QALA For Financial Investments : Qalaa Holdings 2Q23 Business Review - Consolidated Results

2Q 2023 BUSINESS REVIEW

CAIRO, EGYPT: 16 September 2023

Qalaa Holdings Reports 2Q 2023 Results

• Qalaa's consolidated revenue grew 2% year-on-year to EGP 27.7 billion in 2Q23 supported by solid performances across all subsidiaries with the exception of Takamol Cement, which saw both its sales and production impacted by the ongoing armed conflict in Sudan. Meanwhile, recurring EBITDA recorded EGP 4.5 billion compared to EGP 9.0 billion in 2Q22 following reduced margins at ERC this quarter;
• ERC contributed c.75% to Qalaa's total revenue in 2Q23. ERC's refining margins dropped noticeably in 2Q23 partially reflecting a normalization from the record highs reached in the previous year. While margins have since improved, the planned shutdown that took place in July for an overhaul of the plant will weigh on results in 3Q23. Meanwhile, despite ERC's receivables from EGPC reaching USD 537.8 million as of September 2023, EGPC continues to make payments enabling ERC to exceed mandatory debt repayments. ERC made a payment of USD 264.0 million to senior lenders, and further funded its debt service reserve account with USD 181.0 million in June 2023. ERC is on track to be senior debt free by December 2025;
• Qalaa's revenue excluding ERC, grew 26% year-on-year driven by positive performances across most of Qalaa's subsidiaries, reflecting the success of the Group's long-term strategy focused on import substitution and developing export-oriented businesses. Meanwhile, recurring EBITDA dropped by a marginal 2% year-on-year in 2Q23;
• The Group's export proceeds recorded c. USD 18.9 million in 2Q23, while local foreign currency revenue recorded c. USD 702.8 million in 2Q23. Going forward, the Group will continue focusing on growing its exports and leveraging the cost advantage available to local manufacturers;
• In 2Q23, Qalaa recorded a net loss of EGP 381.2 million compared to a net profit of EGP 361.6 million in 2Q22, primarily reflecting an increase in finance costs for the period on the back of the sharp rise in interest rates over the past twelve months;
• All in all, Qalaa's 2Q23 operational and financial results continued to showcase the Group's resilience in the midst of a highly challenging macroeconomic environment;
• On 9 July 2023, TAQA Arabia's shares began trading on the Egyptian Exchange (EGX). The company went public on the EGX via a direct offering, rather than going the conventional Initial Public Offering (IPO) route. Following the listing, the National Service Projects Organization (NSPO) acquired a 20% stake in TAQA Arabia from a subsidiary of Qalaa. The agreement gives Qalaa the right to repurchase the sold shares within the coming four years. The proceeds of the transaction were used to settle the outstanding balance of a loan taken out by Qalaa in 2022, which as of 30 June 2023 stood at EGP 1.629 billion. It is important to note that this transaction has had no impact on the current consolidated financial statements as it did not alter the control position of Qalaa over TAQA Arabia;
• Qalaa's ongoing strategy will continue to include the following elements:
  o Qalaa may divest a few small non-core or under-performing businesses and assets. The aforementioned debt settlement and disposal of assets may lead Qalaa to recognize capital gains in the coming period;
  o The Group will continue driving growth by making small incremental investments in its subsidiaries, expanding cashflows, and thereby reducing its debt to cashflow ratios. Management is confident this strategy will continue to deliver the desired results;
  o Qalaa is currently studying several new medium-sized,export-oriented, and predominantly green investments with high local value-added components, to be executed through its subsidiaries.

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2Q 2023 BUSINESS REVIEW

CAIRO, EGYPT: 16 September 2023

2Q 2023 Consolidated Income Statement Highlights

Revenue	Revenue (excluding ERC)
EGP 6.9 bn
EGP 27.7 bn
vs. EGP 5.5 bn in 2Q22
vs. EGP 27.0 bn in 2Q22

	EBITDA*		EBITDA* (excluding ERC)
	EGP 4.5 bn		EGP 915.2 mn
	vs. EGP 9.0 bn in 2Q22		vs. EGP 931.7 mn in 2Q22
	Net Income After Minority		Net Income After Minority (excluding ERC)
	EGP (381.2) mn
		EGP (429.4) mn
	vs. EGP 361.6 mn in 2Q22
		vs. EGP (516.6) mn in 2Q22
	1H 2023 Consolidated Income Statement Highlights
	Revenue		Revenue (excluding ERC)
		EGP 13.8 bn
	EGP 57.9 bn
		vs. EGP 10.5 bn in 1H22
	vs. EGP 45.7 bn in 1H22
	EBITDA*		EBITDA* (excluding ERC)
	EGP 14.9 bn		EGP 2.5 bn
	vs. EGP 12.9 bn in 1H22		vs. EGP 1.7 bn in 1H22
	Net Income After Minority**		Net Income After Minority** (excluding ERC)
	EGP (308.1) mn
		EGP (905) mn
	vs. EGP 830.4 mn in 1H22***
		vs. EGP (599.3) mn in 1H22***
	Highlights from Consolidated Balance Sheet at 30 June 2023

Consolidated Assets

EGP 181.0 bn

At current book value vs. EGP 144.9 bn in FY22

Consolidated Debt

EGP 90.7 bn

Of which EGP 55.9 bn related to ERC

*Recurring EBITDA excludes one-off selling, general and administrative expenses.

**The optional exceptional accounting treatment of reclassifying the FX to the Other Comprehensive Income (OCI) has been applied in 2023. Comparative figures of 2022 have been restated accordingly.

***Including a one-off gain of EGP 842 million booked as a result of debt restructuring at the Transportation and Logistics sector.

ERC's debt consists of the USD equivalent of EGP 31.8 billion in Senior Net Debt (Senior Debt - Cash) and EGP 17.0 billion in Mezzanine Debt.

Qalaa Holdings, a leader in energy and infrastructure (CCAP.CA on the Egyptian Exchange), released today its consolidated financial results for the three- and six-month periods ending 30 June 2023. Financial and operational highlights follow, as do the management's comments and overview of the performance of Qalaa's different business units. Full financials are available for download at ir.qalaaholdings.com.

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2Q 2023 BUSINESS REVIEW

CAIRO, EGYPT: 16 September 2023

Financial and Operational Highlights

	• Qalaa's consolidated revenue grew by 2% y-o-y in 2Q23 to EGP 27.7 billion,
QALAA HOLDINGS	primarily driven by ERC's contribution.
CONSOLIDATED REVENUE 2Q23

EGP 27,655.6 mn

• Energy - 87% ◼ Agrifoods - 2%
• Packaging & ◼ Transportation &

Printing - 4%	Logistics - 0.6%
◼ Cement - 3%	◼ Other - 2%
◼ Mining - 2%

REVENUE PROGRESSION

(EGP mn)

	26,981.2		27,655.6						57,942.8
			45,662.8
	2Q22	2Q23	1H22		1H23
		RECURRING EBITDA
			PROGRESSION
			(EGP mn)
	9,024.5
							14,850.2
		4,520.1		12,914.3
	2Q22	2Q23	1H22	1H23

ERC's USD-denominated revenue dropped by 3% y-o-y in EGP terms to reach EGP 20.7 billion in 2Q23, driven by the decline in refined petroleum product prices. Despite this, ERC continued to make up the lion share of Qalaa Holding's top-line for the quarter at 75%. While no slowdowns or shutdowns took place at ERC during the quarter, a planned overhaul took place in 3Q23.

• Excluding ERC, Qalaa's 2Q23 revenue was up 26% y-o-y, recording EGP 6.9 billion, driven by improved performances across most subsidiaries.
  TAQA Arabia's revenue grew 30% y-o-y in 2Q23 reaching EGP 3.2 billion compared to EGP 2.5 billion in 2Q22. The company's revenue growth was primarily driven by a strong performance at TAQA Gas, which benefited from increased connection revenues as well as a rise in CNG volumes sold resulting from an expansion in the number of operating CNG stations versus last year. Revenue was also supported by the increase in the price and volume of both fuel and lubes at TAQA Petroleum.
  National Printing's revenue remained stable y-o-y in 2Q23, standing at EGP 1.1 billion as the company witnessed mixed performances across its subsidiaries. Most notably, El Baddar continued to capitalize on its new facility to report a 15% y-o-y rise in revenues for the quarter. Meanwhile, Shorouk for Modern Printing and Packaging and Uniboard reported relatively stable revenues versus the previous year.
  ASCOM delivered a 23% y-o-ytop-line increase to EGP 436.7 million in 2Q23, mostly driven by EGP devaluation augmenting revenues at the USD denominated businesses including Ascom for Chemicals and Carbonates Manufacturing (ACCM) and Glassrock, an insulation material producer, the biggest revenue generators for ASCOM. Revenues were further boosted by the strong performance delivered by ASCOM's Egyptian quarrying business.
  In 2Q23 ASEC Holding's revenue was EGP 811.2 million, down 25% y-o-y compared to 2Q22, owing to the negative impact of the ongoing armed conflict in Sudan on the company's operations. It is worth noting that the staff and assets of Qalaa's Sudan affiliate Takamol Cement are safe and continue to operate at a limited capacity. Qalaa continues to closely monitor the ongoing developments within the country.
  Dina Farms Holding Company's revenue reached EGP 480.0 million in 2Q23, up 40% y-o-y. The company's performance was backed by improved operations across all business segments at Dina Farms and ICDP's revenue benefiting from both higher prices and new product launches.
  Finally, CCTO's transport & logistics business delivered a 148% y-o-y revenue increase to record EGP 168.6 million in 2Q23 driven by improvements across all revenue streams of its Egyptian arm NRPMC.

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RECURRING EBITDA

PROGRESSION (Excluding ERC)

			(EGP mn)
931.7		915.2				2,524.5
		1,715.1
2Q22	2Q23	1H22	1H23

NET PROFIT PROGRESSION

(EGP mn)

361.6		830.4
	(381.2)		(308.1)
2Q22	2Q23	1H22	1H23

2Q 2023 BUSINESS REVIEW

CAIRO, EGYPT: 16 September 2023

• Qalaa's recurring EBITDA dropped significantly in 2Q23 to EGP 4.5 billion compared to EGP 9.0 billion in 2Q22. Profitability was mainly impacted by the thinning margins at ERC this quarter.
  ERC's gross refining margins declined significantly during the quarter, averaging USD 1.86 million per day in 2Q23, compared to USD 5.36 million per day in 2Q22. The decline reflected an increase in feed stock prices, a drop in refined product prices, and the lower quality of feedstock received. It also partially reflects a normalization of oil product prices following a spike recorded in 2022.

Consolidated Recurring EBITDA Progression Chart* (EGP mn)

Consolidated EBITDA Consolidated EBITDA ex- ERC

	10,504
9,025	10,330
	8,841

											3,890						4,520
											2,088
				762			626		750	1,205
329	290	303	328	367	320	357							1,609
				932	1,057	931	915
			328		360	214	303		454	521	512	783
329	290	303	320	90

1Q19 2Q19 Q319 Q419 1Q20 2Q20 3Q20 Q420 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23

*ERC started operation in 1Q20

• Excluding ERC, Qalaa recorded a marginal 2% y-o-y drop in recurring EBITDA from EGP 931.7 million in 2Q22 to EGP 915.2 million in 2Q23, driven by rising interest rates and borrowing costs, as well as the negative effects of the ongoing armed conflict in Sudan on Takamol Cement's results.
  Qalaa's EBITDA excluding ERC was primarily driven by contributions from TAQA, National Printing, and CCTO. Additionally, ASCOM's export-driven businesses delivered a strong performance, capitalizing on its competitive advantage in global markets.
• Depreciation and amortization expenses stood at EGP 2.3 billion in 2Q23, up 71% y-o-y compared to EGP 1.1 billion in 2Q22. Of the total, EGP 1.8 billion were related to ERC.
• Bank interest expense recorded EGP 2.4 billion in 2Q23, up 105% y-o-y versus the EGP 1.2 billion recorded in 2Q22. The increase is attributable to higher interest rates, reflecting global monetary tightening, along with the impact of FX translations.
• It is worth noting that all FX gains/losses incurred in 2023 following the devaluation of the EGP were reclassified into other comprehensive income (OCI) under equity on the balance sheet as per the exceptional accounting treatment adopted by Qalaa. Meanwhile, in 2Q23 Qalaa recorded an FX gain of EGP 262.8 million as a result of hyperinflation treatment in Sudan.

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2Q 2023 BUSINESS REVIEW

CAIRO, EGYPT: 16 September 2023

• Qalaa Holdings recorded a consolidated net loss after minority interest of EGP 381.2 million for 2Q23, compared to a net income of EGP 361.6 million recorded in 2Q22. This decline came on the back of significantly higher finance costs following globally elevated interest rates.

Net Bank Debt Progression (EGP bn)

	60.00		March 2022:		January 2023:
		October 2022:	EGP floatation
			EGP floatation
	55.00		EGP floatation
	50.00
	45.00				48.70
	40.00
Billion	35.00
30.00
EGP	25.00
	20.00				19.24
	15.00
	10.00				7.20
	5.00
	0.00
	Mar'2020 Jun'2020 Sep'2020 Dec'2020 Mar'2021 Jun'2021 Sep'2021 Dec'2021 Mar'2022 Jun'2022 Sept'2022 Dec'2022 Mar'2023 Jun'2023
	2020	2021		2022	2023
	All Others	ERC	QH SPVs related to financing ERC Shares

ERC's debt consists of the USD equivalent of 1) EGP 39 billion in Senior Debt, 2) EGP 31.8 billion in Senior Net Debt (Senior Debt - Cash), and 3) EGP 17.0 billion in Mezzanine Debt.

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