UPDATE 2-Egypt's Ezz Steel Q1 profit at record on higher prices

(Adds details, analyst comment, background)

By Wael Gamal

CAIRO, July 3 (Reuters) - Ezz Steel (ESRS.CA) (AEZDq.L), Egypt's largest steel company by sales, posted a record first-quarter net profit on Thursday, beating an analyst's forecast, on higher global steel prices.

First quarter net profit after tax and minority intersts rose to 436 million Egyptian pounds ($81.7 million), up 56 percent from the previous quarter.

Growth was driven by "the global increase in steel prices as well as our own strong operating performance," Paul Chekaiban, Ezz managing director, said in a statement.

Prices for some steel products have nearly doubled this year, helped by an export tax in China halting supplies out of the country and squeezing the world market.

Egyptian brokerage HC Securities and Investment had forecast in March the company would make 361 million pounds in the first quarter.

The company said net sales were up 35 percent at 5 billion pounds, driven by sales of flat products, which are mainly exported. Flat steel sales surged 58 percent to 1.94 billion pounds.

Sales of long steel products, mainly sold in Egypt, gained 24 percent to 3.05 million pounds.

Flat steel is used in the bodies of cars or ships, while long steel is used for wires or as supports in reinforced concrete.

SECOND QUARTER SEEN STRONG

Ezz, which has said it will beat last year's 12 percent profit growth, said first-quarter core earnings gained 32 percent to 1.3 billion pounds.

"Ezz Steel is expected to see a very good financial year in 2008 and these results are the first indication of that," said Tarek Shahin, analyst at Egyptian investment bank Beltone Financial.

"The second half will see the best results, in our opinion, as the increase in input costs will have mostly stabilised and selling prices have been set at a level that should result in better profitability over 2007," he added.

Ezz has said it was seeking to boost steel production to about 5.3 million tonnes by the end of 2009. Production in 2007 was about 4.8 million tonnes.

The company signed a deal last year to invest $750 million in a steel plant in Algeria, its first outside Egypt.

Steel demand in Egypt, where the company generates three quarters of its sales, would likely match last year's growth rate of 15 percent in 2008, the company has said.

Egypt's economy grew 7.1 percent in the last fiscal year, its fastest rate in at least two decades. Gulf Arab construction companies, including Emaar Properties EMAR.DU and Damac Properties, are investing billions of dollars to develop real estate in Egypt, the most populous Arab country.

Ezz owns a 50 percent stake in Ezz Dekheila Steel (IRAX.CA), Egypt's largest steel producer by market value. (Writing by Will Rasmussen; Editing by David Holmes)