SCGC Reports Q1 Results as at 31 March 2016

SCGC's 1^st Q 2016 results at a glance

Cairo, May 11, 2016 –  Today Suez Cement Group of Companies' (SCGC's) Board of Directors approved the unaudited consolidated financial report for the first quarter of the year
2016.Egyptian cement market continued its solid trend of growth, which has begun during the last quarter of 2015. Such a growing trend has been confirmed during the first quarter of 2016 which witnessed a remarkable increase in grey cement demand by 15.6%, sustained by the mega and infrastructure projects, as well as a positive demand from private sector’s smallmid size projects. Energy availability improvement driven by coal utilization and more steady supply of mazot, allowed Egyptian cement industry to increase clinker production by 12.13% as compared to the same period of last year, and to reach a better balance between supply and demand reflected in the capacity utilization rates reaching close to 80%.

During this period selling prices started to improve by the end of February following the strong demand supported by a strong devaluation of the Egyptian pound vs. USD by around 14.3%; nevertheless, the prices in YTD March 2016 still remained below the level of YTD March 2015.

SCGC continued to maintain its leadership and market share. Group sales volumes increased significantly by 22.1% in the local market during the first quarter of 2016, while Exports remained limited due to the political and economic instability in the regional markets.

SCGC reported a 14.5% increase in revenues for the first quarter of the year versus the same period in 2015, while EBITDA declined around -20 MEGP mainly due to the lower sales prices over the first two months as compared to same period in 2015.

The Egyptian pound devaluation had a negative effect on the operational results through a strong impact on energy costs, imported raw materials and spare parts.

The company continued to implement aggressively its action plans to improve internal efficiencies and modify its energy mix with two plants now fully converted to coal and waste, both fuels representing almost 40% of the total needs. The resulting cost improvement in the plants converted to coal from prior year proved unfortunately insufficient to offset the impact from pricing, energy costs and Egyptian pound devaluation.

Outlook
SCGC maintains its optimistic outlook on cement production and sales in 2016 and onwards as the fundamentals are still good for the construction sector. However recent tightening measures on consumer credit and imports are expected to have a negative impact on economic growth which is premature to evaluate. The continued shortage in foreign currency, which has not yet improved in spite of the EGP devaluation, may further slow down the economy.

SCGC is currently preparing for the implementation of coal conversion project at the Helwan Plant over the next two years similar to those already completed at the Kattameya and Suez Plants. SCGC’s energy diversification program is focused on increasing the use of wastederived fuels, petroleum coke, coal and renewable energy in order to prevent fluctuating natural gas and mazut prices from negatively impacting the Company’s bottom line. SCGC anticipates that its innovative energy program will continue to improve the Company’s manufacturing capacity and decrease operational and production overhead. The launch of coal and petroleum coke energy generation goes hand in hand with SCGC's focus on reducing its environmental impact through the implementation of state-of-the-art dust filter technology and streamlined manufacturing processes. SCGC is also working to better serve domestic customers by shifting its strategy to service-oriented targets through customer satisfaction surveys, tailor-made product offerings, distribution centers, an SCGC customer call center and awareness sessions with customers about cement quality, technical assistance and partnerships with leading cement consultants and academic institutions.