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Strategic Recommendations:1- Introducing New grades of Advanced High Strength Steel AHSS, willprovide lighter, optimized body designs for car and truck body structureindustry that enable improved vehicle crashworthiness, improved fueleconomy and lower total greenhouse gas emissions.2- Invest in Renewable Energy particularly through alliance with aninternational developer in wind power generation to produce electricityfrom wind farms and thus benefiting from selling carbon certificatestraded in the London Stock Exchange(1Ton Co2=$4.0).3- Invest in Libya for a steel production line.4- Implementing a waste heat recovery in the four production plants andbenefiting from EU grants and CDMA funds. (production cost efficiency)5- Preparing a junk yard equipped with machinery for 30 yrs old carrecycling proposed new law.
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Company Profile
• EZZ STEEL Virtually a steel monopolist in Egypt since 1999.
• EZZ STEEL (ES) became the largest player in the domestic market
with respective shares of 65% & 60% of rebars & flat steel local
sales during 9M08. Currently, ES owns 90.73% of Ezz Steel Mills
(ESM); 75.15% of EFS and 53.24% of EDZK.
• EZZ STEEL stands out as lowly rated and growing quickly. The
catalyst is the construction volumes as it controls its margins.
• EZZ STEEL cheaper than foreign competition. Benefits from any
rally in commodity prices, and more fundamentally from the
continued (non-housing) construction investment we think will
continue in Egypt.
Ezz Steel Success History
• In the early 70’s of the last decade,
Haj Abdel Aziz Ezz the father of Ahmed
Ezz began the steel wholesale business
and then importing steel rebars
from Ukraine and former
Soviet Union.
Company Structure
53.24%
Market Share
Steel Cost Structure
• Raw materials account for the highest contribution to the total production cost 75%.
• Feedstock mixes is composed of:• DRI (Direct reduced iron)• Billet• Scrap
• local manufacturers fully import their raw materials.
• Steel Industry is an energy intensive industry Energy costs contribution is 7%
Ezz Steel Cost Structure
• EZDK uses a DRI/Scrap mix of 80/20• ESR uses a DRI/scrap mix of 15/85• EFS uses a DRI/scrap mix of 25/75
Raw Material Prices
Commodity Nov. 2007 Oct. 2008 Nov. 2008 Monthly Change Rate
(%)
Iron (billet)
519.0 481.0 321.7** -33.1
Copper 6942.1 4863.3 3825.8 -21.3
Aluminum 2266.9 1660.6 1393.0 -16.1
USD / Ton
Energy Prices
• Electricity:
Item Oct. 2007
Sept.
2008
Oct. 2007 Monthly change
rate (%)
Generated Electricity 10198 11732 10599 -9.7
Total Consumption 9221 10187 10021 -1.6
Million kwh
Energy Prices
• Petroleum:
Item Sep. 2007 Aug.
2008
Sep. 2008 Monthly change
rate (%)
Production of crude oil, condensates and butane
(000 tone)
2707 3006 2891 -3.8
Domestic consumption of petroleum products
(000 tons)
2465 2430 2650 9.1
Exports of crude oil and petroleum products
(USS m.n)
396.0 481.0 424.0 -11.9
Energy Prices
• Natural Gas:
Item Sep. 2007
Aug.
2008
Sep. 2008
Monthly change
rate (%)
Natural gas production
(00 tone)
3490 3850 3766 -2.2
Domestic consumption of natural gas
(000 tones)
2424 2696 2660 -1.3
Electricity consumption as % of natural gas consumption
5720 58.3 58.1 - 0.2
Exports of natural gas and its derivatives
( Uss mn)
230 325 368 13.2
Steel Market Demand
• Per/capita Consumption of Steel• 20 kg. per person per year in Africa
• 340 kg in Europe.
• 420 kg in North America
• 635 kg in Japan.
• Singapore (1,200 kg/capita)
• Taiwan ROC (over 970 kg)
• Rep. of Korea (830 kg).
Steel Market in Egypt
• Market Structure:• 20 steel producers in the local market. • Total capacity of 9.60 mn tons of steel products.• Steel rebars 72.9% and flat steel 27.1%.
Steel Market in Egypt
• Steel Market:
Item Sep. 2007Aug.
2008Sep. 2008
Monthly change
rate (%)
Reinforcement steel production
(000 tons)
256.4 284.1 239.7 -15.6
Reinforcement steel sales
( 000 tons)239.2 273.2 216.6 -20.7
Iron local prices (LE/ton) 3530 6630 5950 -10.3
EZZ Steel Mission
• To continually build our capacity and knowledge base to meet the growing and diverse needs of customers across the region.
• To offer a full line of products, grades and qualities that are perceived as equal to – or better than – those of market-leading producers.
• To provide a service that meets or exceeds customer expectations.
EZZ Steel Vision
• To sustain our position as the leading steel producer in the Middle East region and to remain a global player in the international steel trade, with a brand name that is synonymous with quality and reliability.
EZZ Steel Objective
• Increase our profit margins.• To increase our growth rate through regional
expansions.• To protect our environment.• Optimizing operations
WHY EGYPT ?
• Political Stability.• Diverse Economy.• Available Energy Resources w/competitive prices.• Large local market, proximity to GCC, MENA, EU• markets.• Availability of qualified Labor force at competitive
cost.• Developed infrastructure (telecommunications,
roads,• sea ports, airports)
EGYPT land of opportunities
• PEST Analysis:– Political & Legal Forces:
• Egypt has introduced to humanity the oldest political system. Along the banks of the River Nile, there arose the most ancient unified government which built the greatest civilization in the world. Over ages, the bases of the Egyptian political system were deeply entrenched.
• Modifying anti-monopoly law.• Removal of export duties & export ban.• Raising energy prices.
EGYPT land of opportunities
• PEST Analysis:– Economic Forces:
• Real GDP Growth Rate
2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8
3.4 3.2 3.1
4.25.1
6.8
7.17.2
Summary Macro SnapshotActual Forecast
2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12
Real GDP Growth (%) 6.8% 7.1% 7.2% 5.0% 4.4% 5.7% 6.3%
Population 71,347 72,798 74,357 75,844 77,361 78,908 80,486
Avg. Population (>15<45 yrs
old)
35531 36253 37030 37770 38526 39296 40082
GDP/Capita, Current (US$)
1527 1792 2191 2305 2455 2698 3026
Private Sector Credit
Growth 5.3% 9.1% 13.4% 10.5% 9.0% 12.3% 14.0%
Fiscal Deficit % GDP 8.0% 7.3% 6.6% 6.5% 6.0% 5.7% 5.3%
EGYPT land of opportunities
• PEST Analysis:– Economic Forces:
• Inflation Rate
Inflation Rate
Oct. 2007 Sep. 2008 Oct. 2008 Change
Monthly 1.0 0.3 -0.01 -0.4
Annual 7.5 21.5 20.2 12.7
EGYPT land of opportunities
• PEST Analysis:– Socio-Cultural Forces:
• Egypt's population until May 1, 2008 reached 78.7 million
according to final results of this year's census as announced
Thursday by the Central Agency for Public Mobilization and
Statistics (CAPMAS).
• Of the population 37.2 million are males, up 22.6 percent from the
30.4 million in 1996, and 35.6 million are females which is 22.9
percent more from their count in 1996 that was estimated at 29
million.
• High rates of population growth has lead to a greater demand for
utilities and service
EGYPT land of opportunities
• PEST Analysis:– Socio-Cultural Forces:
• Population: • 41% of the population are 58% of the population is part of
Between the age of (15-39) the work force age (15-64)
13%20%
2000 2006 2000 2006
EGYPT land of opportunities• PEST Analysis:
– Technological Forces:
Item Sep. 2007Aug.
2008Sep. 2008
Monthly change rate
(%)
Land line telephones subscribers (millions)
11.03 11.40 11.42 0.2
Mobile phones subscribers (millions)
26.40 37.62 38.00 1.2
Internet users (million) 10.02 11.08 11.69 5.5
Internet international connection capacity (million bit/second)
14556 24522 27077 10.4
Companies in the field of Information and communications Technology (ICT) (company)
2278 2600 2621 0.8
Corporate Value Chain Analysis
SupplierValue
Chains
FirmValueChain
ChannelValueChains
BuyerValue
Chains
Firm Infrastructure
Human Resource Management
Technology & Product Development
Purchasing&
InboundLogistics
Production Distribution Marketing& Sales
Service
MA
RG
IN
Ezz Steel Value Chain Analysis
• With EZZ Steel Components, customers can avoid capital investment and move away from non-value-added primary operations. Instead, they can rely on EZZ to perform the initial operations, and receive components at any value-added level.
Ezz Steel Value Chain Analysis
• Through EZZ supply chain system, they provide cost-effective raw material for planetary gear sets, manual gears, input/output shafts and other transmission components.
• They consider the customer’s production capabilities or requirements, our capabilities and those available from our network of manufacturing partners. Then they develop an optimal supply chain solution that provides the component required by the customer, at the lowest possible per-unit price. This enables a lean approach to supply chain management for the customers.
Ezz Steel Value Chain Analysis
Porter’s 5 Forces
Porter’s 5 Forces
• EZZ steel a monopoly in Egypt.
• Low Fixed Cost.
• High Capacity.
• High Exit Barrier from the market.
Porter’s 5 Forces
• It’s very difficult to enter steel market due to :– Huge Capital requirement .– Government policy that protect Egyptian
market from import.
Porter’s 5 Forces
• Arising of new technique as spar block technology.
• Minor Threat of retaining walls.
• Minor Switching cost.
Porter’s 5 Forces
• Recommended by Engineering Consultants
• As high market demand in Egypt .
• Monopoly status
Porter’s 5 Forces
• Suppliers:
- Billet suppliers have power
- Power and Energy Suppliers have power.
SWOT Analysis
• Strengths :– High market share .– Political support – Good working condition :
» Low turnover.» Retain employees .» Carrier path .» Loyalty.
– Effective distribution channels.– High turn over and working capital .– Strong Strategic team .– Strong Export market . ( Dekheila sea port ).– Powerful R&D .
SWOT Analysis
• Weaknesses:– Working union.– Working locations
SWOT Analysis
• Opportunities :
– New regional market specially Algeria & Libya .– Market growth
» Middle age growth of population.
– Construction backlog.» As projects announced TMT ,ORASCOM Hotels and E3mar.
– Preferential among engineering consultant .– Outstanding Quality Product than other competitors .– El-Sokhna Plant
» Exempted from Custom Duties and Taxes (Free Zone) .
SWOT Analysis
• Threats :– Monopoly resistance
» Public opinion .
» Governmental . ( Anti-Monopoly law ).
– New Steel manufacture license for DRI/billet (4 licenses).
– Imports .
– High Energy Prices :
» Electricity .
» Natural Gas.
» MAZOT.
– Low corporate governance in the company.
– Environment regulations (1.9 ton Co2 / Ton steel)
Ezz Family wholesaleEzz Family wholesale
Manufacturing
1995
Manufacturing
1995
1- Steel rebars1- Steel rebars2-Flat Steel sheets2-Flat Steel sheets 3-Dekheila factory3-Dekheila factory
4- Private sea port
4- Private sea port
5- Algeria Factory 5- Algeria Factory
License for Production of Raw materials
(DRI/billet)
License for Production of Raw materials
(DRI/billet)
1999
1995
1996
70’s - 90’s
2010
2008
BCG Matrix
Directional Policy Matrix
Strong Business , Considerably High Market
Attractiveness
Invest Grow
Harvest Divest
Hig
h L
ow
Mark
et A
ttractiv
en
ess
High Low
Business Strength
Competitive Analysis
Maintain Specialty Outstanding Success
Hope for Market
Growth
Maintain Cost Advantage
Hig
h L
ow
Mark
et A
ttractiv
en
ess
High Low
Business Strength
Ezz Steel Life Cycle
1994-1999 EZZ started the business in the local market
1999-2008 EZZ acquires DEKHEILA
2008 EZZ take the license to produce bellit (raw material)
Marketing Mix
• Product
• Price
• Place
• Promotion
• Distribution strategies … see next slide
Marketing MixDEMAND-PULL FORCES
• Steel consumption is closely tied to the mushrooming
construction activity. Construction activity in Egypt grew
by 7.4% over 2004-2007; triggering rebars consumption
to grow by 15.9% over the same time span.
• Consumer goods and the locally assembled vehicles
(Completely Knock down – CKD) are key consumers of
flat steel. Growing production levels in both industries
drove up the demand for flat steel which enjoyed a
13.3% over 2004-2007
FinancialsKey highlights
EGP 2006 2007 +/-• Net sales 11.6bn 16.2bn +40%• Gross profit 3.2bn 3.6bn +12%• EBITDA* 3.6bn 3.9bn +8%• Net profit before tax 2.6bn 2.9bn +11%• Tax and deferred tax 611m 653m +7%• Net profit after tax and minority interests 995m 1.1bn +12%• EPS on a weighted average number of shares 5.85 6.26 +7%• Net debt to Equity 1.26x 0.99x -21%
Strategic Recommendationsezzsteel
عـــز حــديـد
1- Introducing New grades of Advanced High Strength Steel AHSS, will
provide lighter, optimized body designs for car and truck body structure
industry that enable improved vehicle crashworthiness, improved fuel
economy and lower total greenhouse gas emissions.
2- Invest in Renewable Energy particularly through alliance with an
international developer in wind power generation to produce electricity
from wind farms and thus benefiting from selling carbon certificates
traded in the London Stock Exchange(1Ton Co2=$4.0).
3- Invest in Libya for a steel production line.
4- Implementing a waste heat recovery in the four production plants and
benefiting from EU grants and CDMA funds. (production cost efficiency)
5- Preparing a junk yard equipped with machinery for 30 yrs old car
recycling proposed new law.
ezzsteelعـــز حــديـد
Q & A
Thank You