducted):
Income Tax (Dividend Tax) (7,275,000) (2,699,000) (133,394,000) (770,995,000)
Deferred Tax 185,703,000 (325,303,000) (766,144,000) (328,829,000)
Total Income Tax 178,428,000 (328,002,000) (899,538,000) (1,099,824,000)
Net Income (603,336,000) 560,153,000 (1,097,164,000) (1,029,748,000)
Basic and Diluted Share per Share in Net Profit / Loss for the Year (LE / (0.78) 0.30 (2.96) (3.29)
(Deducted)
Other comprehensive income
Currency differences arising from the translation of - 4,970,324,000 (267,774,000) 81,349,000
Output adjustment of cost of assets - 4,013,795,000 - -
Deferred tax - (903,104,000) - -
Realized portion of results of asset cost adjustment - (40,809,000) (243,965,000) (229,877,000)
Actuarial losses / gains from defined benefit pensio n - 6,942,000 (8,291,000) 4,306,000
Transfer to retained earnings during the year - - - -
- - - -
Net Income (603,336,000) 8,607,301,000 (1,617,194,000) (1,173,970,000)

Cash Flow (1/2)
Desc 2015 2016 2017 2018
Cash Flow from Operating Activities
Net Loss / Profit Before Income Taxes (781,764,000) 888,155,000 (197,626,000) 70,076,000
Adjustments:
Depreciation of Fixed Assets 751,633,000 841,955,000 1,441,215,000 1,497,757,000
Expansion license consumption - - 5,530,000 5,801,000
Depreciation of the due treasury bills - (2,128,000) (8,848,000) (1,469,000)
Return on investments in treasury bills (3,827,000) - - -
Debt interest (financing interest) 1,211,162,000 1,825,770,000 3,703,212,000 4,203,544,000
Interest payable (finance expenses) - - - -
Finance Lease Expense Charged to the Income Statement during the Year - 16,761,000 42,706,000 50,755,000
Deferred Income Charged to the Income Statement during the Year - - - (429,000)
Loss / Profit of Foreign Currency Translation - Banks 10,869,000 - - -
Capital Loss / Gain 936,000 (4,727,000) (347,000) 47,060,000
Interest payable (finance expenses) - - - -
Provision created during the year 17,960,000 4,350,000 95,976,000 -
Provisions used - - - -
Inventories of impairment are reversed and assets are impaired 609,000 (3,613,000) 9,007,000 (5,791,000)
Provisions No Longer Intended (244,000) - (175,000) -
Adjustments (146,643,000) (1,052,460,000) (82,226,000) (47,295,000)
Dividends from Subsidiaries - - - -
1,060,691,000 2,514,063,000 5,008,424,000 5,820,009,000
Change in:
Inventory (107,743,000) (943,292,000) (1,379,974,000) (5,420,456,000)
Accounts And Notes Receivable (1,580,787,000) (517,123,000) (1,339,614,000) (974,482,000)
Checcks under collection - - - -
Suppliers - Advance Payments (Net) - - - -
Debitors and Other Debit Balances (Net) - - - -
Accounts And Notes Payable 3,364,948,000 1,121,506,000 2,301,638,000 1,858,099,000
Customers - Advance payments - - - -
Creditors and Other Credit Balances (Net) 3,654,000 (3,896,000) (7,107,000) (12,206,000)
Cash (Used in / Generated) from Operating Activities 2,740,763,000 2,171,258,000 4,583,367,000 1,270,964,000
Provisions Used (8,444,000) (1,746,000) (377,000) (79,180,000)
Paid Finance Ineterests (41,786,000) (1,431,911,000) (3,578,565,000) (4,368,212,000)
Paid Income Tax (999,908,000) (7,275,000) (3,267,000) (81,856,000)
Declines used from the value of the assets - - (1,089,000) (25,760,000)
Prepaids - - - -
Other Receivables - - - -
Other Current Assets - - - -
Other Current Liabilities - - - -
Net Cash (Used in / Generated) from Operating Activities 1,690,625,000 730,326,000 1,000,069,000 (3,284,044,000)

C ash Flow (2/2)

Desc 2015 2016 2017 2018
Cash Flow from Investment Activities

Payments for the Purchase of Fixed Assets and Projects in Progress (1,125,629,000) (871,719,000) (760,863,000) (862,537,000)
(Payments) Projects in progress (30,315,000) - - -
(Payments) Purchase of treasury bills during the year (184,248,000) (66,228,000) (172,866,000) (38,747,000)
(Receipts) from the recovery of treasury bills during the year 219,100,000 75,850,000 185,274,000 38,050,000
Cash Receipts from Sale of Fixed Assets 5,907,000 6,784,000 875,000 224,638,000
- - - -
Cash Receipts from Dividends from Subsidiaries - - - -
CHG LT Receivables (7,675,000) - - -
CHG NET Intagiables - - - -
CHG Other Taxes (7,950,000) - - -
Sundry Expense - - - -
Net Cash Flow from Investment Activities (1,130,810,000) (855,313,000) (747,580,000) (638,596,000)
Cash Flow from Financing Activities

Payments to Repay Long-Term Loans (2,876,035,000) (778,858,000) (2,752,653,000) (624,552,000)
Receipts from Long Term Loans 3,836,651,000 565,218,000 314,526,000 3,033,399,000
Receipts from short - term loans - - - -
Paid from Finance Leases (1,925,156,000) (26,481,000) (31,671,000) (72,100,000)
Net Receipts from Finance Leases - - - 98,097,000
Proceeds from cash deposits and frozen current accounts - 465,170,000 566,314,000 1,018,231,000
Dividends paid (to employees or non-controlling interests) (60,235,000) (137,333,000) (164,238,000) (1,134,206,000)
Debt Interests - - - -
Credit Payments / Receipts from Banks 1,504,006,000 700,354,000 2,238,476,000 550,904,000
CHG Shareholder's Account - - - -
CHG Equity - - - -
Net Cash Flow from Financing Activities 479,231,000 788,070,000 170,754,000 2,869,773,000
Change in Cash and Cash Equivalents during the Year 1,039,046,000 663,083,000 423,243,000 (1,052,867,000)
Loss / Profit of Balance's Translation and Transactions in Foreign Currencies - 264,277,000 - -
Net Change in Cash and Cash Equivalents during the Year 1,039,046,000 927,360,000 423,243,000 (1,052,867,000)
Cash Available - Beginning of the Year 608,136,000 1,647,865,000 2,598,427,000 3,019,728,000

683,000 23,202,000 (1,942,000) 11,515,000
Cash Available - End of the Year 1,647,865,000 2,598,427,000 3,019,728,000 1,978,376,000

Financial Analysis (1/2)


DESC 2015 2016 2017 2018
DUPON FORMULA-Asset Efficiency-Fixed Assets Turnover 148.44% 82.39% 156.77% 185.82%
DUPON FORMULA-Asset Efficiency-Total Assets Turnover 58.94% 50.12% 89.57% 98.34%
DUPON FORMULA - Profitability-Return On Total Assets -2.14% 1.21% -2.35% -2.06%
DUPON FORMULA - Profitability-Return On Common Equity (Dupont Analysis) -12.62% 5.49% -12.44% -16.44%
PROFITABILITY-NET OPERATING PROFIT MARGIN (EBIT/SALES)BASIC EARNING POWER 2.06% 6.91% 6.95% 7.79%
PROFITABILITY-Profit Margin on Sales -3.63% 2.42% -2.63% -2.09%
LIQUIDITY-CURRENT Ratio - Net working Capital (NWC) 0.75 0.64 0.73 0.77
LIQUIDITY-QUICK Ratio 0.48 0.37 0.40 0.30
LIQUIDITY-Debt Management-DEBIT Ratio 0.83 0.78 0.81 0.87
LIQUIDITY-Debt Management-Times-Interest-Earned (0.33) (1.05) (0.91) (1.01)
ASSET EFFICIENCY-A/R Days on Hand A/R DOHDays Sales Oustanding 0.33 4.52 1.65 2.76
ASSET EFFICIENCY-Inventory Turnover 390% 3.78 5.59 3.81
MARKET VALUE-Price / Earnings (7.91) 11.22 (10.33) -
MARKET VALUE-Price / Cash Flow 32.20 4.49 33.28 -
MARKET VALUE-Market / Book Value 1.99 8.97 (13.26) (4.09)
DUPON FORMULA-Return on Sales -3.63% 2.42% -2.63% -2.09%
DUPON FORMULA-Return on Capital Employed (Working Capital) -9.01% -20.02% -46.87% -62.34%
DUPON FORMULA-Return On Invested Capital -4.71% 2.34% -4.59% -4.49%
DUPON FORMULA-Dupont Analysis -12.62% 0.05 (0.12) (0.16)
PROFITABILITY-Sales Growth Rate - 39.35% 80.01% 17.78%
PROFITABILITY-COGS/SALES 93.34% 89.17% 89.61% 88.65%
PROFITABILITY-GROSS PROFIT MARGIN EBITDA MARGIN 6.66% 10.83% 10.39% 11.35%
PROFITABILITY-SG&A/SALES 5.09% 4.10% 3.25% 3.35%
PROFITABILITY-FX LOSS SALES -0.54% 3.52% 0.21% 0.08%
PROFITABILITY-NPBT/SALES -4.70% 3.83% -0.47% 0.14%
PROFITABILITY-INTEREST/SALES -6.22% -6.60% -7.64% -7.72%
PROFITABILITY-TAXES/NPBT 22.82% 36.93% -455.17% 1569.47%
LIQUIDITY-Free Cash Flow (LE M) 148.30 1,399.98 340.73 472.34
LIQUIDITY-WORKING CAPITAL (LE M) (3,810) (8,002) (6,192) (6,143)
ASSET EFFICIENCY-ASSET GROWTH - 63.86% 0.73% 7.27%
ASSET EFFICIENCY-Working Capital Investment (LE M) 629.34 708.00 744.00 4,730.18
ASSET EFFICIENCY-% CHG Working Investment - 0.125 0.051 5.358
ASSET EFFICIENCY-Working Investment/Sales 3.78% 3.05% 1.78% 9.62%
ASSET EFFICIENCY-Receivables Turnover Ratio 0.09% 1.24% 0.45% 0.76%
FINANCIAL STRUCTURE-% Short Term Debit 0.00% 0.00% 0.00% 0.00%
FINANCIAL STRUCTURE-% Spontaneous Financing 12.72% 12.67% 13.59% 18.80%
FINANCIAL STRUCTURE-% Long Term Debit 24.69% 19.96% 20.96% 22.47%
FINANCIAL STRUCTURE-% Equity 16.93% 22.04% 18.92% 12.53%
FINANCIAL STRUCTURE-% Other Liabilities 43.57% 37.33% 38.42% 38.49%
FINANCIAL STRUCTURE-% Other Grey Area 2.09% 8.00% 8.12% 7.71%
FINANCIAL STRUCTURE-TOTAL 100.00% 100.00% 100.00% 100.00%
PER SHARE DATA-Earnings per Share (1.11) 1.03 (2.02) (1.90)
PER SHARE DATA-Book Value per Share 5.53 1.25 (1.36) (4.40)
PER SHARE DATA-Cash Flow per Share 0.27 2.58 0.63 0.87


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STRATEGIC MANAGEMENT

Dr. Ashraf Abdel Khalek

Ezz Steel Strategic Plan

SL60A - Group A 1 Final Project: ezzsteel Case Study

SL60A - Group A 2 Final Project: ezzsteel Case Study

Certification and Management systems

SL60A - Group A 3 Final Project: ezzsteel Case Study

Entering new markets and expanding existing markets through continuous

SL60A - Group A 4 Final Project: ezzsteel Case Study

Board of Directors: executive and non-executive members.

Ezz steel stocks are publicly traded. Stocks ownership structure:

SL60A - Group A 14 Final Project: ezzsteel Case Study

• Market leader in MENA Region.

SL60A - Group A 15 Final Project: ezzsteel Case Study

Political & Legal Forces:

SL60A - Group A 16 Final Project: ezzsteel Case Study

o ezzsteel has invested extensively in environmental protection at its plants,

SL60A - Group A 17 Final Project: ezzsteel Case Study

New Market Entrants (High)

Supplier Bargaining Power (Low);

Competitive Rivalry (Medium);

Buyer Bargaining Power (Low);

SL60A - Group A 18 Final Project: ezzsteel Case Study

5.1 External FactorAnalysis Summary(EFAS)

Mega projects by the government in Egypt .15 4 0.6

Demand is higher than the supply .10 4 0.4

Future emerging markets. .10 4 0.4

Market growth. .05 3 0.15

Anti-dumping Laws. .05 2 0.1

High exit barriers. .10 4 0.4

The governmental interference in the industry .10 3 0.3

Currency fluctuations & tax laws changes. .15 2 0.3

Changes in the power prices (electricity and gas). .05 2 0.1

SL60A - Group A 19 Final Project: ezzsteel Case Study

Market leader in MENA Region. 0.1 5 0.5

Ezz Steel acquisition to EZDK 0.15 4 0.6

Financial position (Large Debt-to-equity ratio.) 0.05 2 0.1

Over Staffed 0.1 3 0.3

No Second Line Leaders (one man show) .05 2 0.1

SL60A - Group A 20 Final Project: ezzsteel Case Study

Ezz Steel Suez Steel Beshay Steel

Distribution Channels 0.2 5 1 3 0.6 3 0.6

Quality 0.1 5 0.5 4 0.4 4 0.4

Financial Position 0.1 3 0.3 3 0.3 3 0.3

Ability to export 0.1 5 0.5 2 0.2 2 0.2

Prices 0.1 4 0.4 4 0.4 4 0.4

economic of scale 0.1 3 0.3 3 0.3 3 0.3

Total 1 4.45 3.05 3.2

SL60A - Group A 21 Final Project: ezzsteel Case Study

O1. Mega projects by the government in Egypt 0.15 4 0.6

O2. Demand is higher than the supply 0.10 4 0.4

O3. Future emerging markets. 0.05 4 0.2

O.4 Very High Entry Barriers 0.10 4 0.4

S1. Market leader in MENA Region. 0.05 5 0.25

S5. Economies of scale benefits. 0.15 4 0.6

W1. No Second Line Leaders (one man show) 0.05 2 0.1

SL60A - Group A 22 Final Project: ezzsteel Case Study

• S1 Market leader in MENA Region. • W1 Financial position