(For other news from the Reuters Middle East Investment Summit,
* Expansion slowed by July revolution, power shortage
* But aims to open two new plants in early 2015
* Expects to conduct IPO in that year
* Production capacity to rise six-fold by 2017
* Hoping for government to impose import duties
By Shadia Nasralla
CAIRO, Oct 27 Egyptian Steel is preparing for an
initial public offer of its shares in 2015 and is on track to
boost its production capacity several-fold by then, chairman
Ahmed Abou Hashima said.
The company's ambitions underline an important truth for
Egypt's economy: although many businesses have cut investment
during the political turmoil of the past two years, they are
ready to revive it quickly if stability returns.
The economic slump since President Hosni Mubarak was
overthrown in February 2011 has created a massive deficit of
investment in the country of 85 million people, in areas ranging
from heavy industry to services and basic infrastructure such as
roads and power generation.
If Egypt's army-backed government succeeds in its plans to
draft a new constitution and hold parliamentary and presidential
elections early next year, the political environment may become
stable enough for companies such as Egyptian Steel to pour
billions of dollars into the economy.
"The market in Egypt is very promising and I believe in this
market," Abou Hashima, 38, said in an interview at the Reuters
Middle East Investment Summit. He cited Egypt's large population
and unsatisfied consumer demand.
Egyptian Steel was established in 2010, a year before
Mubarak's overthrow, as a joint venture between Egyptian and
Qatari interests that brought together three existing firms.
Egyptian Steel now has capital of about 2 billion Egyptian
pounds ($290 million), said Abou Hashima, who started his career
as a steel trader in the 1990s.
The economic slump and disarray in the government since 2011
have hurt demand for cement and steel used in building
infrastructure and luxury housing. Steel mills and other
energy-intensive industries have faced power cuts or been forced
to buy electricity from private suppliers at high prices.
But the failure of post-Mubarak administrations to enforce
building regulations triggered a boom in construction of
low-cost housing, which has buoyed steel firms. Ezz Steel
, Egypt's biggest steel maker, said last week that its
group net profit jumped 76 percent from a year earlier in the
second quarter of this year.
The army-backed government, which took power after Islamist
President Mohamed Mursi was ousted in July, is now promising to
resolve problems such as the power shortages, using $12 billion
in aid promised by Egypt's wealthy Gulf Arab allies.
A rise in the stock market, up 25 percent since
Mursi was overthrown, is a tentative sign of growing confidence
in the business sector. If it continues, the market could regain
its role as an important financing source for companies such as
Egyptian Steel; Egypt's last IPO was in November 2010.
"I expect it in 2015. I'm preparing myself from now," Abou
Hashima said of the Egyptian Steel IPO, adding that he would
want to float between 25 and 30 percent of the company.
The next expansion step for Egyptian Steel, which now
produces about 300,000 tonnes of steel a year at a plant in Port
Said, will be the opening of an Alexandria plant with capacity
of 250,000 tonnes.
"The factory in Alexandria was supposed to open in June but
there was a delay because of (the mass protests that led to
Mursi's overthrow) and delays in gas and electricity delivery to
it. It will open in November," Abou Hashima said.
Two more plants in the Nile city of Beni Suef and Ain Sukhna
on the Red Sea coast are due to open in early 2015, he said. The
company's total production capacity is to hit 2 million tonnes
Financing has been hard for many Egyptian companies as banks
have become risk-averse since the 2011 revolution, but it is not
impossible. Abou Hashima said the firm's expansion plans would
cost about 5 billion Egyptian pounds; shareholders have already
contributed 2 billion pounds and the firm signed for bank loans
worth about 1.1 billion pounds last week. The rest of the money
is to be raised via more loans and shareholder contributions.
The fate of heavy industry in Egypt has long depended to a
large degree on the government, which has provided subsidies and
regulatory support, and in many cases held large stakes in
Abou Hashima said Egyptian steel also hoped for government
support in the form of anti-dumping tariffs on steel imports,
especially imports from Turkey.
Egypt's trade ministry said last month that it was studying
the possibility of imposing anti-dumping duty on Turkish steel
imports. Relations between Egypt and Turkey have deteriorated
since the overthrow of Mursi, who had close ties with Istanbul.
Cairo's diplomatic relations with Qatar, which was a major
supporter of the Mursi administration, have also deteriorated.
But Abou Hashima said this would have no effect on his business.
Follow Reuters Summits on Twitter @Reuters_Summits
(Additional reporting by Nadia El Gowely and Ehab Farouk;
Editing by Michael Georgy, Patrick Werr and Andrew Torchia)