Al Ezz Steel Rebars reports consolidated full year 2007 results

The audited results have been prepared in accordance with Egyptian Accounting Standards.

Commenting on the 2007 results, Mr. Ahmed Ezz, Chairman and Managing Director of Ezz Steel, said: "2007 reinforced our position as a leading steel producer, both in the Middle East and internationally and our results are a testament to this, with total net sales reaching EGP16.2bn and total production capacity of 5.3 million tonnes per year."

"These results should be viewed in the context of a highly dynamic global steel market. Internationally, steel prices rose considerably during 2007, and continue to do so, underpinned by an increasing supply and demand imbalance and the impact of rising raw materials prices. While
visible in our top line, this is also reflected in our margins."

"Despite the record levels of production achieved during the year and efficiency levels which rival those of our international peer group, our focus has been on securing the future because of this industry context. In 2007, we initiated strategies for growth and improved integration efficiency across our operations, designed to build on the production performance we have become synonymous with."

Outlook

The Company is building on its strong market position at home and overseas, expanding and optimizing existing operations as well as forging ahead with plans for the development of new facilities to further enhance productivity, minimize our exposure to industry pressures and pursue the opportunities presented by robust demand conditions.

The Company expects to maintain its current production in the near term and to benefit from the expansion and enhancement projects as they come on-stream.

The Company expects that there will continue to be strong demand for long products in Egyptian and regional markets. Demand for flat steel products is expected to continue to grow strongly in the Egyptian market as the country becomes increasingly industrialized. Steel prices globally have risen considerably in recent months, underpinned by an increasing supply and demand imbalance and the impact of rising raw materials prices.

2007 was also a landmark year for ezzsteel, making its first expansion outside of Egypt. This involved signing a Memorandum of Understanding with the Algerian Government to build and operate an integrated mini-mill complex that will provide the company a platform from which to serve the booming Algerian construction industry.

Algeria is attractive to ezzsteel because it is a country that is rich in oil and natural gas and has an economy that is growing rapidly. The country is a net importer of steel, consuming 2.8 million tonnes of rebar annually, but only producing in the region of 600 thousand tonnes domestically. There is a strong pipeline of government approved projects such as house building and road construction.

Full Year 2007 Operational Review

Regional steel sector overview

Steel consumption throughout the region has expanded rapidly in recent years underpinned by demand from the construction sector. Strong growth in demand has supported production growth across the region. MENA steel production was up by 9% in 2007 and now represents one of the highest growth markets worldwide. MENA countries produced approximately 25.9 million tonnes of crude steel in 2007. Despite the growth in total crude steel output in the region, supply continues to be outpaced by MENA demand which grew 12% to 38.1 million tonnes in 2007. As a result, the region remained a net importer of steel. Considering the high oil prices, steady GDP growth and construction projects in the pipeline, particularly in GCC region, the demand for rebar is expected to continue to grow.

Steel prices respond to supply and demand and fluctuate in response to general and industryspecific economic conditions. The price of steel - long and flat - continued to rise in 2007 as worldwide demand surged and the price of raw materials rose significantly.

During the course of 2007, Egyptian steel demand grew 15 per cent, compared with just 4% in 2006 as the impact of major infrastructure projects and the expansion of real estate market took effect. The outlook for steel demand remains robust and all indications are that local market demand will be sustained.

As the market leader in Egypt, with over 65% domestic market share in terms of sales,
ezzsteel's priority is to facilitate industrial and economic growth in our home market and output is, therefore, first directed internally. Egypt is the Company's largest single market, with long and flat products having established a reputation for the highest quality and prompt delivery. Almost 74% of sales in 2007 were derived from Egypt.

Sales

All of the below financial breakdowns are based on ezzsteel's consolidated financials which
include 12 months financial performance of ezzsteel (ESR/ESM), EZDK and EFS. This is the first full year of consolidation for all of these entities, resulting from the restructuring undertaken in 2006.

Consolidated net sales for 2007 were EGP16.2bn compared with EGP11.6bn during 2006, representing a rise of 40%. Long steel products accounted for 64% of total sales and flat steel products represented 35% of sales in 2007. Local sales accounted for 74% of total sales, a rise of 13%, this resulted from the Company's commitment to supply demand in the local market as a priority. The EU was ezzsteel's largest export market accounting for 72% of flat product in 2007, up from 34% in 2006. Greatest demand
for long product outside of Egypt came from the MENA region, which took 85 per cent of ezzsteel's rebar export compared to 62% in 2006.

The contributions of ezzsteel, EZDK and EFS to net sales for the period ending 31 December 2007 were 28%, 54%, and 18% respectively.

Cost of Goods Sold

In 2007, scrap and billet prices increased by 18% and 29% in dollar terms respectively. Freight costs, which influence overall feedstock prices, were stable for most of the year, however, sharp increases were seen in the final two months of 2007. Compared with global
prices, ezzsteel's energy prices remained low and accounted for just 7% of total costs.

Fluctuating feedstock prices continue to represent a challenge for the industry and the outlook remains volatile. ezzsteel took significant steps in 2007 towards reducing its ongoing exposure to this volatility. In addition to the existing DRI plants in operation at its EZDK facility in Alexandria, 2007 saw ezzsteel laying the foundations for two new DRI plants to be located in close proximity to its existing operations. Both plants will provide a captive supply of DRI for internal company use, thus reducing ezzsteel's reliance on externally sourced scrap. The plants are expected to process an additional 3.2 million tonnes of DRI for internal consumption, with production scheduled to commence in Q3 2010.

Gross profit

Increased vertical integration allows ezzsteel to protect and improve gross margin. Gross profit for the period ended 31 December 2007 was EGP3.6bn up from EGP3.2bn in 2006. The significant price appreciation witnessed in global raw material prices has put some pressure on our gross margin, which ended the year at 23%.

EBITDA

EBITDA for the period reached EGP3.9bn, up from EGP3.6bn for the same period in 2006 reflecting a 10% growth in the absolute value of EBITDA between 2007 and 2006.

At ezzsteel, EBITDA is calculated as follows: Sales - cost of goods sold - selling & marketing expenses - G&A expenses + Depreciation and amortization.

Tax and deferred tax

The corporate tax rate for Egyptian companies is 20 per cent of net income. Tax and deferred tax reached EGP653m in 2007, compared to EGP611m in 2006, making ezzsteel one of the largest corporate tax payers in Egypt. Income tax pai during 2006 amounted to EGP492m.

Net profit after tax and minority interests

Net profit after minority interests was EGP1.1bn, up 13% in comparison to the same period in 2006. This has delivered earnings per share (EPS) of EGP6.26 in 2007, a 7% increase versus EGP5.85 per share in 2006 on a weighted average number of shares basis.

New debt

During the course of 2007, cash generated from operations has been used to reduce net debt. By 31 December, 2007 Net Debt stood at EGP5.3bn. This represents a Net Debt / EBITDA ratio of 1.3x compared to 1.8x in 2006.