Citadel Capital 1Q13 Loss Narrows by 20.6 %, Aggregate Revenues Stable

Citadel Capital (CCAP.CA), the leading investment company in Africa and the Middle East, reported today a standalone net profit of EGP 5.3 million and a 20.6% narrowing of its consolidated net loss to EGP 126.4 million in 1Q13.

As part of its report, the firm also released data on the performance of its eight operational core platforms in the core industries of energy, transportation, agrifoods, mining and cement, which together reported 1Q13 aggregate revenues to EGP 1.4 billion (on par with the same quarter of last year). This came as top-line improvements in the Agrifoods and Cement sectors were largely balanced out by dips in revenues in Transportation (as freight volumes in East Africa fell temporarily as the market sagged on political risk worries) and Energy sectors.

“Broadly speaking we are pleased with the performance of our operational core platform companies in the first quarter, and are very optimistic that we are on the right side of medium- and long-term macroeconomic trends,” said Citadel Capital Chairman and Founder Ahmed Heikal. “We expect our agrifoods, East African transport, non-Egyptian cement services and all export-oriented businesses will continue to lead growth in the portfolio. Meanwhile, continued economic turbulence in the short term will mute growth at a number of our Egyptian businesses.

“In the medium- and long-term, our investments will grow by helping nations capture opportunities and governments solve challenges, whether it’s Rift Valley Railway in Kenya and Uganda helping spur regional trade and growth, or the Egyptian Refining Company in Egypt helping reduce the nation’s present-day diesel imports by well over half,” Heikal noted.

For 1Q13, Citadel Capital reported a standalone net profit of EGP 5.3 million on revenues of EGP 20.2 million, compared with a net loss of EGP 30.5 million in the same quarter last year. Revenues eased 17.2% from 1Q12 largely because equity investments in Egyptian Refining Company became non-fee-earning in advance of financial close on the project in June 2012.

On a consolidated basis, the firm reports a net loss of EGP 126.4 million in 1Q13 as opposed to a loss of EGP 159.3 million in the same quarter of the previous year, a narrowing of 20.6%. Lower losses came primarily as the firm consolidated fewer losses from its Share of Associates’ Results in the first quarter. Putting aside additional impairments on intercompany balances related to the fully impaired National Petroleum Company, losses would have been at EGP 43.2 million, a 72% improvement from 1Q12.

As part of its drive to transform into an investment company, Citadel Capital is pursuing majority control of 10 focus platforms in its five core industries with a view to maximizing shareholder value through long-term holding periods to take full advantage of prevailing macro trends.

As consolidated results do not present a complete picture of the performance of core platform companies that will remain part of Citadel Capital’s investments following the winding down of a three-plus year divestment program for non-core assets, Management has presented aggregate revenue and EBITDA figures for the firm’s eight core operational platform companies since its FY12 Business Review. These aggregate figures give a more accurate picture of financial and operational performance than do consolidated results, which will become better indicators of the firm’s performance as the transformation process moves forward.

Energy
Aggregate sector revenues dropped 9.2% year-on-year in 1Q13 to EGP 291.5 million as EBITDA fell 56.9% to EGP 18.7 million. Factors contributing to the performance in the quarter included declining power generation and distribution volumes (expected to turn around going forward on new projects), lower sales at TAQA Marketing due to the fuel shortages witnessed in the country, and a declining contribution from Tawazon’s turnkey contracting business. Another factor was one-off revenues for Tawazon’s waste management business in 1Q12, for sales of EGP 15 million. The decline in EBITDA owes particularly to the end of operations at the power plant for the South Valley Cement project.

Agrifoods
Aggregate sector revenues rose 7.2% to EGP 324.8 million while EBITDA climbed 151.5%, both on the back of significant operational progress at Gozour in Egypt and lower losses at Wafra, a newly operational greenfield in Sudan and South Sudan. Sales at Gozour surged on both national marketing efforts and new products at Rashidi El-Mizan; improving revenues at RIS in Sudan; and fast-rising sales at Enjoy on the back of new packaging, logos and product formulations. The sector’s farm and fresh milk platforms also reported strong sales growth in the quarter.

Transportation
Aggregate sector revenues fell 14.5% to EGP 110.5 million, while EBITDA was largely stable at negative EGP 31.3 million. This came as turnaround play Rift Valley Railways in Kenya and Uganda reported a dip in revenues as the market sagged on since-resolved fears of electoral violence in Kenya, while Nile Logistics in Egypt saw revenues sag 22.2% as new revenues from anchorage operations in the Port of Alexandria compensated for a near complete halt of river transport operations in the first quarter due to lock maintenance.

Mining
Sector revenues eased 3.1% to EGP 131.8 million while EBITDA fell 53.2% to EGP 5.7 million. Results reflect the preponderance of pre-operational and newly operational greenfields in the portfolio as well as the end of ASCOM’s quarrying contract at Al-Takamol Cement in Sudan. ASCOM for Chemicals and Carbonates Mining (ACCM) reported double-digit growth in revenues and EBITDA and its highest-ever monthly operational EBITDA in the quarter and began commissioning of its new 5,000 TPM line.

Cement
The Cement sector includes a Cement division and a Construction division. Aggregate sector revenues remained stable at EGP 547.8 million as revenues from the Construction division offset flagging revenues from the Cement division. As a whole, the Cement sector reports that EBITDA  more than doubled  to EGP  19.1 million in 1Q13. Individual companies within the cement division report improved performance, the impact of which on the sector’s consolidated financial statements is muted by adverse foreign exchange swings. Perhaps most notable are Al-Takamol (Sudan)’s first-ever positive EBITDA, strong sales increases at Zahana (Algeria) and growth at ASEC Ready Mix. Moreover, ASEC Minya, the division’s US$ 360 million greenfield facility in Egypt, started cement production in late June.

Principal Investments
Citadel Capital principal investments from its own balance sheet remain largely unchanged at US$ 1,150.5 million.