RCS - Ittihad Intnl. Invs. - Ittihad announces Full Year 2023 Financial Results

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17/05/2024 13:15

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RNS Number : 8172O  Ittihad Intnl. Investment LLC  17 May 2024

 

Ittihad announces Full Year 2023 Financial Results

Transformational year - well positioned for future growth

Abu Dhabi -  17 May 2024: Ittihad International Investment LLC (Ittihad), the
leading industrial conglomerate in the UAE, today announces its Full Year 2023
Financial Results.

Financial Highlights

·    Group Revenue of $2.8 billion (AED10.4 billion)

·    Group Adjusted EBITDA* of $138.7 million (AED509.6 million)

·    Successfully launched a 5NC2 debut Sukuk, raising $350 million

·    Continued focus on deleveraging the business, with gross debt
leverage of 5.3x at year end (down from 6.0x as of December 31, 2022), and
adjusted net leverage* stood at 3.4x in 2023, down from 3.5x in 2022

o  Debt repayments for the year amounted to $119 million (AED436.6 million)

·    Strong balance sheet continues to provide capital allocation
optionality

o  Net cash and cash equivalents of $153 million, with readily marketable
inventories (RMI) of $107 million as at year end

o  $50 million of restricted cash was released in December 2023, with
proceeds used to pay down working capital facilities

o  Ittihad is well-placed to continue to capitalise on a pipeline of
strategic M&A opportunities to compound growth

·    Arranged $88 million of term loan and Export Credit Agency (ECA )
backed term financing for the tissue mill expansion project in Saudi Arabia.
The facility is unsecured with a maturity of 12 years door-to-door

Operational Highlights

·    Infrastructure and Building Materials Manufacturing (IBMM): strong
margin growth as a result of positive pricing performance and a significant
shift in demand driven by the energy transition and long-term investments in
infrastructure and real estate development across the region.

·    Consumer Goods Manufacturing (CGM): margin compression in the segment
in the second and third quarter of the year due to destocking and a rapid
correction in both raw material and finished goods prices.

·    Construction commenced on the new tissue mill in Saudi Arabia, a
project that will ensure a more competitive logistics costs and improved price
margins in the country.

·    Metropolic Paper Industries (MPI) became the main tissue supplier for
Carrefour, a leading retail brand in the UAE.

·    Business Services: Double digit growth in EBITDA achieved across the
waste collection, city cleaning, and sewage network services. Ittihad
successfully penetrated a niche market in this segment by introducing robotic
camera technology solution for sewage network inspection and repair, seeing
strong levels of demand in the local market. Ittihad is well-placed to take
advantage of potential opportunities for regional expansion with this
technology.

·    The acquisition and expansion of a waste collection and city cleaning
company in Saudi Arabia, effectively scaling up operations with new long-term
projects valued at $40 million.

Outlook

·    Organic growth and sustainability will remain the primary focus over
the next five years.

·    Plans to further expand into Saudi Arabia in consumer goods and
business services segments.

·    The Company has a medium-term leverage target of 2.5x - 3.0x (net of
bank balances and cash and RMI) and is focused on meeting this leverage target
in the short to medium term.

·    Ittihad is well-placed to capitalise on strategic M&A
opportunities and is strategically positioned to expedite its investment plans
while exploring additional avenues for capital raise.

 

* Note on adjustments:

 

"Adjusted EBITDA" is defined as net profit (loss) for the year / period from
continuing operations plus finance costs, tax, depreciation, amortisation,
impairment of goodwill, and changes in the fair value of derivative financial
instruments

 

"Adjusted net leverage" is defined as gross debt minus cash balances and
readily marketable inventories (RMI) to adjusted EBITDA

 

 

Amer Kakish, Chief Executive Officer of Ittihad, said:

"The sustained and resilient EBITDA performance witnessed in 2023 highlights
Ittihad's ability to maintain the strong earnings achieved in the
record-breaking year of 2022. This consistent long-term growth demonstrates a
significant milestone in our expansion journey, emphasizing the resilience of
our diversified portfolio amidst challenging economic and geopolitical
conditions, both regionally and globally."

"We take pride in Ittihad's current contribution, accounting for over 4% of
the UAE's non-oil manufacturing sector exports, and our rapid progress aligns
with the UAE's 'Operation 300bn' strategy. Looking ahead, our focus remains on
driving organic growth throughout our portfolio while maintaining our
commitment to ongoing investment plans."

 

For further information please contact:

Ittihad International Investment

Zahi Abu Hamze

Chief Financial Officer

+971 506128603

 

Wasfi Al Tayara

Corporate Finance and Investor Relations Manager

+971 501307449

investor.relations@ittihadinvestment.ae

 

MHP Group

James McFarlane / Charlie Barker / Veronica Farah

+44 7584 152665 / +44 7834 623818 / +44 7710 117517

Ittihad@mhpgroup.com

 

 

Overview

The headline figures of AED 10.4 billion in revenues and AED 509.6 million
adjusted EBITDA for the 12-month period remained relatively consistent with
the prior year. However, it's important to recognize that 2022 marked a record
year for the CGM segment, driven by customers replenishing inventories
post-pandemic. Subsequently, as supply chain disruptions eased, customers
scaled back on excess stock. Moreover, challenges such as higher interest
rates, inflation, and geopolitical conflicts further complicated market
conditions. Despite these obstacles, our ability to maintain the strong gains
achieved in 2022 amid such challenges is commendable.

Our robust performance underscores the diversified nature of our investment
portfolio spanning four key verticals: Consumer Goods Manufacturing,
Infrastructure and Building Materials Manufacturing, Business Services, and
Healthcare and Other. Throughout 2023, this diversification strategy has
proven effective, showcasing resilience across various sectors and geographic
markets. While certain segments faced macroeconomic challenges like destocking
in consumer goods, others enjoyed robust demand and predictable earnings
streams, mitigating any negative impacts at the Company level.

Revenue decreased by AED 538.4 million, or by 4.9 per cent., to AED 10,427.9
million in the twelve months ended 31 December 2023 from AED 10,966.3 million
in the twelve months ended 31 December 2022, primarily due to a cyclical
correction in commodity prices including paper, copper, and chemicals.

Adjusted EBITDA decreased by AED 12.7 million, or by 2.4 per cent., to AED
509.6 million in the twelve months ended 31 December 2023 from AED 522.3
million in the twelve months ended 31 December 2022, primarily due to
softening of EBITDA in the chemicals and paper businesses as a result of lower
prices of raw materials and finished goods, largely offset by higher margins
and volume in IBMM and Business Services divisions. As a percentage of
revenue, Adjusted EBITDA margin decreased from 13.3 per cent. to 12.6 per
cent.

Segmental Performance

Consumer Goods Manufacturing

CGM comprises three product lines: Printing and writing paper, tissue, and
chemicals used in detergents and personal care products. The nature of the
products the Company manufactures are fast moving essential goods which
enables its Consumer Goods margins to remain relatively resilient during
economic downturns. In the 12 months ended 31 December 2023, the Company's
three consumer goods products  accounted for 18 per cent of the Company's
revenue and 41 per cent of its adjusted EBITDA.

Revenue decreased by AED 220.8 million, or by 10.4 per cent., to AED 1,906.7
million in the twelve months ended 31 December 2023 from AED 2,127.5 million
in the twelve months ended 31 December 2022, primarily due to a post COVID
drop in demand and prices of chemicals from June 2022 onwards as a result of
destocking and normalization in supply chain, and a cyclical correction in the
prices of tissue and paper during the second and third quarter of 2023.

Adjusted EBITDA decreased by AED 125.1 million, or by 37.6 per cent., to AED
207.7 million in the twelve months ended 31 December 2023 from AED 332.9
million in the twelve months ended 31 December 2022, primarily due to
softening of margins as a result of lower prices of tissue, paper and chemical
driven by a significant correction in raw material prices on the back of
easing of supply chain crunch. Some of the excess demand growth of 2022 caused
paper inventories to swell, contributing to de stocking and thereby softening
of demand during second and third quarter in 2023. The impact was more
significant in the chemical business due to much lower post-pandemic demand
for cleaning and disinfecting chemicals.

Infrastructure and Building Materials Manufacturing

IBMM division comprises three product lines: Refined copper rods, steel bars,
and cement. The copper business enjoys a positive outlook due to strong demand
propelled by the increasing adoption of alternative energy sources and
electric vehicles, aligned with global trends favoring energy transition
initiatives. Similarly, the overall building materials segment has experienced
a surge in sales and improved margins, fuelled by substantial infrastructure
investments and heightened construction activity in key markets such as the
UAE and Saudi Arabia. In the 12 months ended 31 December 2023, IBMM accounted
for 73 per cent of the Company's revenue and 32 per cent of its adjusted
EBITDA.

Revenue decreased by AED 444.3 million, or by 5.5 per cent., to AED 7,643.9
million in the twelve months ended 31 December 2023 from AED 8,088.2 million
in the twelve months ended 31 December 2022, primarily due to a lower average
price of copper during the period. Cement and steel business experienced
healthy demand from the regional market on account of strong push for real
estate and infrastructure projects, partly offset the decrease in copper.

Adjusted EBITDA increased by AED 90.7 million, or by 125.1 per cent., to AED
163.2 million in the twelve months ended 31 December 2023 from AED 72.5
million in the twelve months ended 31 December 2022, primarily due to higher
margins and sales volume in the copper, steel and cement businesses.

Business Services

The Company's business services division provides: Long-term procurement,
maintenance, and operation of radiology departments in Government-owned
hospitals; Operation and maintenance services for infrastructure networks,
wastewater treatment plants, sewage network and sewage treatment plants; and
city cleaning and municipal waste collection. In the 12 months ended 31
December 2023, Business Services accounted for 6 per cent of the Company's
revenue and 28 per cent of its adjusted EBITDA.

Revenue increased AED 66.3 million, or by 12.8 per cent., to AED 585.4 million
in the twelve months ended 31 December 2023 from AED 519.0 million in the
twelve months ended 31 December 2022, primarily due to an increase in work
orders in the sewage and infrastructure business.

Adjusted EBITDA increased by AED 20.4 million, or by 16.5 per cent., to AED
144.2 million in the twelve months ended 31 December 2023 from AED 123.8
million in the twelve months ended 31 December 2022, primarily due to improved
margins in city cleaning and waste collection and an increase in work orders
in the operation and maintenance of sewage networks.

Healthcare and other

The division comprises of healthcare, fund management, logistics and
transportation, and interior design services for government and the private
sector. These businesses, in alignment with our Business Services division,
have minimal asset requirements and operate in sectors with promising growth
prospects. In the 12 months ended 31 December 2023, Healthcare and other
accounted for 3 per cent of the Company's revenue and 5 per cent of its
adjusted EBITDA.

Revenue increased by AED 131.5 million, or by 83.6 per cent., to AED 288.7
million in the twelve months ended 31 December 2023 from AED 157.3 million in
the twelve months ended 31 December 2022, primarily due to an increase in
sales of medical lab equipment, operating theatres, hospital beds, office
furniture and a revenue ramp up of the newly expanded operation in Egypt and
Saudi Arabia.

Adjusted EBITDA improved to AED 27.4 million in the twelve months ended 31
December 2023 from AED 6.1 million in the twelve months ended 31 December
2022, primarily due to increased margin on account of increase in sales of
medical lab equipment, operating theatres, hospital beds, office furniture and
a revenue ramp up of the newly expanded operation in Egypt and KSA.

Outlook

Ittihad expects further growth at the EBITDA level, with revenues across
verticals expected to organically expand. Moreover, improvements in margins
are anticipated within the Consumer Goods vertical as the segment supply and
demand dynamics normalize.

From an operational standpoint, Ittihad is strategically positioned to drive
growth within its portfolio. In Q2 2024, the commissioning of our copper
recycling plant is scheduled, along with additional expansion plans for the
recently acquired waste collection operation in Saudi Arabia.

Looking ahead, the Company's primary focus over the next five years will be on
organic growth and sustainability. Expansion into Saudi Arabia will remain a
key priority, alongside ongoing investments in human capital development and
the advancement of our ESG program.

 

ENDS

 

About Ittihad

Ittihad is a privately owned business founded in 2008 and headquartered in the
United Arab Emirates (UAE), with investments in the UAE, Saudi Arabia, and
Egypt. The Company exports products and services to over 50 countries
worldwide. It has a talented team of more than 8,000 members from over 57
nationalities with sector-wide expertise and a commitment to operational
excellence.

Since 2015, Ittihad has pursued a strategy of investing in businesses with
leading domestic positions in the UAE and the Gulf Cooperation Council (GCC),
as well as strong international export potential. The Company focuses on
long-term investments, all structured for business-to-business (B2B) export
and designed to capture the unique value proposition offered by the UAE and
the region.

Ittihad is committed to powering wealth creation through assets that balance
profitability with sustainability and generate positive outcomes for
stakeholders, society, and the planet.

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