Qalaa Holdings r evenues rose 2% y-o-y to EGP 27.7 bn during 2Q 2023 as growth at Taqa Gas helped offset lower revenues at the Egyptian Refining Company (ERC),according to its latest earnings release (pdf). Qalaa Holdings reported a EGP 381.2 mn loss in the April-June quarter as rising interest rates more than doubled the company’s financing costs from a year earlier. Qalaa reported EGP 361.6 mn in net income in the same period last year.

Higher borrowing costs hit profitability: A sharp rise in interest rates caused Qalaa’s finance costs to more than double to EGP 2.3 bn from EGP 1.1 bn in 2Q 2022, which the company said was primarily responsible for the loss.

ERC revenues fall: ERC’s USD-denominated revenues fell 3% in EGP terms to EGP 20.7 bn on the back of falling refined petroleum prices. The company’s gross refining margins declined “significantly” to USD 1.86 mn per day from USD 5.36 mn in 2Q 2022 as oil prices normalized from last year’s highs and feedstock prices rose. The refinery continued to account for the bulk of the company’s top line, contributing some 75% of Qalaa’s 2Q revenues.

Qalaa’s other business helped to plug the gap: Revenues excluding ERC increased 26% y-o-y to EGP 6.9 bn in 2Q 2023. Energy distribution subsidiary Taqa Arabia’s revenues rose 30% y-o-y to EGP 3.2 bn on the back of a strong performance from Taqa Gas as well as an increase in the price and volume of both fuel and lubricants at Taqa Petroleum. Revenue was stable y-o-y at National Printing at EGP 1.1 bn, while Dina Farms Holding Company’s revenue grew 40% y-o-y to EGP 480 mn. Cement and construction subsidiary ASEC Holding took a 25% hit to its revenue due to the impact of the conflict in Sudan on its operations.

What they said: “I am pleased with Qalaa’s results over the past quarter, which continue to showcase our strength and resilience in the face of a highly difficult operating environment,” said Qalaa founder and chairman Ahmed Heikal. “Qalaa’s top-line increased slightly year-on-year, supported by stable results at the ERC and solid performances across all subsidiaries.”

Looking ahead: Qalaa warned that a shutdown of the refinery in July will likely weigh on results in July. It also said it is studying multiple new “medium-sized, export-oriented, and predominantly green investments with high local value-added components.” On the flip side, the company may look to divest “a few small non-core or under-performing businesses and assets,” it said.

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