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The International Finance Corporation (IFC) has signed off on a USD25 mn loan to Kandil Steel. The funding will be used to support the company’s expansion plans amid ongoing economic headwinds. The loan, approved earlier this year, will “support the company’s operational and financial resilience” by funding working capital and enabling it to continue purchasing raw materials, the multilateral lender said in a s tate ment yesterday.
Kandil needs the greenbacks: The ongoing economic crisis is weighing on the local steel industry, with soaring inflation, a weaker EGP and a prolonged shortage of foreign currency squeezing margins and curbing access to key production inputs. In its disclosure, the IFC said that Kandil’s working capital requirements have risen on the back of rising raw material costs and reduced access to USD. The proceeds will be primarily go towards paying for raw materials and “optimizing production” at its plants, it said
Supporting expansion: The company wants to increase annual production by 60% to 800k tons by the end of 2024, said CEO Amr Kandil. “IFC’s financing, provided amid a very challenging local and global environment, will help us sustain a growing presence in our export markets while continuing to fulfill our home market needs,” he said.
Kandil is a key player in the local steel industry: Kandil Steel ranks among Egypt’s 10 largest steel exporters, currently shipping to more than 40 countries across the world. The company’s factories in Tenth of Ramadan City and Obour City have the capacity to produce 708k tons of steel a year, and it dominates the local market for galvanized steel products.
A climate add-on: The IFC will also help the company develop a decarbonization program to reduce its carbon emissions.
BACKGROUND- The sands are shifting (somewhat) in the industry. Beshay Steel, one of the region’s largest private-sector steel firms, this month sold significant minority stakes in three of its subsidiaries to the military’s National Service Projects Organization reportedly in order to fund debt repayments. Reports in the local press have also suggested that state-owned Delta Steel may be up for sale, with a number of local private companies reportedly considering making bids. Ezz Steel, meanwhile, believes enough in the future of the industry that it committed to a USD 241 mn buyout of the government’s 31% stake in its subsidiary Al Ezz Dekheila.
