2024-03-26 21:53:34
“2023 was quite a complicated year for Sonasid, but 2024 and the years to come look promising.”, this is how Ismail Akalay, Managing Director of the national steelmaker, summed up the situation from the outset during a press conference this Tuesday in Casablanca. “The projects announced in the kingdom are numerous and Sonasid is fully ready to support them. We also have a great ambition to increase our exports, particularly of steel fiber. We’ve done it in 2023 in Canada, Europe, the UAE, South Africa and other regions… and we will continue to grow our portfolio of high-value products to support this growth“, he promises.
It must be said that the group experienced a year 2023 marked by low prices which significantly impacted its margins. But the group was able to contain all this thanks to greater operational efficiency and the product mix which indeed generates effects which cushion the ambient gloom. To understand it, you have to break down the margins and explain them. An exercise undertaken in turn by Assia Baraka, Sales Director, Marketing and Communication, and Youssef Hbabi, Group Financial Director: In 2023, Sonasid was able to increase its sales volumes by 9% in a market which remained rather stable , as evidenced by the volumes of cement sold in 2023. This volume effect alone generated 60 MDH in additional margins. But sales prices fell, under pressure from Chinese exports which exploded by 36% and flooded all regions of the planet. Management estimates the negative impact of the drop in margins on results at MAD 176 million, completely erasing the gains in volumes. But this effect was countered by the announced diversification, notably with steel fiber and an ambitious strategy in recycling which generate margins of 18 and 14 million dirhams respectively, the operational performance – the group being in the top 3 subsidiaries of ArcelorMittal in the world in this area – generates 49 MDH in margins. For the rest, the group was able to count on its good financial structure to limit the drop in profit to MAD 42 million.
Growth drivers by 2028
The construction market in the Kingdom is experiencing a significant rebound which should benefit steel, a key material found in all construction sites, ranging from infrastructure to housing. The group has added to this perspective by presenting a new strategic plan for 2028. In the short term, demand should be supported by the Al Haouz reconstruction program and housing aid which is boosting real estate production. Preparations for the 2025 Africa Cup, notably through the extension of 6 stadiums and the upgrade of the Mohammed V Stadium in Casablanca, are also cited as growth drivers. Added to this are hydraulic infrastructure projects (desalination stations, dams, etc.) and other structuring projects such as new industrial zones, high-speed line extensions, renewables, preparations for the world, etc. Assia Baraka explains that demand for infrastructure projects is already being felt, particularly in sports infrastructures, ports and hydraulic projects. It is expected to accelerate in construction and real estate from the second half of the year, which would be more conducive to growth, with the periods of Eid El Fitr and Eid Al Adha both being in the first half of this year. The manager prefers to exercise great caution and tells us that she foresees an increase in demand of 3% thanks to these projects. A figure which, however, should surely be revised upwards in the second part of the year in his own opinion. “Leading partner of Morocco’s major infrastructure with a production capacity of more than 1.1 million tonnes, the group is well equipped to support the Kingdom’s major projects. recalls Yassir Hmidouch, Director of Operations of the group.
New products
“We promised the market to launch a new value-added project every year to be less dependent on raw materials and that is what we are doing. After steel fiber and green steel, we are launching into prestressed wire”, confirms Ismail Akalay who is not counting solely on the increase in demand to generate growth. According to him, this high added value offer is a key element to put Sonasid on a sustainable growth trajectory. Noureddine Rais, Director of Strategy, Supply Chain and Information Systems, explains that this new project required 7.5 million euros (almost 77 million dirhams) in investments and should enter production in the last quarter of 2024. According to him, the Prestressed wire is in great demand in construction. Today, 100% of this product is imported by construction companies. We are therefore going to offer them a substitute product. At the same time, the group is progressing faster than expected on its steel project for the automobile industry with first deliveries to German automobile manufacturers. For management, it is a good reference to address other manufacturers.
Greater cash generation
The drop in results in 2023, due to the compression of margins, masked the group’s progress in generating greater operating cash flow despite the market context. Indeed, according to Youssef Hbabi, Financial Director of the group, operational flows amounted to 235 MDH in 2023, compared to 167 MDH in 2022. This improvement makes it possible to support the group’s new dividend distribution policy, which has become regular with the new management, while allowing investments of around 100 MDH per year. Enough to preserve Sonasid’s war chest: massive excess cash (756 MDH at the end of 2023) which is ultimately intended to be invested in projects with a high internal rate of return (IRR), around 30% according to Youssef Hbabi. Thus, the dividend distribution rate (payout) reached 104% this year, an effort which is intended to be a signal of compliance with dividend commitments.
A.H
1711517198
#Important #growth #drivers
