Emirates Steel Arkan more than doubles first-quarter net profit on GCC construction boom

Entry into new export markets and increased steel volumes behind profitability, company says

An Emirates Steel Arkan plant in Mussafah. Antonie Robertson / The National

Emirates Steel Arkan, the UAE's largest public steel and building materials business, more than doubled its first-quarter net profit on higher sales bolstered by an upturn in residential construction in the UAE and GCC.

Net income for the three months to the end of March jumped to Dh152.2 million, compared to Dh72.6 million in the first three months of 2022, the company said in a statement on Wednesday to the Abu Dhabi Securities Exchange.

Revenue increased 18 per cent year-on-year to Dh2.41 billion in the first quarter, driven by the steel division.

“Emirates Steel Arkan continued its strong financial performance in the first three months of 2023,” group chief executive Saeed Al Remeithi said.

“This was driven by our entry into new markets, our focus on higher-value-added products with improved margins supported by favourable cost and pricing conditions, and further efficiencies achieved in our expanded business while remaining focused on our sustainability mission.

“This reflects the anticipated improvement in performance which we envisaged at the time of the strategic combination of Emirates Steel with Arkan.”

Formed after the merger of Emirates Steel and Arkan Building Materials in 2021, Emirates Steel Arkan is majority owned by Abu Dhabi holding company ADQ.

It supplies products to the manufacturing and construction sectors in the UAE and more than 70 international markets.

Emirates Steel Arkan's first-quarter revenue from the steel division increased by 18 per cent annually to Dh2.14 billion, while the unit's profit rose 125 per cent year on year to Dh137.5 million.

Revenue from the company's cement and blocks division climbed 15 per cent during the period to Dh211.2 million, while profit also increased nearly 14 per cent to Dh10.6 million.

The group's earnings before interest, taxes, depreciation and amortisation rose 41 per cent year-on-year to Dh320 million, Emirates Steel Arkan said in the bourse filing.

The company reduced its net bank borrowings by a further Dh130 million in the quarter, leading to a debt-to-equity ratio of 0.12 as of March 31, compared to 0.32 at the end of December 2021 immediately following the merger.

The group has also pledged to reduce its carbon emissions by 40 per cent by 2030 and achieve net zero emissions by 2050, in line with the UAE’s carbon-reduction targets and its targets for exporting low-carbon steel.

The UAE aims to become carbon neutral by 2050, with new investments worth Dh600 billion planned in clean and renewable energy sources over the next three decades.

Emirates Steel Arkan also plays a key role in supporting the UAE's Operation 300bn strategy launched in 2021, which seeks to position the country as an industrial centre by 2031.

The 10-year strategy focuses on increasing the industrial sector’s contribution to gross domestic product to Dh300 billion by 2031, from Dh133 billion in 2021.

“As we move into our second full year of operations as a combined entity, our strategy remains to lead the way in promoting UAE-made steel and building materials, thereby bolstering our international presence as a sustainability champion,” Mr Al Remeithi said.