Citadel Capital’s Q3 Total Investments Under Control Hit $9.5 Bln

Citadel Capital (CCAP.CA), the leading private equity firm in the Middle East and Africa, announced Sunday its financial results for the third quarter of 2012, reporting a 2.5% rise in principal investments and 0.7% increase in total invested equity quarter-on-quarter as it made continued progress on reduction of execution risk at key greenfield investments, drawing down additional equity and debt into the US$ 3.7 billion Egyptian Refining Company, and deploying fresh capital from the third tranche of a US$ 150 million facility backed by the United States Overseas Private Investment Corporation.

Notably, the firm’s standalone loss narrowed 86.2% year-on-year (and 69.1% quarter-on-quarter) in 3Q12. Citadel Capital also reports in the quarter just ended a 13.4% decline in its consolidated loss year-on-year, reflecting improved performance at key platform companies.

Total investments under control across the firm’s 15-industry footprint stood at more than US$ 9.5 billion as of 3Q12, rising 0.4% from the previous quarter.

“The third quarter of 2012 was very much about building for the future,” said Citadel Capital Chairman and Founder Ahmed Heikal. “While maintaining our focus on the development of all of our platform and portfolio companies, we have laid the groundwork for a three-year transformation into an investment holding company that will control 11 unique platform companies in five  core high-potential industries: energy, agriculture and consumer foods, transportation and logistics, mining and cement manufacturing. Our goal is simple: We will capture the compelling upside presented by prevailing macro trends and fundamentals across our core geography in Egypt, East Africa and North Africa.

“Against that backdrop, continued investment in core and non-core platforms alike in the three months ending September 2012 leaves us on a stronger footing as we look to acquire majority control of our core platforms while preparing to divest non-core holdings over the coming three years.”

With no exits in the quarter, Citadel Capital registered a standalone net loss of US$ 0.5 million (EGP 2.9 million) for 3Q12 on revenues of US$ 3.3 million (EGP 19.8 million), underscoring the soundness of a cost-control program that saw OPEX spending down 29.9% year-on-year and stable quarter-on-quarter.

Net standalone losses stood at US$ 7.0 million (EGP 42.6 million) in 9M12, a 41.1% contraction from the same period last year.

On a consolidated basis, Citadel Capital reports a net loss of US$ 22.0 million (EGP 134.0 million) in 3Q12, a 13.4% improvement from the same quarter last year. On a nine-months basis, the firm’s net loss contracted 6.5% year-on-year to US$ 68.7 million (EGP 417.5 million).

Notably, the firm’s eight operational core platforms — out of a total of 11, with the remaining three being pre-operational greenfields — reported substantial year-on-year operational improvements in 9M12 as reflected in 2% revenue growth to US$ 0.5 billion (EGP 2.8 billion) and 6.4% growth in EBITDA, which closed the first nine months at US$ 23.8 million (EGP 144.5 million). This reflects management’s sustained emphasis since the early days of the Egyptian Revolution on the reduction of operational risk, which has seen overhauls at major plants, capacity expansions, the entry of greenfields into operation, and turnarounds proceed both on time and on budget.

Key platform and portfolio companies held as Associates posted improvements in performance. Citadel Capital recorded US$ 10.8 million (EGP 65.6 million) in losses from its Share of Associates’ Results in 3Q12, a fractional improvement from the previous quarter and a 30.7% narrowing year-on-year. On a nine-months basis, Citadel Capital’s Share of Associates’ Losses narrowed 30.9% year-on-year to US$ 33.0 million (EGP 200.8 million), reflecting better performance of the underlying Associates.

“In light of the return to health of our eight operational core platform investments, our emphasis as we prepare to divest non-core platforms will be on continued reduction of operational risk across our portfolio — core and non-core alike — through a judicious mix of fresh investment, OPIC-backed financing, the right business plans, and new management talent at the Citadel Capital level,” concluded Heikal, noting the appointment in recent days of a new Managing Director to oversee the firm’s energy businesses.

Management’s discussion of operations and details of Citadel Capital’s 3Q12 standalone and consolidated financials follows; full financials are available for download at citadelcapital.com.