Now, the steel and building
materials giant wants to make a statement with renewables
The
financial performance for the nine months ended September 30 validates the
strategic alliance.Image
Credit: Emirates Steel
Abu Dhabi’s leading steel
manufacturer Emirates Steel and Arkan Building Materials Company completed
their merger in October 2021, and thus embarked on the start of an upward
trajectory.
During the pandemic, the
construction industry faced many headwinds due to global supply chain
disruptions. Yet, the GCC construction sector remained resilient and
experienced a pickup in activity driven by government-funded infrastructure
projects. In addition, the merger helped unlock value in the form of a
diversified revenue stream, cost control and an increase in operational
efficiencies.
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The group delivers a range of products to various industries, including
construction, energy, and transportation. Its finished products are shipped to
more than 70 markets and used in maritime engineering, construction of
skyscrapers, and infrastructure projects in markets such as the US.
The financial performance for the
nine months ended September 30 validates the strategic alliance. The company
has a market cap of Dh12.3 billion and investors have seen the stock appreciate
26 per cent year-to-date.
Solid on financials
For the nine months, revenue surged
to Dh7.12 billion, with 95 per cent generated from the manufacture and
distribution of long steel products, boosted by strong sales into Europe and
the Americas and an increased volume of orders from inside the UAE.
The group was able to overcome any sourcing issues through alternate lines of
supply, and mitigate commodity cost increases through higher average sales
prices. This enabled the company to generate a net income of Dh383.15 million
for the nine months. The resulting basic earnings per share from continuing
operations was Dh0.056.
The balance sheet improved
considerably through a fall in borrowings from Dh2.35 billion to Dh1.84
billion. Additionally, tight working capital control and inventory management
contributed to significant cost efficiencies that reduced the debt ratio. The
company’s sizeable cash reserve is bound to aid in planning for further growth
opportunities. At present, it doesn’t pay dividends, which essentially means
that all its profits are to be reinvested.
Expansion with green
hydrogen
Emirates Steel Arkan recently
announced a partnership with Japan’s Itochu Corp. to study the feasibility of a
ferrous raw material production facility in Abu Dhabi. The material would first
be created using a decarbonised method that would reduce the iron ore by using
natural gas, while also including provisions for using renewable energy power
sources and green hydrogen for the reduction process.
Moreover, the group signed a prelim
agreement with Abu Dhabi National Energy Co. (TAQA) for supply of green
hydrogen to produce low-carbon steel. These opportunities are right on the nose
as the UAE government aims to become carbon neutral by 2050, with new
investments worth Dh600 billion projected in clean and renewable energy sources
over the next three decades.