Strong growth rates and significant profitability at both group and company level were recorded in the first half of the year by SIDMA Metallurgy.
According to a company announcement, in the first half of 2021 the rapid and strong recovery of the world economy from the recession caused by the pandemic COVID-19, a recovery which was accompanied by a rise in prices of raw materials and goods as well as transport costs, led to a dramatic increase in demand for steel products internationally and in boosting steel prices to their highest levels over time. The significant increase in demand and the significant increase in prices also characterized the domestic steel market during the same period.
More specifically, the consolidated turnover of the SIDMA Metallurgical group, in the first half of the year amounted to 106.5 million euros or 73.8% higher compared to the corresponding period of 2020, while together with the sales of the agency amounted to 130.3 million from euro 75.9 million increased by 71.7% compared to last year. The above increases are mainly due to the average selling price, as it increased compared to the first half of last year by 47.1%, increasing the turnover accordingly. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to 19,068 thousand from 1,841 thousand euros last year, while profits before taxes amounted to 28,290 thousand euros from losses of 1,768 thousand in the corresponding period last year. The difference in pre-tax results is mainly due to operating profitability due to expanded gross profit margins. The gross profit margin increased by 166.8% from 8.1% in the first half of 2020 to 21.6% in the corresponding period this year, while in absolute terms gross profit increased by 364% or by € 18 million compared to last year, at 23 million. As stated in the announcement, the remaining amount of the increase in profitability is due to the accounting treatment of the refinancing of the company’s loan liabilities, which ended on February 5, 2021. In accordance with the requirements of IFRS 9, the new loan liabilities were reflected in their fair value resulting in their reduction by € 14.3 million with the corresponding improvement of the results of the group and the company. The group’s Equity is now positive and amounts to euros 12.7 million.
At company level, the turnover in the first half of the year amounted to 70.6 million euros from 41.3 million, showing an increase of 70.9%, while together with the sales of the agency it amounted to 94.4 million from 55, 9 million in the corresponding period of 2020, increased by 68.9%. As at the group level, the largest increase is due to the increase in sales prices, as mentioned above. The results before taxes, interest and depreciation (EBITDA) amounted to 14.3 million euros, from 1.6 million in the corresponding period last year, while the line of pre-tax results recorded a profit of 24.3 million from losses of 1.0 million in the corresponding period last year for the reasons mentioned above. Of the € 25 million difference, about half relates to the company’s operating profitability and the rest to the fair value presentation of its new loan liabilities.
In terms of subsidiaries, both SIDMA Bulgaria and SIDMA Romania increased their turnover by 81.3% and 76.6% respectively, compared to the first half of 2020. Specifically, SIDMA Bulgaria’s turnover amounted to 21.9 million euros against 12.1 million while SIDMA Romania’s stood at 14.5 million against 8.2 million euros in the first half of 2020.
In terms of other subsidiary sizes, SIDMA Bulgaria showed an increase in both operating profitability (EBITDA), from 236 thousand last year to 2,627 thousand this year, and pre-tax results, from losses of € 58 thousand last year to profits of € 2,375 thousand this year.
SIDMA Romania at EBITDA level presented a profit of 2.2 million euros, while at the level of pre-tax results presented a profit of 1,682 thousand euros from losses of 704 thousand euros last year.
The liquidity of the group increased by 4.2 million euros or 25% and amounted to 21 million.
It is noted, finally, that the combination of the increase of equity, the positive results of the half year and the refinancing of the Company’s loan liabilities, which ended in February of this year, dramatically improved the financial ratios of capital structure and were formed on 30/06/2021 as follows:
Net Lending Ratio to Equity = 2.7
Interest Coverage Ratio (EBITDA / Net Interest) = 7.5.
The prospects for the rest of 2021
For the rest of 2021, and provided that it is estimated that no additional measures will be imposed to limit economic activity due to the pandemic, SIDMA estimates that the domestic economy is expected to maintain its growth momentum, maintaining the demand for steel at high levels. According to the company’s announcement in Greece, an increase in domestic investments is projected at 11.5% for this year and 20% for 2022, a fact that will contribute significantly to the increase in demand for steel products, from which SIDMA “is expected to draw the largest part of the benefit, as the market leader “.
In terms of foreign subsidiaries, Romania’s economy performed strongly in the first quarter of this year, according to the European Commission’s summer report. Investment is expected to remain strongly supported by both the private and public sectors. SIDMA Romania is closely monitoring market developments and is expected to complete the restructuring of its loans and the improvement of its equity within the year.
Respectively in Bulgaria, despite the continuous restrictions on economic activity related to the pandemic, the country’s real GDP increased in the first quarter of 2021 by 2.5% compared to the previous quarter due to exports and private consumption according to the summer report from the European Commission. Consumer confidence reached pre-crisis levels in April and May, suggesting a further improvement in domestic consumer demand this year. In the second half of the year, household consumption is expected to continue to expand, following the improvement in the labor market. Real GDP growth is expected to reach 4.6% in 2021 and 4.1% in 2022.
Regarding the steel market, the World Steel Association (WorldSteel Association) predicts that global steel demand will increase by 5.8% in 2021 and will reach 1.874 billion metric tons (mt). Demand will increase further by 2.7% in 2022 to 1.925 billion tons. But also Eurofer, the European Steel Union, in its last report in August 2021, predicts that apparent steel consumption in the EU. is expected to recover (+ 11.2%) in 2021 and (+ 3.7%) in 2022 where it will return above the levels of 2017 thanks to the continuous increase in demand from sectors that use steel.
Finally, as SIDMA points out, the risks that threaten the growth prospects – both locally and internationally – are not negligible, but remain broadly balanced. The expected fourth wave of the COVID-19 pandemic is likely to affect the short-term growth prospects, as well as the geopolitical developments that remain among the biggest challenges for the Greek economy. “The important thing, however, is that all analysts and economic pundits in their basic scenarios adopt the optimistic estimates for the development of growth rates for the rest of the year and in 2022. And this is, without a doubt, good news for the company and the group “concludes the announcement.