EZZ Steel, one of Egypt's largest and most important steel producers, has made a significant announcement regarding its future on the Egyptian Exchange EGX. The company’s board of directors has approved a voluntary delisting from the stock exchange, marking a strategic shift in its approach to operations and shareholder engagement. The delisting process, however, is contingent upon approval from the company’s Extraordinary General Assembly. Should the proposal be approved by shareholders, the company will proceed with the necessary actions to finalize the delisting.
A key aspect of this voluntary delisting plan is the company’s offer to buy back shares from willing shareholders at a fair price. The buyback will be based on the highest closing price of the previous month, which stood at EGP 118.98 per share, the average closing price over the past three months (EGP 108.19 per share), or the fair value determined by an independent financial advisor. EZZ Steel has enlisted BDO Keys Financial Advisory to provide an independent valuation to ensure that the share buyback is conducted at a fair and reasonable price for all parties involved.
The board of EZZ Steel has set a maximum purchase price of EGP 120 per share for the delisting. However, the company has also reserved the right to cancel the delisting process if valuations exceed this threshold. This cautious approach indicates the company’s aim to maintain a balanced financial position while navigating through the complexities of delisting from the stock exchange.
This decision to delist comes during a challenging period for EZZ Steel, which has faced significant operational disruptions in recent months. In November 2024, a major fault in one of the blast furnaces at the company’s Ain Sokhna plant caused a production interruption, which is expected to last for approximately nine months. The fault has led to an estimated reduction in annual production by 1.6 million metric tons, impacting the company’s output of flat steel products. This disruption has already had a negative effect on EZZ Steel’s stock price, which saw a drop of 9.33% on the EGX, leading to a market loss of EGP 5.8 billion (approximately 117.9 million USD).
The operational setback at Ain Sokhna is expected to not only lower production but also lead to reduced sales revenues, particularly from flat steel products, a key segment of EZZ Steel’s product portfolio. Additionally, the plant’s lower output is anticipated to negatively affect the company’s foreign currency revenues, which have been an important source of income, given the company’s significant exports. This situation is compounded by the broader challenges in the global steel market.
Adding to the company’s difficulties, EZZ Steel has also been under scrutiny by the European Union due to an anti-dumping investigation launched by the European Commission in August 2024. The investigation stems from a complaint by the European Steel Association (EUROFER), which alleges that EZZ Steel’s hot-rolled flat steel exports were being sold at unfairly low prices in the European market. The investigation could potentially lead to tariffs or restrictions on EZZ Steel’s exports to the EU, further exacerbating the challenges faced by the company.
Despite these challenges, EZZ Steel remains one of Egypt’s most significant steel producers, known for its technological advancements and high production capacity. The company operates factories with a combined annual production capacity of 7 million metric tons of long and flat steel products. EZZ Steel’s total investment in its facilities amounts to around $5.9 billion, and it provides employment to over 8,000 workers across its operations. This scale of operations allows the company to maintain a competitive edge in the domestic and international markets, despite the recent setbacks.
The company’s financial performance has shown signs of recovery, particularly in the first half of 2024, when EZZ Steel reported sales exceeding 100 billion Egyptian pounds (around 2.03 billion USD). During this period, the company achieved a profit of 2.3 billion Egyptian pounds (approximately 45.9 million USD), a significant improvement compared to the 810 million Egyptian pounds (around 16.3 million USD) in losses incurred during the same period in 2023. This turnaround highlights the company’s resilience and potential for growth, even in the face of challenging market conditions.
Moreover, in July 2023, Al Ezz Dekheila Steel Alexandria, a subsidiary of EZZ Steel, also decided to voluntarily delist from the EGX, signaling a possible trend among key players in Egypt’s steel sector to reevaluate their market strategies. The company’s decision to exit the stock exchange could be driven by the need for greater operational flexibility, the reduction of costs associated with being publicly traded, or a desire to focus on long-term strategic goals rather than short-term market performance.
Overall, EZZ Steel’s move towards delisting reflects a broader set of challenges and opportunities facing the company. While the delisting process will allow the company to streamline its operations, it also highlights the pressures from both internal operational issues and external market conditions. As the company works through these challenges, its ability to adapt and recover will play a crucial role in determining its future trajectory within the competitive steel industry in Egypt and beyond.
