Turkish Steel Maker Erdemir's Net Profits Decrease 72% in Second-Quarter 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--Eregli Demir Celik (ISE:EREGL) (Erdemir) (Zonguldak, Turkey), Turkey's biggest flat-steel maker, said second-quarter profit decreased 72% from the same period last year to $45.7 million, due to lower steel prices and a negative inventory effect. According to a filing to the Istanbul Stock Exchange, the revenue for Erdemir was up 7.7% to $1.28 billion.

Erdemir's EBITDA came in at $131.3 million in second-quarter 2012, down by 58% year-on-year (YoY), due to higher costs, below market expectations of $150.3 million, while EBITDA margins fell to 10% in the second quarter from 25.6% in the same period of 2011. In cumulative terms, total profit fell 63% YoY to $115.1 million in the first half of this year from $309.5 million in the first half of 2011.

Erdemir's total steel production declined 5% quarter-to-quarter to 1.68 million tons from the first quarter. The total sales volumes declined at a rate of 6% to 1.73 million tons in the same period.

Due to weak industrial activity and increasing competition, the company sold 1.47 million tons in flat-steel and 260,000 tons in long-steel. "Increasing sales from accumulated inventories at lower prices also pressured Erdemir's margins. Despite the marginal improvement in EBITDA on a quarterly basis, net earnings contracted sharply due to fx [foreign exchange] translation losses," said Burak Demirbilek, an equity analyst from Seker Securities in Istanbul.

Erdemir posted a net profit of $567.4 million last year, up 31% from a year earlier, and the company's sales jumped 34% to $5.33 billion in 2011 from the previous year.

The company will start a $700 million investment to develop an iron ore plant in Malatya by 2016, Erdemir Chairman Tar said on April 27, 2012. The company is upgrading a furnace at a cost of $45 million, as part of a plan to increase production capacity and modernize facilities with a total investment of between $300 million and $400 million.

The company will start a $700 million investment to develop an iron ore plant in Malatya by 2016, Erdemir Chairman Tar said on April 27. The company is upgrading a furnace at a cost of $45 million, as part of a plan to increase production capacity and modernize facilities with a total investment of between $300 million and $400 million.

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