Ezz Steel Company (S.A.E)

and its subsidiaries

Consolidated Financial Statements

Prepared in accordance with IFRS

For the year ended December 31, 2022

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

For the year ended December 31, 2022

Table of contents

Page(s)

Independent Auditor’s Report

1 – 4

Consolidated statement of financial position

Consolidated statement of profit or loss

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements

10 – 66

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Consolidated statement of financial position

As at December 31, 2022

		December 31,	December 31,	January 1,
	Notes	2022	2021	2021
		EGP ‘000	EGP ‘000	EGP ‘000
ASSETS
Non-current assets
Property, plant and equipment	6	21,799,442	20,936,247	20,419,145
Right-of-use assets	7	24,167	42,292	60,417
Goodwill and other intangible assets	8	388,058	402,489	416,849
Investment in associates	9	-	105	105
Financial assets at fair value through other comprehensive income	10	2,520,522	7,562	4,616
Deferred tax assets	20	1,785,385	1,258,168	2,120,703
Trade and other receivables	13	57,507	47,632	45,380
Total non-current assets		26,575,081	22,694,495	23,067,215
Current assets
Inventories	11	8,724,190	9,447,131	6,676,756
Trade and other receivables	13	13,256,296	11,043,779	7,326,561
Financial assets at amortised cost – treasury bills	14	566,332	132,261	249,732
Cash and bank balances	15	12,815,380	3,481,292	2,223,086
Total current assets		35,362,198	24,104,463	16,476,135
TOTAL ASSETS		61,937,279	46,798,958	39,543,350
EQUITY AND LIABILITIES
Equity
Share capital	16	2,716,325	2,716,325	2,716,325
Legal reserve	17(A)	1,358,163	1,358,163	1,358,163
Other reserves	17(B)	(1,176,073)	(1,176,073)	(1,176,073)
Accumulated losses		(8,627,268)	(11,963,092)	(15,579,664)
Treasury shares	16	(82,302)	(82,302)	(71,921)
Deficit of equity attributable to the Owners
of the Company		(5,811,155)	(9,146,979)	(12,753,170)
Non-controlling interests		5,157,882	3,430,686	1,496,768
Deficit of equity		(653,273)	(5,716,293)	(11,256,402)
Non-current liabilities
Borrowings	18	15,735,432	12,659,845	11,909,563
Employee benefit obligations	19	192,482	221,242	196,729
Deferred tax liabilities	20	3,145,527	3,024,122	2,996,147
Lease liabilities	7	34,939	63,962	91,052
Trade and other payables	22	3,121,114	3,215,353	3,520,895
Total non-current liabilities		22,229,494	19,184,524	18,714,386
Current liabilities
Bank overdraft	21	638,717	270,398	155,949
Trade and other payables	22	19,600,990	9,367,805	8,727,571
Current portion of borrowings	18	17,034,756	22,179,747	22,854,924
Current income tax liabilities	23	2,444,108	929,489	34,304
Current portion of lease liabilities	7	30,115	25,786	22,080
Provisions	24	612,372	557,502	290,538
Total current liabilities		40,361,058	33,330,727	32,085,366
Total liabilities		62,590,552	52,515,251	50,799,752
TOTAL EQUITY AND LIABILITIES		61,937,279	46,798,958	39,543,350

These consolidated financial statements were approved and authorised for issue by the Board of Directors on

December 30, 2023 and were signed on their behalf by:

Mr. Mamdouh El Rouby

Chairman of the Board

Mr. Hassan Nouh

Managing Director

Mr. Hazem Gouda

Chief Financial Officer

The accompanying notes 1 to 40 form an integral part of these consolidated financial statements.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Consolidated statement of profit or loss

For the year ended December 31, 2022

	Notes	2022	2021
		EGP ‘000	EGP ‘000
Revenue	25	83,984,233	67,818,516
Cost of sales	26	(64,993,991)	(53,835,597)
GROSS PROFIT		18,990,242	13,982,919
Administrative and general expenses	27	(1,940,395)	(1,412,216)
Selling and marketing expenses	28	(963,028)	(948,077)
Other operating income	29	175,891	80,094
Other operating expenses	30	(901,304)	(1,177,238)
Operating profit		15,361,406	10,525,482
Finance income	31	414,174	136,838
Finance cost	32	(3,363,026)	(3,391,597)
Foreign currency (losses)/gains		(4,466,564)	105,425
PROFIT BEFORE INCOME TAX		7,945,990	7,376,148
Income tax expense	23	(2,100,781)	(1,820,342)
NET PROFIT FOR THE YEAR		5,845,209	5,555,806
Profit attributable to:
Owners of the Company		3,721,472	3,620,327
Non-controlling interests		2,123,737	1,935,479
		5,845,209	5,555,806
Earnings per share (expressed in EGP per share):
Basic and diluted earnings per share	33	6.98	6.79

The accompanying notes 1 to 40 form an integral part of these consolidated financial statements.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Consolidated statement of comprehensive income

For the year ended December 31, 2022

	Notes	2022	2021
		EGP ‘000	EGP ‘000
Net profit for the year		5,845,209	5,555,806
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Changes in fair value of financial assets at fair value through other comprehensive income	10	-	3,546
Actuarial gains/(losses) on remeasurements of employee benefit obligations	19	63,585	(4,227)
Other comprehensive income/(loss) for the year		63,585	(681)
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR		5,908,794	5,555,125
Total comprehensive income attributable to:
Owners of the Company		3,762,138	3,619,665
Non-controlling interests		2,146,656	1,935,460
		5,908,794	5,555,125

The accompanying notes 1 to 40 form an integral part of these consolidated financial statements.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Consolidated statement of changes in equity

For the year ended December 31, 2022

				Attributable to the Owners of the Company
							Non-	Total
	Share	Legal	Other	Accumulated	Treasury	Deficit	controlling	deficit of
	capital	reserve	reserves	losses	shares	of equity	interest	equity
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
As at January 1, 2021 as per Egyptian GAAP	2,716,325	1,358,163	(1,176,073)	(15,527,223)	(71,921)	(12,700,729)	2,291,033	(10,409,696)
Effect of first-time adoption of IFRSs (Note 2.3)	-	-	-	(52,441)	-	(52,441)	(794,265)	(846,706)
As at January 1, 2021 as per IFRS	2,716,325	1,358,163	(1,176,073)	(15,579,664)	(71,921)	(12,753,170)	1,496,768	(11,256,402)
Total comprehensive income for the year:
Net profit for the year	-	-	-	3,620,327	-	3,620,327	1,935,479	5,555,806
Other comprehensive loss for the year	-	-	-	(662)	-	(662)	(19)	(681)
Total comprehensive income for the year	-	-	-	3,619,665	-	3,619,665	1,935,460	5,555,125
Transactions with shareholders:
Dividends distributed to non-controlling interests
by subsidiaries	-	-	-	-	-	-	(808)	(808)
Shares issued to non-controlling interest	-	-	-	-	-	-	1,000	1,000
Acquisition of treasury shares (Note 16)	-	-	-	-	(10,381)	(10,381)	-	(10,381)
Acquisition of treasury shares in subsidiaries	-	-	-	(3,093)	-	(3,093)	(1,734)	(4,827)
Total transactions with shareholders	-	-	-	(3,093)	(10,381)	(13,474)	(1,542)	(15,016)
As at December 31, 2021	2,716,325	1,358,163	(1,176,073)	(11,963,092)	(82,302)	(9,146,979)	3,430,686	(5,716,293)
Total comprehensive income for the year:
Net profit for the year	-	-	-	3,721,472	-	3,721,472	2,123,737	5,845,209
Other comprehensive income for the year	-	-	-	40,666	-	40,666	22,919	63,585
Total comprehensive income for the year	-	-	-	3,762,138	-	3,762,138	2,146,656	5,908,794
Transactions with shareholders:
Dividends distributed to non-controlling interests
by subsidiaries	-	-	-	-	-	-	(422,460)	(422,460)
Shares issued to non-controlling interest	-	-	-	-	-	-	3,000	3,000
Dividend distributed during the year (Note 16)	-	-	-	(426,314)	-	(426,314)	-	(426,314)
Total transactions with shareholders	-	-	-	(426,314)	-	(426,314)	(419,460)	(845,774)
As at December 31, 2022	2,716,325	1,358,163	(1,176,073)	(8,627,268)	(82,302)	(5,811,155)	5,157,882	(653,273)

The accompanying notes 1 to 40 form an integral part of these consolidated financial statements.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Consolidated statement of cash flows

For the year ended December 31, 2022

	Notes	2022	2021
OPERATING ACTIVITIES		EGP ‘000	EGP ‘000
Profit for the year before income tax		7,945,990	7,376,148
Adjustments for:
Depreciation of property, plant and equipment	6	1,225,542	1,212,590
Depreciation of right-of-use assets	7	18,125	18,125
Interest on lease liabilities	7	14,009	15,320
Amortization of intangible assets	8	15,275	14,930
Accrued interest on treasury bills	14	(34,175)	(28,095)
Provision for slow-moving and obsolete inventories	11	45,000	87,791
Provision of employees’ benefit obligations	19	48,420	31,691
Provisions formed during the year	24	228,817	340,990
Loss/(gain) on disposal of property, plant and equipment	29-30	490	(900)
Impairment losses on non-financial assets	30	35,269	52,819
Finance income	31	(379,999)	(108,743)
Interest expense on borrowings and bank overdrafts	32	3,349,017	3,376,277
Foreign exchange difference		1,266,489	(7,112)
		13,778,269	12,381,831
Working capital changes:
Inventories		677,941	(2,858,166)
Trade and other receivables		(2,257,556)	(3,772,290)
Trade and other payables		8,551,756	(161,145)
Provisions used		(173,947)	(74,026)
Employees’ benefits obligations paid – net		(11,981)	(7,075)
Cash flow from operations		20,564,482	5,509,129
Interest paid		(3,192,857)	(3,705,210)
Income tax paid		(991,973)	(34,647)
Net cash inflow from operating activities		16,379,652	1,769,272
INVESTING ACTIVITIES
Payment for purchase of property, plant and equipment		(1,909,939)	(909,331)
Proceeds from sale of property, plant and equipment		147	982
Payment for acquisition of intangible assets	8	(844)	(570)
Payment to purchase unquoted equity securities - FVOCI	10	(1,262,980)	-
Interest received	31	379,999	108,743
Change in restricted bank balances		(965,149)	8,213
Payment for purchase of treasury bills		(489,403)	(129,371)
Proceeds from sale of treasury bills		89,507	274,937
Net cash used in investing activities		(4,158,662)	(646,397)
FINANCING ACTIVITIES
Shares issued to non-controlling interest		3,000	1,000
Lease payments	7	(38,703)	(38,703)
Dividends paid		(848,774)	(808)
Repayments of/proceeds from borrowings - Net	18	(3,510,195)	81,335
Acquisition of treasury shares		-	(15,208)
Net cash (used in)/from financing activities		(4,394,672)	27,616
Net increase in cash and cash equivalents		7,826,318	1,150,491
Cash and cash equivalents at beginning of the year		3,078,835	1,927,464
Foreign exchange difference		174,302	880
Cash and cash equivalents at end of the year	15	11,079,455	3,078,835

The accompanying notes 1 to 40 form an integral part of these consolidated financial statements.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements

For the year ended December 31, 2022

1 General information

Ezz Steel Company (S.A.E) (the “Company”) was established as “Al Ezz Steel Rebars Company S.A.E” on

April 2, 1994, under the Law No. 159 of 1981 and was registered in the Commercial Register under number

472, Menofia Governorate, Egypt. The Company changed its name to “Ezz Steel Company S.A.E” on

November 1, 2009.

The Company was initially established for a period of 25 years from the date of its registration in the

Commercial Register. However, the term of the Company has been extended for a further period of 25

years with effect of April 2, 2019.

The registered address of the Company is Plot No. 129/B, Fourth Industrial Zone, El Sadat City, Menofeya,

Egypt.

The Company is engaged in manufacturing, trading and distribution of building materials, all types of iron,

ceramic, sanitary ware, pipes, mixers and taps and carrying on contracting works related thereto.

The Company’s shares are listed on the Egyptian Stock Exchange and its global depositary receipts (each

representing three ordinary shares) are also listed on the London Stock Exchange.

These consolidated financial statements as at December 31, 2022 comprise the Company and its

subsidiaries (hereinafter referred to as the “Group”). The Group’s financial year starts on January 1, and

ends on December 31, each year.

The Group has prepared a separate set of consolidated financial statements in accordance with Egyptian

Accounting Standards, and applicable laws and regulations for the year ended December 31, 2022, which

does not constitute part of these consolidated financial statements.

The details of Company’s principal subsidiaries, as at December 31, are set out below:

		Effective ownership		Effective ownership
		interest held by the		interest held by non-
	Company			controlling interests
Subsidiaries	2022	2021	2022	2021
Al Ezz Dekheila Steel Company – Alexandria (A)	64.06%	64.06%	35.94%	35.94%
Al Ezz Rolling Mills Company (B)	64.06%	64.06%	35.94%	35.94%
Al Ezz Flat Steel (C)	64.06%	64.06%	35.94%	35.94%
Iron for Industrial, Trading and Constructing Steel
(Contra Steel) (D)	57.66%	57.66%	42.34%	42.34%
Contra Wood for Wood Products (E)	55.16%	55.16%	44.84%	44.84%
Al Ezz for Medical Industries (F)	49.22%	49.22%	50.80%	50.80%

A. Al Ezz Dekheila Steel Company - Alexandria

Al Ezz Dekheila Steel Company - Alexandria (“EZDK”) is established on July 17, 1982 under Commercial

The registered address of EZDK is Alexandria-Matrouh Highway, Al Dekheila, Alexandria, Egypt.

EZDK is engaged in producing, shaping, manufacturing and trading of all forms of iron and steel products

and provision of services and consultations relating to the technological, technical, administrative and

financial aspects of iron and steel.

The shares of EZDK were listed on the Egyptian Stock Exchange as at the reporting date. However, on

August 5, 2023, the shareholders of EZDK resolved to authorise the voluntary delisting of EZDK’s shares

from the Egyptian Stock Exchange (refer to Note 40 for details).

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

1 General information (continued)

B. Al Ezz Rolling Mills Company

Al Ezz Rolling Mills Company (“ERM”) is established on March 10, 1986 under Commercial Register

number 77038. ERM is a wholly owned subsidiary of EZDK.

The registered address of ERM is 8 Amr Street, Mohandeseen, Giza, Egypt.

ERM is engaged in producing of steel rebars, welded rebar mesh, iron billets, direct reduced iron and

architectural material ancillary thereto.

C. Al Ezz Flat Steel

Al Ezz Flat Steel (“EFS”) is established on July 25, 1998 under Commercial Register number 33296. EFS

is a wholly owned subsidiary of EZDK.

The registered address of EFS is Suez, Industrial Economic Zone, North-West of the Gulf of Suez, Ain

Sokhna, Suez, Egypt.

EFS is engaged in producing hot and cold rolled and acid and oil treated steel rolls, flat steel sheets, cut and

acid and oil treated flat steel sheets, sponge iron, burned lime and steel blocks and slabs and rebars.

D. Iron for Industrial, Trading and Constructing Steel (Contra Steel)

Iron for Industrial, Trading and Constructing Steel (Contra Steel) (“Contra Steel”) is established on May

31, 1995 under Commercial Register number 138227. The Group owns 57.66% interest in Contra Steel

through its subsidiary EZDK (90% shares of Contra Steel are held by EZDK as at the reporting date).

The registered address of Contra Steel is Polt 6, Borg Al Arab, Alexandria, Egypt.

Contra Steel is engaged in production and trade of all metals, mineral products, constructions, maintenance,

transportation, imports and exports.

E. Contra Wood for Wood Products

Contra Wood for Wood Products (“Contra Wood”) is established on August 30, 1992 under Commercial

Steel (95.67% shares of Contra Wood are held by Contra Steel as at the reporting date).

The registered address of Contra Wood is Plot No. 63, Industrial Zone No. 4, 6th October, Giza, Egypt.

Contra Wood is engaged in production of pipes supplies, steel casting foundry, and mechanical equipment.

F. Al Ezz for Medical Industries

Al Ezz for Medical Industries (“Ezz Medical”) was established on August 11, 2020 under Commercial

19.22% through EZDK) in Ezz Medical. The management has assessed that the Group has controlling

interest over Ezz Medical as the majority of its shares are currently held by the Group’s companies along-

with the ultimate beneficial owner of the Company.

The registered address of Ezz Medical is 35 Lebanon Street, Mohandeseen, Giza, Egypt.

Ezz Medical is established to manage a plant for producing medical supplies along with assembling medical

supplies and equipment.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

1 General information (continued)

Financial information of the subsidiaries of the Group as at and for the years ended December 31, 2022

and December 31, 2021, before consolidation adjustments, is as follows:

A. Financial position

		2022
			Equity/
			(deficit of
	Assets	Liabilities	assets)
	EGP ‘000	EGP ‘000	EGP ‘000
Al Ezz Dekheila Steel Company – Alexandria	51,793,670	37,472,869	14,320,801
Al Ezz Rolling Mills Company	11,899,642	17,609,873	(5,710,231)
Al Ezz Flat Steel	19,690,136	14,591,849	5,098,287
Iron for Industrial, Trading and Constructing Steel (Contra Steel)	1,429,875	570,469	859,406
Contra Wood for Wood Products	31,748	2,362	29,386
Al Ezz for Medical Industries	26,271	18,252	8,019

		2021
			Equity/
			(deficit of
	Assets	Liabilities	assets)
	EGP ‘000	EGP ‘000	EGP ‘000
Al Ezz Dekheila Steel Company – Alexandria	40,153,758	29,939,948	10,213,810
Al Ezz Rolling Mills Company	10,826,798	15,844,074	(5,017,276)
Al Ezz Flat Steel	17,648,784	13,654,643	3,994,141
Iron for Industrial, Trading and Constructing Steel (Contral Steel)	942,606	315,299	627,307
Contra Wood for Wood Products	26,998	1,920	25,078
Al Ezz for Medical Industries	12,892	10,808	2,084

B. Financial Performance

	2022			2021
		Net profit/		Net profit/
	Revenue	(loss)	Revenue	(loss)
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Al Ezz Dekheila Steel Company –
Alexandria	61,710,826	5,276,996	47,930,574	3,719,669
Al Ezz Rolling Mills Company	12,048,571	(753,677)	8,076,904	(1,217,810)
Al Ezz Flat Steel	19,350,333	1,104,145	17,060,327	2,602,611
Iron for Industrial, Trading and Constructing Steel (Contra Steel)	1,822,242	254,973	834,952	241,649
Contra Wood for Wood Products	37,822	5,778	24,608	4,249
Al Ezz for Medical Industries	-	(1,565)	-	(416)

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

1 General information (continued)

C. Cash flows

		2022
	Operating	Investing	Financing
	activities	activities	activities
	EGP ‘000	EGP ‘000	EGP ‘000
Al Ezz Dekheila Steel Company – Alexandria	12,947,243	(1,518,678)	(5,738,893)
Al Ezz Rolling Mills Company	1,639,044	(8,723)	(909,356)
Al Ezz Flat Steel	2,518,025	(1,354,181)	(653,833)
Iron for Industrial, Trading and Constructing Steel (Contra Steel)	689,423	(350,850)	(23,933)
Contra Wood for Wood Products	343	(11,529)	(1,469)
Al Ezz for Medical Industries	(2,652)	5,602	-
		2021
	Operating	Investing	Financing
	activities	activities	activities
	EGP ‘000	EGP ‘000	EGP ‘000
Al Ezz Dekheila Steel Company – Alexandria	1,758,451	(198,572)	(438,761)
Al Ezz Rolling Mills Company	138,124	(3,914)	(130,386)
Al Ezz Flat Steel	1,803,943	(1,496,500)	(409,803)
Iron for Industrial, Trading and Constructing Steel (Contra Steel)	(88,157)	116,875	(8,977)
Contra Wood for Wood Products	(1,615)	1,042	(1,066)
Al Ezz for Medical Industries	(321)	2,458	-

2 Basis for preparation

2.1 Statement of compliance with IFRS

The consolidated financial statements of the Group have been prepared in accordance with International

Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

2.2 Historical cost convention

These consolidated financial statements have been prepared under the historical cost basis, except for the

following:

• Defined benefit obligations are recognised at the present value of future obligations using the

projected credit unit method; and

• Financial instruments at fair value through other comprehensive income are measured at fair value.

2.3 First-time adoption of IFRS

These consolidated financial statements for the year ended December 31, 2022 are the first set of

consolidated financial statements prepared in accordance with IFRS for the Group. For periods up to and

including the year ended December 31, 2022, the Group prepared its consolidated financial statements in

accordance with Egyptian Accounting Standards.

Accordingly, the Group has prepared consolidated financial statements that comply with IFRS applicable

as at December 31, 2022, together with the comparative information for the year ended December 31,

2021, as described in the summary of significant accounting policies (refer to Note 4). In preparing the

consolidated financial statements, the Group’s opening consolidated statement of financial position was

prepared as at January 1, 2021, the Group’s date of transition to IFRS.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

2 Basis for preparation (continued)

2.3 First-time adoption of IFRS (continued)

This note explains the principal adjustments made by the Group in restating its Egyptian Accounting

Standards consolidated financial statements, including the consolidated statement of financial position as

at January 1, 2021 and the consolidated financial statements as of, and for, the year ended December 31,

2021.

The afore-said transition to IFRS has resulted in the following changes:

Extract from the consolidated	Egyptian	Adjustments /		IFRS IFRS figures
statement of financial position	Accounting	Reclassification		conversion as at January
as at January 1, 2021	Standards	(C)	adjustments	1, 2021
ASSETS	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Fixed assets (Net)	23,291,803	(23,291,803)	-	-
Projects under construction	212,660	(212,660)	-	-
Long term investments	4,721	(4,721)	-	-
Long term lending to others	45,380	(45,380)	-	-
Other assets	35,858	(35,858)	-	-
Goodwill	315,214	(315,214)	-	-
Trade and notes receivables	2,875,782	(2,875,782)	-	-
Debtors and other debit balances	4,404,704	(4,404,704)	-	-
Suppliers – advance payments	331,373	(331,373)	-	-
Property, plant and equipment (A and B)	-	23,310,602	(2,891,457)	20,419,145
Right-of-use assets	-	60,417	-	60,417
Goodwill and other intangible assets	-	416,849	-	416,849
Investment in associates	-	105	-	105
Financial assets at fair value through other comprehensive income	-	4,616	-	4,616
Deferred tax assets	2,120,703	-	-	2,120,703
Inventories	6,676,756	-	-	6,676,756
Trade and other receivables	-	7,371,941	-	7,371,941
Financial assets at amortised cost –
treasury bills	249,732	-	-	249,732
Cash and bank balances	2,223,086	-	-	2,223,086
TOTAL ASSETS	42,787,772	(352,965)	(2,891,457)	39,543,350
EQUITY AND LIABILITIES
Equity
Share capital	2,716,325	-	-	2,716,325
Reserves	182,090	(182,090)	-	-
Legal reserve	-	1,358,163	-	1,358,163
Other reserves	-	(1,176,073)	-	(1,176,073)
Surplus of property, plant and equipment (B)	1,446,615	-	(1,446,615)	-
Accumulated losses	(15,527,223)	(52,441)	-	(15,579,664)
Treasury shares	(71,921)	-	-	(71,921)
Non-controlling interests (A, B, D and E)	2,291,033	-	(794,265)	1,496,768
Total equity	(8,963,081)	(52,441)	(2,240,880)	(11,256,402)

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

2 Basis for preparation (continued)

2.3 First-time adoption of IFRS (continued)

Extract from the consolidated	Egyptian	Adjustments /		IFRS IFRS figures
statement of financial position	Accounting	Reclassification		conversion as at January
as at January 1, 2021 (continued)	Standards	(C)	adjustments	1, 2021
Liabilities	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Long-term loans	11,634,621	(11,634,621)	-	-
Credit facilities and loan installments
due within one year	22,812,438	(22,812,438)	-	-
Long-term liabilities	3,717,624	(3,717,624)	-	-
Trade and notes payables	5,181,826	(5,181,826)	-	-
Customers- advance payments	1,008,553	(1,008,553)	-	-
Creditors and other credit balances	2,738,194	(2,738,194)	-	-
Liability of the supplementary pension scheme	20,771	(20,771)	-	-
Borrowings	-	34,764,487	-	34,764,487
Employee benefit obligations	-	196,729	-	196,729
Deferred tax liabilities (E)	3,661,950	(15,226)	(650,577)	2,996,147
Lease liabilities	430,560	(317,428)		113,132
Bank overdraft	155,949	-	-	155,949
Trade and other payables	-	12,248,466	-	12,248,466
Current income tax liabilities	34,304	-	-	34,304
Provisions	354,063	(63,525)	-	290,538
Total liabilities	51,750,853	(300,524)	(650 577)	50,799,752
TOTAL EQUITY AND LIABILITIES	42,787,772	(352,965)	(2,891,457)	39,543,350

				IFRS figures
Extract from the consolidated	Egyptian	Adjustments /	IFRS	as at
statement of financial position	Accounting	Reclassification	conversion	December
as at December 31, 2021	Standards	(C)	adjustments	31, 2021
ASSETS	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Fixed assets (Net)	22,202,508	(22,202,508)	-	-
Projects under construction	1,585,312	(1,585,312)	-	-
Long term investments	4,121	(4,121)	-	-
Long term lending to others	47,632	(47,632)	-	-
Other assets	30,735	(30,735)	-	-
Goodwill	315,214	(315,214)	-	-
Trade and notes receivables	4,795,988	(4,795,988)	-	-
Debtors and other debit balances	5,849,788	(5,849,788)	-	-
Suppliers – advance payments	802,659	(802,659)	-	-
Property, plant and equipment (A and B)	-	23,606,822	(2,670,575)	20,936,247
Right-of-use assets	-	42,292	-	42,292
Goodwill and other intangible assets	-	402,489	-	402,489
Investment in associates	-	105	-	105
Financial assets at fair value through other comprehensive income	-	7,562	-	7,562
Deferred tax assets	1,258,168	-	-	1,258,168
Inventories	9,518,954	(71,823)	-	9,447,131
Trade and other receivables	-	11,091,411	-	11,091,411
Financial assets at amortised cost –
treasury bills	132,261	-	-	132,261
Cash and bank balances	3,481,292	-	-	3,481,292
TOTAL ASSETS	50,024,632	(555,099)	(2,670,575)	46,798,958

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

2 Basis for preparation (continued)

2.3 First-time adoption of IFRS (continued)

				IFRS figures
Extract from the consolidated	Egyptian	Adjustments /	IFRS	as at
statement of financial position	Accounting	Reclassification	conversion	December
as at December 31, 2021 (continued)	Standards	(C)	adjustments	31, 2021
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
EQUITY AND LIABILITIES
Equity
Share capital	2,716,325	-	-	2,716,325
Reserves	182,090	(182,090)	-	-
Legal reserve	-	1,358,163	-	1,358,163
Other reserves	-	(1,176,073)	-	(1,176,073)
Surplus of property, plant and equipment (B)	1,335,620	-	(1,335,620)	-
Accumulated losses	(11,901,458)	(61,634)	-	(11,963,092)
Treasury shares	(82,302)	-	-	(82,302)
Non-controlling interest (A, B, D and E)	4,163,261	1,501	(734,076)	3,430,686
Total equity	(3,586,464)	(60,133)	(2,069,696)	(5,716,293)
Liabilities
Long-term loans	12,432,596	(12,432,596)	-	-
Credit facilities and loan installments
due within one year	22,132,212	(22,132,212)	-	-
Long-term liabilities	3,436,595	(3,436,595)	-	-
Trade and notes payables	5,301,611	(5,301,611)	-	-
Customers- advance payments	1,708,783	(1,708,783)	-	-
Creditors and other credit balances	2,686,513	(2,686,513)	-	-
Liability of the supplementary pension scheme	25,101	(25,101)	-	-
Borrowings	-	34,839,592	-	34,839,592
Employee benefit obligations	-	221,242	-	221,242
Deferred tax liabilities (E)	3,643,489	(18,488)	(600,879)	3,024,122
Lease liabilities	364,532	(274,784)	-	89,748
Bank overdraft	270,398	-	-	270,398
Trade and other payables	-	12,583,158	-	12,583,158
Current income tax liabilities	929,489	-	-	929,489
Provisions	679,777	(122,275)	-	557,502
Total liabilities	53,611,096	(494,966)	(600,879)	52,515,251
TOTAL EQUITY AND LIABILITIES	50,024,632	(555,099)	(2,670,575)	46,798,958

				IFRS figures
				as for the year
Extract from the consolidated statement	Egyptian	Adjustments /	IFRS	ended
of cash flows for the year ended	Accounting	Reclassification	conversion December 31,
December 31, 2021	Standards	(C)	adjustments	2021
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Cash flows from operating activities
(B and D)	4,078,452	(2,086,823)	(222,357)	1,769,272
Cash flows used in investing activities	(1,600,029)	945,419	-	(654,610)
Cash flows (used in)/ from financing
activities (D)	(1,327,052)	1,361,406	1,475	35,829

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

2 Basis for preparation (continued)

2.3 First-time adoption of IFRS (continued)

				IFRS figures
				as for the year
Extract from the consolidated statement	Egyptian		IFRS	ended
of profit or loss for the year ended	Accounting	Adjustments /	conversion December 31,
December 31, 2021	Standards	Reclassification	adjustments	2021
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Revenue	67,818,516	-	-	67,818,516
Cost of sales (B)	(54,048,213)		212,740	(53,835,473)
Administrative and general expenses	(1,404,507)	(14,500)	6,668	(1,412,339)
Selling and marketing expenses	(948,077)	-	-	(948,077)
Other operating income	80,094	-	-	80,094
Other operating expenses	(1,177,239)	-	-	(1,177,239)
Finance income	136,838	-	-	136,838
Finance cost	(3,391,597)	-	-	(3,391,597)
Foreign currency (losses)/gains	105,425	-	-	105,425
Income tax expense (D)	(1,773,905)	3,262	(49,699)	(1,820,342)
NET PROFIT FOR THE YEAR	5,397,335	(11,238)	169,709	5,555,806
Profit attributable to:
Owners of the Company	3,521,418	(7,014)	105,923	3,620,327
Non-controlling interests	1,875,917	(4,224)	63,786	1,935,479
	5,397,335	(11,238)	169,709	5,555,806
Basic and diluted earnings per share
(expressed in EGP per share):	6.61	(0.01)	0.19	6.79

				IFRS figures
				as for the year
Extract from the consolidated statement	Egyptian		IFRS	ended
of comprehensive income for the year	Accounting	Adjustments /	conversion December 31,
ended December 31, 2021	Standards	Reclassification	adjustments	2021
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Net profit for the year	5,397,335	(11,238)	169,709	5,555,806
Other comprehensive income
Changes in fair value of financial assets at fair value through other comprehensive income*	-	3,546	-	3,546
Realised portion of modification surplus of fixed assets (transferred to retained losses
during the year) (B)	(171,184)	-	171,184	-
Remeasurements of employee benefit
Obligations	(4,227)	-	-	(4,227)
Other comprehensive income	(175,411)	3,546	171,184	(681)
TOTAL COMPREHENSIVE INCOME	5,221,924	(7,692)	340,893	5,555,125

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

2 Basis for preparation (continued)

2.3 First-time adoption of IFRS (continued)

The reclassifications/remeasurements made to the consolidated statement of financial position and the

consolidated statement of comprehensive income as part of IFRSs conversion are as follows:

A. Capitalisation of foreign currency changes in property, plant and equipment

In accordance with Annexure B of the Egyptian Accounting Standard 13, the Group has opted for

capitalization of foreign currencies differences arising on remeasurement of foreign currency denominated

liabilities in relation to property, plant and equipment as part of acquisition costs. However, these

differences are required to be charged to the consolidated statement of profit or loss under IFRS and have

been accounted for accordingly while preparing these consolidated financial statements. Further, the

depreciation impact of these capitalized foreign currency changes has also been eliminated from the

consolidated statement of profit or loss.

B. Modification surplus on property, plant and equipment

While preparing the consolidated financial statements under Egyptian Accounting Standards, the Group

had adopted modified cost model for accounting for some classes of its property, plant and equipment and

had made adjustments to cost and accumulated depreciation using modification factors stated in Annexure

A of the Egyptian Accounting Standard 13. However, these adjustments are not permitted under IFRSs

and have been eliminated in preparation of these consolidated financial statements. Further, the

depreciation impact of this modification surplus has also been eliminated accordingly from the consolidated

statement of profit or loss.

C. Adjustments/reclassifications of figures in the consolidated statements of financial position

The following items have been adjusted/reclassified to comply with the requirements of IFRSs and improve

the quality of information presented:

i. Certain items of property, plant and equipment, right-of-use assets and intangible assets, earlier

disclosed as fixed assets (Net), projects under construction, other assets and goodwill have been

reclassified to appropriate line items in the consolidated statement of financial position.

ii. Certain items of investment in associates and financial assets at fair value through other comprehensive

income, earlier disclosed as long-term investments, have been reclassified to appropriate line items in

the consolidated statement of financial position.

iii. Certain items of trade and other receivables, earlier disclosed as trade and notes receivables, debtors and

other debit balances, suppliers – advance payments and long-term lending to others, have been reclassified

to appropriate line items in the consolidated statement of financial position.

iv. Reserves have been disaggregated into legal reserves and other reserves in the consolidated statement

of financial position.

v. Certain liabilities, earlier included in lease liabilities, have been reclassified to borrowings in the

consolidated statement of financial position as these did not qualify to be accounted for as lease

liabilities.

vi. Certain items of trade and other payables and employees’ benefit obligations, earlier disclosed as trade

and notes payables, creditors and other credit balances, customers – advance payments and other long-

term liabilities, have been reclassified to appropriate line items in the consolidated statement of financial

position.

vii. Certain items of borrowings, earlier disclosed as long-term loans and credit facilities and loan

installments due within one year, have been reclassified to appropriate line items in the consolidated

statement of financial position.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

2 Basis for preparation (continued)

2.3 First-time adoption of IFRS (continued)

C. Adjustments/reclassifications of figures in the consolidated statements of financial

position (continued)

viii. Difference between the cost and amount received pursuant to winding up of Atlantic Pacific Transport

Ltd., an investment classified at fair value through other comprehensive income, has been recognised

to adjust the fair value of that investment, based on best estimates available as at the date of these

consolidated financial statements.

D. Dividends to employees and the Board of Directors

As stipulated by the Egyptian laws, when a publicly joint stock company declares any dividends, the

company is mandated to distribute profits to its employees and Board of Directors. Those distributions are

treated as an adjustment to retained earnings, similar to the treatment of dividends. However, these

compensations are treated as a direct charge to the profit or loss under IFRS and have been accounted for

under General and administrative expenses in the consolidated statement of profit or loss.

E. Deferred tax liabilities and tax expense

This represents the cumulative effect of the afore-said remeasurement/reclassification transactions on

deferred tax liabilities as at the year end and deferred tax expense for the year.

2.4 Going concern basis of accounting

These consolidated financial statements have been prepared on a going concern basis, which assumes that

the Group will be able to recover its financial assets within the credit terms and discharge its liabilities as

and when these falls due.

As at December 31, 2022, the Group has accumulated losses of EGP 8,627.2 million (2021: EGP 11,963.1

million), deficit of equity of EGP 653.2 million (2021: EGP 5,716.3 million) and net current liabilities of

EGP 4,998.9 million (2021: EGP 9,226.3 million). However, the Group has recognized net profit of EGP

5,845.2 million for the year ended December 31, 2022 (2021: EGP 5,555.8 million) and has also generated

cash flows of EGP 16,379.6 million from operating activities during the year (2021: EGP 1,769.2 million).

The management believes that this positive trend profitability and source of finance will continue in the

foreseeable future based on the five years’ budgets and forecasts. Based on this, the management has a

reasonable expectation that the Group has and will have adequate resources to continue in operational

existence for the foreseeable future.

3 New or revised standards and interpretations

3.1 Standards, Interpretations and amendments adopted as at January 1, 2022

Accounting pronouncements which have become effective from January 1, 2022 and have therefore been

adopted are as follows:

• Reference to the Conceptual Framework (Amendments to IFRS 3);

• COVID-19 – Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16);

• Property, Plant and Equipment: Proceeds Before Intended Use (Amendments to IAS 16);

• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); and

• Annual Improvements to International Financial reporting Standards 2018-2020 Cycle (amendments

to IAS 41, IFRS 1, IFRS 9 and IFRS 16)

These amendments do not have a significant impact on these consolidated financial statements and

therefore disclosures have not been made.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

3 New or revised standards and interpretations (continued)

3.2 Standards, amendments and interpretations to existing Standards that are not

yet effective and have not been adopted early by the Group

Other standards and amendments that are not yet effective and have not been adopted early by the Group

are as follows:

Effective for annual reporting periods beginning on or after January 1, 2023:

• IFRS 17 ‘Insurance Contracts’;

• Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS

12);

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); and

• Definition of Accounting Estimate (Amendments to IAS 8).

Effective for annual reporting periods beginning on or after January 1, 2024:

• Classification of Liabilities as Current or Non-current (Amendments to IAS 1);

• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16); and

• Non-current Liabilities with Covenants (Amendments to IAS 1).

These amendments are not expected to have a significant impact on the consolidated financial statements

in the period of initial application and therefore the disclosures have not been made.

4 Summary of significant accounting policies

These consolidated financial statements have been prepared using the measurement bases specified by IFRS

for each type of asset, liability, income and expense. The principal accounting policies applied in the

preparation of these consolidated financial statements are set out below and on the following pages.

Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group

controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement

with the entity and has the ability to affect those returns through its power to direct the activities of the

entity.

Specifically, the Group controls an investee if, and only if, the Group has:

• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities

of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee; and

• The ability to use its power over the investee to affect its returns.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when

the Group loses control of the subsidiary.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there

are changes to one or more of the three elements of control. Generally, there is a presumption that a

majority of voting rights results in control. To support this presumption and when the Group has less than

a majority of the voting or similar rights of an investee, the Group considers all relevant facts and

circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement(s) with the other vote holders of the investee;

• Rights arising from other contractual arrangements; and

• The Group’s voting rights and potential voting rights.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Basis of consolidation (continued)

The consolidated financial statements include the assets, liabilities, income and expenses of subsidiaries

controlled by the Group from the date the Group gains control until the date the Group ceases to control

the subsidiary. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to

transactions between members of the Group are eliminated in full on consolidation.

Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the

transferred asset. When necessary, adjustments are made to the financial statements of subsidiaries to bring

their accounting policies in line with the Group’s accounting policies. Profit or loss and each component

of other comprehensive income (“OCI”) are attributed to the equity holders of the Company and to the

non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity

transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including

goodwill), liabilities, non-controlling interest and other components of equity, while any resulting gain or

loss is recognised in consolidated statement of profit or loss. Any investment retained is recognised at fair

value.

Business combinations

The Group determines that it has acquired a business when the acquired set of activities and assets include

an input and a substantive process that together significantly contribute to the ability to create outputs. The

acquired process is considered substantive if it is critical to the ability to continue producing outputs, and

the inputs acquired include an organised workforce with the necessary skills, knowledge, or experience to

perform that process or it significantly contributes to the ability to continue producing outputs and is

considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to

continue producing outputs.

The acquisition method of accounting is used to account for all business combinations by the Group,

regardless of whether equity instruments or other assets are acquired. The consideration transferred for the

acquisition of a subsidiary comprises the fair values of the assets transferred, liabilities incurred to the

former owners of the acquired business, equity interests issued by the Group, fair value of any asset or

liability resulting from a contingent consideration arrangement and fair value of any pre-existing equity

interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,

with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises

any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis at the non-

controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related

costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate

classification and designation in accordance with the contractual terms, economic circumstances and

pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host

contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition

date and is classified either as equity or a financial liability. Amounts classified as a financial liability are

subsequently remeasured with changes in fair value being recognised in consolidated statement of

comprehensive income.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and

the amount recognised for non-controlling interests over the net identifiable assets acquired and liabilities

assumed. If those amounts are less than the fair value of the net identifiable assets of the business acquired,

the difference is recognised directly in profit or loss as a bargain purchase.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Business combinations (continued)

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the

purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,

allocated to each of the Group’s cash-generating units that are expected to benefit from the combination,

irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed

of, the goodwill associated with the operation disposed of is included in the carrying amount of the

operation when determining the gain or loss on disposal of the operation. ‘Goodwill disposed of in these

circumstances is measured based on the relative values of the operation disposed of and portion of the

cash-generating unit retained.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are

discounted to their present value as at the date of exchange. The discount rate used is the Group’s

incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an

independent financier under comparable terms and conditions.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s

previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains

or losses arising from such remeasurement are recognised in profit or loss.

Foreign currency translation

Functional and presentation currency

Functional currency of all the entities within the Group is Egyptian Pound (“EGP”) which is also the

Group’s presentation currency. All values are rounded to the nearest thousands (‘000) Egyptian Pound,

except where noted otherwise.

Transactions and balances

Transactions in foreign currencies are translated to the presentation currency of the respective Group entity

at exchange rates prevailing at the dates of the transactions (spot exchange rate).

Monetary assets and liabilities denominated in foreign currencies are translated to the presentation currency

at the exchange rate applicable at the reporting date and the resulting foreign exchange gains and losses are

recognised in the consolidated statement of profit or loss, except for monetary items that are designated as

part of the hedge of the Group’s net investment in a foreign operation. These are recognised in OCI until

the net investment is disposed of, at which time, the cumulative amount is reclassified to the consolidated

statement of profit or loss. Tax charges and credits, if any, attributable to exchange differences on those

monetary items are also recognised in OCI.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the

presentation currency at the exchange rate when the fair value was determined. Non-monetary items in a

foreign currency that are measured based on historical cost are not retranslated at the reporting date.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated

impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition

of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow to

the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is

derecognised. All other repairs and maintenance are charged to the consolidated statement of profit or loss

during the financial year in which they are incurred.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Property, plant and equipment (continued)

Land is not depreciated. Depreciation on other property, plant and equipment is calculated using the

straight-line method except for rolling rings and miles which is depreciated using the units of production

method. The useful lives can be summarised, as follows:

Classification
Buildings		8 – 50 years
Machinery and equipment
-	Rolling rings and mills	According to actual use
-	Other machinery and equipment	5 – 25 years
Vehicles		2 – 5 years
Furniture and office equipment		3 – 10 years
Tools and appliances		4 – 5 years
Leasehold improvements		8 – 40 years

Residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting

period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying

amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are

recognised within “other income/(expenses)” in the consolidated statement of profit or loss.

Projects under construction

Projects under construction are stated at cost less realised impairment losses, if any. Cost includes all

expenditures associated with the acquisition of the asset and make it usable. When the assets are ready for

its intended use, it is transferred from projects under construction to the appropriate category under

property, plant and equipment and depreciated in accordance with Group’s policies.

Leases

The Group has entered into various lease contracts having tenure of 8 years. Lease terms are negotiated on

an individual basis and contain a wide range of different terms and conditions. The lease agreements do

not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased

asset is available for use by the Group. Each lease payment is allocated between the liability and finance

cost. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease

payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the

lessee’s incremental borrowing rate.

I. Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the

underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated

depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of

right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease

payments made at or before the commencement date less any lease incentives received. Unless the Group

is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised

right-of-use assets is depreciated on a straight-line basis over the shorter of its estimated useful life and the

lease term as follows:

Buildings

8 years

Right-of-use assets is also subject to impairment.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Leases (continued)

II. Lease liabilities

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the

lease commencement date if the interest rate implicit in the lease is not readily determinable. After the

commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and

reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if

there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a

change in the assessment to purchase the underlying asset and is recognised under lease liabilities in the

consolidated statement of financial position.

The finance cost is charged to consolidated statement of profit or loss over the lease period to produce a

constant periodic rate of interest on the remaining balance of the liability for each period.

III. Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases

that have a lease term of 12 months or less from the commencement date and do not contain a purchase

option). It also applies the lease of low-value assets recognition exemption to leases that are considered to

be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense

on a straight-line basis over the lease term in profit or loss.

Goodwill and other intangible assets

Intangible assets are identifiable non-monetary assets without physical substance, which can be controlled

and are capable of generating future economic benefits.

Intangible assets are stated at purchase cost including any expenses that are directly attributable to preparing

the asset for its intended use, net of accumulated amortisation and impairment losses, if any. Amortisation

is recognised in consolidated statement of profit or loss on a straight-line basis over the estimated useful

lives of intangible assets from the date that they are available for use, since this mostly reflects the expected

pattern of consumption of the future economic benefits embodied in the asset.

Production license and computer software

Production license comprises amount paid by Al Ezz Flat Steel to Industrial Development Authority in Egypt

to obtain approval for steel rebar production permit.

Computer software represents amount incurred in connection with the acquisition of ERP and other

software being used by the Group.

These intangible assets are measured at historical cost less the accumulated amortisation and accumulated

impairment losses, if any. Historical cost includes all expenditures associated with the acquisition of an

intangible asset.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditures are recognised in the consolidated statement of

profit or loss as it is incurred.

Amortisation is calculated to write-off the costs of these assets less their residual values, using straight-line

method over their estimated useful lives, and is generally recognised in the consolidated statement of profit

or loss. The useful lives in the calculation of amortisation are as follows:

Computer software

8 years

Production license

8 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted, if

appropriate.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Goodwill and other intangible assets (continued)

Goodwill

Goodwill represents the excess of acquisition cost over the Group’s share in the fair value of the investee’s

acquired net assets at the time of acquisition.

Goodwill is assessed for impairment at each reporting date, and impairment losses, if any, are recognised

in the consolidated statement of profit or loss. For the purpose of impairment testing, goodwill acquired in

a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units

that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the

acquiree are assigned to those units.

On disposal of a subsidiary or where the Group ceases to exercise control, the attributable amount of

goodwill is included in the determination of the profit or loss on disposal.

Investment in associates

An associate is an entity over which the Group has significant influence. Significant influence is the power

to participate in the financial and operating policy decisions of the investee but neither control nor joint

control over those policies.

Investment in associate is accounted for using the equity method.

Under the equity method of accounting, interests in associates are initially recognised at cost and adjusted

thereafter to recognise the Group’s share of post-acquisition profits or losses and movements in other

comprehensive income. Goodwill relating to associates is included in the carrying amount of the investment

and is not specifically tested for impairment.

Where the Group’s share of losses exceeds its interest in an associate, the carrying amount is reduced to

zero and recognition of further losses is discontinued except to the extent that the Group has incurred legal

or constructive obligations or made payments on behalf of an investee.

Unrealized gains on transactions between Group and its associates are eliminated to the extent of the

Group’s interest in these associates. Unrealized losses are also eliminated unless the transaction provides

evidence of an impairment of the asset transferred.

After application of the equity method, the Group determines whether it is necessary to recognize an

impairment loss on its investment in its associates. At each reporting date, the Group determines whether

there is objective evidence that the investment in an associate is impaired. If there is such evidence, the

Group calculates the amount of impairment as the difference between the recoverable amount of the

associate and its carrying value, and then recognizes the loss within ‘Share of profit / (loss) of an associate’

in the consolidated statement of profit or loss.

Upon loss of significant influence over the associate, the Group measures and recognises any retained

investment at its fair value. Any difference between the carrying amount of the associate upon loss of

significant influence and the fair value of the retained investment and proceeds from disposal is recognised

in the consolidated statement of profit or loss.

Impairment of non-financial assets

Non-financial assets other than goodwill

Non-financial assets other than goodwill are reviewed for impairment whenever events or changes in

circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised

for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable

amount is the higher of an asset’s fair value less costs to sell, and value in use.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Impairment of non-financial assets (continued)

Goodwill

Goodwill is not subject to amortisation and are tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash

inflows from continuing use that are largely independent of the cash inflows of other assets or cash

generating units (“CGUs”). Goodwill arising from a business combination is allocated to CGUs or groups

of CGUs that are expected to benefit from the synergies of the business combination.

The recoverable amount of an asset or CGU is the greater of its value in use, and its fair value less costs to

sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-

tax discount rate that reflects current market assessments of the time value of money and the risks specific

to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in consolidated statement of profit or loss. They are allocated first to

reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts

of the other assets in the CGU on a pro rata basis.

Reversal of impairment loss

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed

only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have

been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Inventories

Inventories are stated at the lower of cost or net realisable value. Cost comprises direct materials, direct

labour, other direct costs and an appropriate proportion of variable and fixed overhead expenditures, the

latter being allocated on the basis of normal operating capacity but excludes borrowing costs. Costs of

purchased inventory are determined after deducting rebates and discounts. Costs are assigned to individual

items of inventories using weighted average method. Work in process and finished goods are measured at

actual manufacturing cost as the actual level of production of the Group approximates the normal capacity.

Net realisable value is the estimated selling price in the ordinary course of business less the costs of

completion and estimated costs necessary to make the sale.

The provision for slow moving and obsolete inventories is created in accordance with the management’s

assessment.

Financial instruments

Financial assets

Classification

The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income, or

through profit or loss, as applicable); and

• those to be measured at amortised cost.

The Group’s financial assets at fair value through other comprehensive income comprises equity

investment in unlisted companies. The Group’s financial assets at amortised cost include trade and most

other receivables, treasury bills and cash and bank balances.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Financial instruments (continued)

Financial assets (continued)

Classification (continued)

The classification depends on the Group’s business model for managing the financial assets and the

contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other

comprehensive income (OCI), as applicable. For investments in equity instruments that are not held for

trading, this will depend on whether the Group has made an irrevocable election at the time of initial

recognition to account for the equity investment at fair value through other comprehensive income

(FVOCI).

The Group reclassifies debt investments when and only when its business model for managing those assets

changes.

Recognition and measurement

A financial asset (unless it is a trade receivable without a significant financing component that is initially

measured at the transaction price) is initially measured at fair value plus, for an item not at fair value through

profit or loss (“FVTPL”), transaction costs that are directly attributable to its acquisition.

Trade receivables are initially recognised at transaction price (unless there is significant financing

component) and subsequently measured at amortised cost using the effective interest method, less

provision for impairment. Trade receivables are amounts due from customers for goods sold in the ordinary

course of business. If collection is expected in one year or less (or in the normal operating cycle of the

business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Subsequent measurement of debt instruments depends on the Group’s business model for managing the

asset and the cash flow characteristics of the asset. According to the Group business model, the Group

subsequently measures debt instruments at amortised cost for assets that are held for collection of

contractual cash flows where those cash flows represent solely payments of principal and interest. Interest

income from these financial assets is included in finance income using the effective interest rate method.

Any gain or loss arising on derecognition is recognised directly in the consolidated statement of profit or

loss and presented in other gains/(losses), together with foreign exchange gains and losses.

Impairment

The Group assesses on a forward-looking basis, the expected credit loss associated with its trade receivables

and debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends

on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires

expected lifetime losses to be recognised from initial recognition of the receivables.

Financial liabilities

Classification

Financial liabilities are classified, at initial recognition, as borrowings or payables.

The Group’s financial liabilities include lease liabilities, borrowings, bank overdrafts and trade and most

other payables.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Financial instruments (continued)

Financial liabilities (continued)

Recognition, measurement and derecognition

Financial liabilities are recognised initially at fair value, net of transaction costs incurred. These are

subsequently measured at amortised cost; any difference between the proceeds (net of transaction costs)

and the redemption value is recognised in the consolidated statement of profit or loss over the period of

these liabilities using the effective interest method.

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled

or expired. The difference between the carrying amount of a financial liability that has been extinguished

or transferred to another party and the consideration paid, including any non-cash assets transferred or

liabilities assumed, is recognized in consolidated statement of profit or loss as other income or finance

costs.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated

statement of financial position if there is a currently enforceable legal right to offset the recognised amounts

and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. The fair value measurement is based on

the presumption that the transaction to sell the asset or transfer the liability takes place either:

• in the principal market for the asset or liability; or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

The fair value of an asset or a liability is measured using the assumptions that market participants would

use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate

economic benefits by using the asset in its highest and best use or by selling it to another market participant

that would use the asset in its highest and best use.

Management uses valuation techniques to determine the fair value of financial instruments (where active

market quotes are not available). This involves developing estimates and assumptions consistent with how

market participants would price the instrument. Management bases its assumptions on observable data as

far as possible but this is not always available. In that case management uses the best information available.

Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction

at the reporting date.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as

a deduction, net of tax, from the proceeds.

Reserves

Legal reserve

The Group transfers 5% of its net profit for the year to legal reserve in accordance with applicable Laws

and Regulations. This transfer is shown as a reclassification adjustment in the consolidated statement of

changes in equity for the year in which it occurs.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Reserves (continued)

Legal reserve (continued)

The shareholders may resolve to discontinue such transfer once the legal reserve has reached 50% of the

paid-up share capital of the Company. The legal reserve may be used for the benefit of the Company at the

discretion of the Directors, subject to approval by shareholders.

Other reserves

The Directors of any entity within the Group may resolve to create reserve by setting aside share of yearly

profits for future expenditure commitments and obligations or any other purpose as they deem appropriate.

Treasury shares

When any entity within the Group purchases the Company’s equity share capital (treasury shares), the

consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted

from equity attributable to the Company’s shareholders until the shares are cancelled or reissued.

Repurchased shares are classified as treasury shares and are presented in equity. Where such shares are

subsequently sold or reissued, any consideration received, net of any directly attributable incremental

transaction costs and the related income tax effects is included within equity.

Dividends

Obligation is made for the amount of any dividend declared, being appropriately authorised and no longer

at the discretion of the Group, on or before the end of the reporting period but not distributed at the end

of the reporting period.

Employee benefits

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly

within 12 months after the end of the period in which the employees render the related service, are

recognised in respect of employees’ services up to the end of the reporting period and are measured at the

amounts expected to be paid when the liabilities are settled.

Post-employment obligation

Defined benefit plan

Some of the entities within the Group are maintaining a supplementary pension scheme for their employees.

The liability recognised in the consolidated statement of financial position in respect of this defined benefit

plan is the present value of the defined benefit obligation at the end of the reporting period less the fair

value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using

the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash

outflows using interest rates of government bonds that are denominated in the currency in which the

benefits will be paid, and that have terms approximating to the terms of the related obligation.

The net interest cost is calculated by applying the discount rate to the balance of the defined benefit

obligation. This cost is included in employee benefit expense in the consolidated statement of profit or loss.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions

are recognised in the period in which they occur, directly in other comprehensive income. They are included

in retained earnings in the consolidated statement of changes in equity and in the consolidated statement

of financial position.

Changes in the present value of the defined benefit obligation resulting from plan amendments or

curtailments are recognised immediately in profit or loss as past service costs.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Employee benefits (continued)

Post-employment obligation (continued)

Defined contribution plan (continued)

For defined contribution plan, the Group has established a provident fund and also pays fixed contributions

to the Social Insurance Authority in Egypt on a mandatory basis.

The Group has no further payment obligations once the contributions have been paid under the afore-said

plans. The contributions are recognised as employee benefit expense when they are due.

Sharing of profits

The Group may distribute share of its profit to its employees in accordance with applicable Laws and

Regulations. These are recognised in the consolidated statement of profit or loss for the period in which

the employees’ rights to receive the share of profit are established, and only when, it has a legal or

constructive obligation to make such payments as a result of past events and a reliable estimate of the

expected obligation can be made.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal

retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits.

The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no

longer withdraw the offer of those benefits; and (b) when the Group recognises costs for a restructuring

that is within the scope of IAS 37 and involves the payment of terminations benefits.

In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured

based on the number of employees expected to accept the offer and in accordance with labour law. Falling

due more than 12 months after the end of the reporting period are discounted to present value.

Taxation

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid

to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted

or substantively enacted at the reporting date in the countries where the Group operates and generates

taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the

consolidated profit or loss. Management periodically evaluates positions taken in the tax returns with

respect to situations in which applicable tax regulations are subject to interpretation and establishes

provisions where appropriate.

Deferred income tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets

and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss; or

• In respect of taxable temporary differences associated with investments in subsidiaries and associates

when the timing of the reversal of the temporary differences can be controlled and it is probable that

the temporary differences will not reverse in the foreseeable future.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Taxation (continued)

Deferred income tax (continued)

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax

credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that

taxable profit will be available against which the deductible temporary differences, and the carry forward of

unused tax credits and unused tax losses can be utilised, except:

• When the deferred tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time

of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• In respect of deductible temporary differences associated with investments in subsidiaries and

associates, deferred tax assets are recognised only to the extent that it is probable that the temporary

differences will reverse in the foreseeable future and taxable profit will be available against which the

temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that

it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax

asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are

recognised to the extent that it has become probable that future taxable profits will allow the deferred tax

asset to be recovered.

Value Added Tax (“VAT”)

The Group is subject to VAT on its transactions inside Egypt and in other jurisdictions in which it operates

at various rates. The amount of VAT liability is determined by applying the applicable tax rate to the

invoiced amount of services (output VAT) less VAT paid on purchases made with the relevant supporting

invoices (input VAT). The Group reports revenue net of value added tax for all the periods presented in

the consolidated financial statements.

Salary Tax

In accordance with the Egyptian Tax Law, the Group withholds the Salary Tax due on each employee and

remits the tax to the Tax Authority. Salary Tax withheld by the Group are recorded as liability in the

consolidated statement of financial position.

Stamp Tax

Stamp tax law in Egypt is imposed on a variety of documents, such as contracts and on the values of certain

transactions e.g. advertisements. Stamp tax is expensed in profit or loss as incurred.

Property Tax

Property tax is imposed on all buildings in Egypt. The tax rate is applied on the annual rental value of the

taxable buildings after certain deduction allowed for maintenance. Property Tax expense is recognized on

an accrual basis.

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past

events, it is probable that an outflow of resources will be required to settle the obligation, and the amount

has been reliably estimated. The timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the

most reliable evidence available at the reporting date, including the risks and uncertainties associated with

the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will

be required in settlement is determined by considering the class of obligations as a whole.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Provisions (continued)

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects

current market assessments of the time value of money and, where appropriate, the risks specific to the

liability. The unwinding of the discount is recognised as finance cost.

The Group makes use of the exemption in IAS 37 not to disclose some or all of the information required

by the accounting standard with regards to provisions when it can be expected that such disclosure would

prejudice seriously the position of the Group in a dispute with other parties on the subject matter of the

provision.

Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of

qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their

intended use or sale, are added to the cost of those assets, until such time as the assets are substantially

ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure

on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs

are recognised in consolidated profit or loss in the period in which they are incurred.

Revenue recognition

The Group recognises revenue from contracts with customers when control of the goods or services is

transferred to the customer in an amount that reflects the consideration to which the Group expects to be

entitled in exchange for those goods or services. The Group recognises revenue from contracts with

customers based on the five steps model set out as follows:

Step 1: identify the contract(s) with a customer:

A contract is defined as an agreement between two or more parties that creates enforceable rights and

obligations and sets out the criteria for every contract that must be met.

Step 2: identify the performance obligations in the contract:

A performance obligation is a premise in a contract with a customer to transfer a good or services to the

customer.

Step 3: Determine the transaction price:

The transaction price is the amount of consideration to which the Group expects to be entitled in exchange

for transferring promised goods or services to a customer, excluding amounts collected on behalf of third

parties.

Step 4: Allocate the transaction price to the performance obligations in the contract:

For a contract that has more than one performance obligation, the Group will allocate the transaction price

to each performance obligation in an amount depicts the amount of consideration to which the Group

expects to be entitled in exchange for satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation:

An entity shall consider the terms of the contract, as well as any laws that apply to the contract, when

evaluating whether it has an enforceable right to payment for performance completed to date.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Revenue recognition (continued)

To determine the point in time at which a customer obtains control of a promised asset and the Group

satisfies a performance obligation, the Group considers the requirements for control. In addition, the

Group considers indicators of the transfer of control, which include, but are not limited to, the following:

• The Group has a present right to payment for the asset. The customer has legal title to the asset.

• The Group has transferred physical possession of the asset.

• The customer has the significant risks and rewards of ownership of the asset.

• The customer has accepted the asset.

Sales of goods

Sales are recognised as revenue at point in time when control of the products has transferred, being when

the products are delivered to the customers, the customer has full discretion over the channel and price to

sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the

products.

Delivery occurs when the products have been shipped to the specific location, risks of damage and loss

have been transferred to the customer, and either the customer has accepted the products in accordance

with the sales contract, acceptance provisions have lapsed, or the Group has objective evidence that all

criteria for acceptance have been satisfied.

A receivable is recognised when the goods are delivered as this is the point in time that the consideration

is unconditional because only the passage of time is required before the payment is due.

Interest income

Interest income is recognised using the effective interest method. When a receivable is impaired, the Group

reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at

the original effective interest rate of the instrument and continues unwinding the discount as interest

income.

Cash and cash equivalents

For the purpose of consolidated statement of cash flows, cash and cash equivalents comprise cash in hand,

current accounts with banks, time deposits, and money market funds that have an initial maturity period of

less than three months and are subject to an insignificant risk of changes in value, net of bank overdrafts,

if any, that are repayable on demand and form an integral part of the Group’s cash management.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief

Executive Officer and Board of Directors. The Board of the Company has appointed a Chief Operating

Decision-Maker who assesses the financial performance and position of the Group and makes strategic

decisions. This Chief Operating Decision-Maker has been identified as the Chief Executive Officer.

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent, excluding

any costs of servicing equity other than ordinary shares, by the weight average number of ordinary shares

in issue during the year (excluding ordinary shares purchased by the Group and held as treasury shares).

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares

outstanding to assume conversion of all dilutive potential ordinary shares.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

4 Summary of significant accounting policies (continued)

Earnings per share (continued)

Diluted earnings per share (continued)

The Group does not have any categories of dilutive potential ordinary shares, hence the diluted earnings

per share is the same as the basic earnings per share.

Current versus non-current classification

The Company presents assets and liabilities in the consolidated statement of financial position based on

current/non-current classification.

An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle;

• Held primarily for the purpose of trading;

• Expected to be realised within twelve months after the reporting period; or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least

twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in the normal operating cycle;

• It is held primarily for the purpose of trading;

• It is due to be settled within twelve months after the reporting period; or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after

the reporting period.

All other liabilities are classified as non-current.

5 Accounting estimates, assumptions and judgments

The preparation of the Group’s consolidated financial statements requires management to make

judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and

liabilities, the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these

assumptions and estimates could result in outcomes that require a material adjustment to the carrying

amount of assets or liabilities affected in future periods.

5.1 Critical accounting estimates and assumptions

Estimates and adjustments are continually being evaluated and are based on historical experience and other

factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates

will, by definition, rarely equal the related actual results. The estimates and assumptions that have a

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the

next financial year are outlined below:

Recognition of deferred tax assets

At each reporting date, the Group’s management reviews the recoverable amount of deferred tax assets

recognised by its subsidiaries with significant carried forward tax losses. Deferred tax assets on these tax

losses are recognised to the extent that it is probable that these losses will be available for adjustment against

future profits of these subsidiaries. As at December 31, 2022, the Group has recognised deferred tax assets

on these carried forward tax losses amounting to EGP 1,054 million. The management of the Group has

prepared a budget for the years upto 2028 and has assessed that these subsidiaries will have sufficient profits

for adjusting carried forward losses in the forthcoming years (Note 20).

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

5 Accounting estimates, assumptions and judgments (continued)

5.2 Other accounting estimates

Impairment of goodwill

The Group tests whether goodwill has suffered any impairment at each reporting date. The recoverable

amount of a cash generating unit (CGU) is determined using certain assumptions (Note 8.1). The changes

in those assumptions may cause actual results to vary and cause adjustments to the goodwill within the next

financial year.

Useful lives of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting date. At each reporting date,

management assesses that the useful lives represent the expected utility of the assets to the Group. The

carrying amounts are analysed in Note 6. The actual results may vary and may cause significant adjustments

to the Group’s assets within the next financial year.

Employee benefit retirement obligations

The present value of employees’ defined benefits obligations depends on a number of factors that are

determined on an actuarial basis using a number of assumptions. The assumptions used in determining the

net cost of employees’ benefits include the discount rate of future cash outflows and any changes in these

assumptions will impact the carrying amount of employees’ benefits.

The Group determines the appropriate discount rate of cash flows at the end of each financial year. The

discount rate is the interest rate that should be used to determine the present value of estimated future cash

outflows expected to be required to settle the defined benefits obligations. The Group considers the

discount rate at the end of the financial year on market returns on the government bonds denominated in

the currency and the year estimated for the defined benefits obligations (Note 19).

5.3 Judgements

Assessment/reassessment of control

The management makes judgements, as to whether or not the Group controls an investee, at the time of

acquisition of the investee and subsequently if facts and circumstances indicate that there are changes to

one or more of the three elements of control listed in IFRS 10. Management has reviewed its control

assessments in accordance with IFRS 10 and has concluded that there is no effect on the classification of

any of the Group’s subsidiaries held as at January 1, 2022.

Determining the lease term

Extension and termination options are included in a number of leases agreements across the Group. These

terms are used to maximize operational flexibility in terms of managing contracts. The majority of

termination options held are exercisable only by the Group and not by the respective lessor.

Judgement is exercised by the management to assess whether the exercise of an option is reasonably certain

and whether it may be considered in determining the lease term. Management considers all facts and

circumstances that create an economic incentive to exercise a termination option. Years after termination

options are only included in the lease term if the lease is reasonably certain not to be terminated.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

6 Property, plant and equipment

					Furniture and			Projects
			Machinery		office	Tools and	Leasehold	under
	Land	Buildings	and equipment	Vehicles	equipment	appliances	improvements construction		Total
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
2022
Cost
As at January 1, 2022	782,142	9,876,983	27,078,637	220,988	296,628	261,886	3,903	1,585,311	40,106,478
Additions during the year	-	-	-	-	-	-	-	2,089,375	2,089,375
Transfers	2,603	12,371	317,877	-	35,721	34,079	-	(402,651)	-
Disposals during the year	-	-	(136,562)	(954)	(798)	(13)	-	-	(138,327)
As at December 31, 2022	784,745	9,889,354	27,259,952	220,034	331,551	295,952	3,903	3,272,035	42,057,526
Accumulated
depreciation:
As at January 1, 2022	-	3,311,816	15,260,742	211,830	212,124	169,817	3,903	-	19,170,232
Charge for the year	-	224,417	940,575	5,349	23,814	31,387	-	-	1,225,542
Disposals during the year	-	-	(135,925)	(954)	(798)	(13)	-	-	(137,690)
As at December 31, 2022	-	3,536,233	16,065,392	216,225	235,140	201,191	3,903	-	20,258,084
Net book value as at December 31, 2022	784,745	6,353,121	11,194,560	3,809	96,411	94,761	-	3,272,035	21,799,442

Land includes a parcel of land purchased from Gulf of Suez Development Company with a consideration of EGP 28 million. The land was purchased in 2010 for

the purpose of establishing an industrial project and has a total area of 928,000 square metres. Currently, the procedures to register the land in the name of the Group

are in process. The Group also includes other parcels of land acquired from different parties from time to time that are pending registration in the name of the Group.

The Group has signed a sale and leaseback arrangement with HD Company in relation to a parcel of land with a cost amounting to EGP 70 million. As per the terms

and conditions of the arrangement, the Group has a right to own the afore-said land at a predetermined amount at the end of a 7 years’ term ending December 25,

2025. This sale and leaseback transaction has been assessed as a financing arrangement by the Group and has been accounted for accordingly.

In 2022, the Group has capitalised certain projects completed during the year amounting to EGP 403 million (2021: EGP 357 million) which were transferred from

projects under construction to relevant classes of property, plant and equipment.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

6 Property, plant and equipment (continued)

					Furniture and			Projects
			Machinery		office	Tools and		Leasehold	under
	Land	Buildings	and equipment	Vehicles	equipment	appliances improvements		construction	Total
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
2021
Cost
As at January 1, 2021	779,275	9,848,756	26,953,313	224,708	281,230	231,775	3,903	212,660	38,535,620
Additions during the year	-	-	-	-	-	-	-	1,729,772	1,729,772
Transfers	2,867	29,401	273,654	635	17,406	33,157	-	(357,120)	-
Disposals during the year	-	(1,174)	(148,330)	(4,355)	(2,008)	(3,046)	-	-	(158,913)
As at December 31, 2021	782,142	9,876,983	27,078,637	220,988	296,628	261,886	3,903	1,585,312	40,106,479
Accumulated depreciation:
As at January 1, 2021	-	3,086,589	14,478,042	209,615	187,935	150,389	3,903	-	18,116,473
Charge for the year	-	226,401	930,957	6,570	26,188	22,474	-	-	1,212,590
Disposals during the year	-	(1,174)	(148,257)	(4,355)	(1,999)	(3,046)	-	-	(158,831)
As at December 31, 2021	-	3,311,816	15,260,742	211,830	212,124	169,817	3,903	-	19,170,232
Net book value as at December 31, 2021	782,142	6,565,167	11,817,895	9,158	84,504	92,069	-	1,585,312	20,936,247

Depreciation included in the consolidated statement of profit or loss are allocated as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Cost of sales (Note 26)	1,206,503	1,192,644
Administrative and general expenses (Note 27)	18,440	19,260
Selling and marketing expenses (Note 28)	599	686
	1,225,542	1,212,590

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

6 Property, plant and equipment (continued)

Property, plant and equipment include fully depreciated assets amounting to EGP 3,854 million still in use

as at December 31, 2022 (2021: EGP 3,297 million).

Projects under construction amounted to EGP 3,272 million as at December 31, 2022 (2021: EGP 1,585

million) mainly represent construction of electric arc furnace with a production capacity of 1.6 million tons

per year of molten steel in Al Ezz Flat Steel. The nature of these projects is as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Buildings	15,729	4,820
Machinery and equipment	3,232,999	1,565,720
Advance to suppliers	21,945	14,772
Other projects under construction	1,362	-
	3,272,035	1,585,312

Machinery and equipment include capitalized borrowing costs of EGP 107.4 million at average

capitalisation rate of 8% per annum (2021: EGP Nil).

7 Leases

The Group has entered in to lease agreements for some of its building located in Cairo, Egypt. The leases

are reflected in the consolidated statement of financial position as right-of-use assets and lease liabilities.

I. Right-of-use assets

The carrying amounts of the right-of-use assets and the movements during the year are shown below:

	Buildings
	2022	2021
	EGP ‘000	EGP ‘000
Gross carrying amount
As at January 1,	145,000	145,000
As at December 31, Accumulated depreciation	145,000	145,000
As at January 1,	102,708	84,583
Charge for the year (Note 27)	18,125	18,125
As at December 31,	120,833	102,708
Net carrying amount as at December 31,	24,167	42,292

II. Lease liabilities

The movements of lease liabilities during the year were as follows:

	Buildings
	2022	2021
	EGP ‘000	EGP ‘000
As at January 1,	89,748	113,131
Interest on lease liabilities (Note 32)	14,009	15,320
Payments during the year	(38,703)	(38,703)
As at December 31,	65,054	89,748

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

7 Leases (continued)

II. Lease liabilities (continued)

Lease liabilities are presented in the consolidated statement of financial position as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Non-current liabilities	34,939	63,962
Current liabilities	30,115	25,786
	65,054	89,748

Commitments in relation to leases payable and present value of lease liabilities are as follows:

	Buildings
	2022	2021
	EGP ‘000	EGP ‘000
Commitments in relation to leases
Within one year	38,704	38,705
Later than one year and less than five years	38,704	77,408
Minimum lease payments	77,408	116,113
Present value of lease liabilities
Within one year	30,115	25,786
Later than one year and less than five years	34,939	63,962
Present value of minimum lease payments	65,054	89,748

8 Goodwill and other intangible assets

	2022	2021
	EGP ‘000	EGP ‘000
Goodwill (Note 8.1)	315,214	315,214
Other intangible assets (Note 8.2)	72,844	87,275
	388,058	402,489

8.1 Goodwill

Goodwill has arisen on the acquisition of Al Ezz Dekheila Steel Company – Alexandria during previous

years. At the reporting date, this goodwill has been carried at an amount initially recognised at the time of

acquisition of the afore-said subsidiary less accumulated impairment losses, if any.

Goodwill is monitored by management at the level of the respective cash generating unit. The impairment

of goodwill is reviewed annually to ensure that its carrying value does not exceed the recoverable amounts.

As at the reporting date, the management has assessed that the carrying value of goodwill is less than their

recoverable amount, hence, no impairment loss was recognised in this regard in these consolidated financial

statements (2021: EGP Nil). The recoverable amount of any of the cash generating unit is based on the

certain key assumptions.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

8 Goodwill and other intangible assets (continued)

8.2 Other intangible assets

	Software	Licenses	Total
2022	EGP ‘000	EGP ‘000	EGP ‘000
Gross carrying amount
As at January 1, 2022	103,381	35,857	139,238
Additions	844	-	844
As at December 31, 2022	104,225	35,857	140,082
Accumulated amortization
As at January 1, 2022	46,840	5,123	51,963
Charge for the year	10,152	5,123	15,275
As at December 31, 2022	56,992	10,246	67,238
Net carrying amount as at December 31, 2022	47,233	25,611	72,844

	Software	Licenses	Total
2021	EGP ‘000	EGP ‘000	EGP ‘000
Gross carrying amount
As at January 1, 2021	102,811	35,857	138,668
Additions	570	-	570
As at December 31, 2021	103,381	35,857	139,238
Accumulated amortization
As at January 1, 2021	37,033	-	37,033
Charge for the year	9,807	5,123	14,930
As at December 31, 2021	46,840	5,123	51,963
Net carrying amount as at December 31, 2021	56,541	30,734	87,275

Amortization expenses included in the consolidated statement of profit or loss are allocated as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Cost of sales (Note 26)	5,123	5,123
Administrative and general expenses (Note 27)	10,152	9,807
	15,275	14,930

9 Investment in associates

		Effective ownership	Carrying amount
	2022	2021	2022	2021
	%	%	EGP ‘000	EGP ‘000
Egyptian German Co. for Flat Steel Marketing
(Franco) (L.L.C) (Under Liquidation)	32.03%	32.03%	90	90
The Egyptian Company for Cleaning
and Security Services	30.80%	30.80%	80	80
Al Ezz El Dekheila for Steel – Egypt	32.03%	32.03%	25	25
EZDK Steel UK Ltd.	32.03%	32.03%	1	1
			196	196
Impairment losses on investment in associates			(196)	(91)
			-	105

The values of these investments have fallen to zero. Therefore, the Group has stopped recognition of

further losses under the equity method for these investments. Management has assessed that neither of

these associates are material to the Group.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

10 Financial assets at fair value through other comprehensive income

The Group has designated the investments, as shown below, as financial assets at fair value through other

comprehensive income (“FVOCI”) because the Group intends to hold these investments for a long term

and strategic purposes:

		Effective ownership	Carrying amount
	2022	2021	2022	2021
	%	%	EGP ‘000	EGP ‘000
Unquoted equity securities
Egyptian Steel Company for Management of Steel Factories
Projects (“Egyptian Steel”)(a)	11.53%	-	2,499,960	-
Arab Company for Special Steel (b)	0.64%	0.64%	4,263	4,263
Atlantic Pacific Transport Ltd. (c)	2.89%	2.89%	4,016	4,016
Collective investment scheme
Mazid Investment Fund (d)			13,000	-
			2,521,239	8,279
Cumulative changes in fair value			(717)	(717)
			2,520,522	7,562

No strategic investments were disposed during the year 2022 (2021: Nil), and there were no transfers of

any cumulative gains or loss relating to these investments within equity.

(a) Egyptian Steel

During the year ended December 31, 2022, the Group invested in shares of Egyptian Steel, a company

engaged in production of steel rebars and iron billets, through Al Ezz El Dekheila for Steel – Alexandria (a

subsidiary) at cost of EGP 2,500 million.

An amount of EGP 1,250 million was paid during the year and balance amount of EGP 1,250 million is

recorded as payable as at December 31, 2022 (Note 22). This remaining payable will be settled in two equal

instalments with the first payment due 12 months after the ownership transfer date and second instalment

due 24 months after the ownership transfer. No interest is associated with these payments.

The management has assessed that the fair value of the afore-said investment, as at December 31, 2022, is

approximately equal to the carrying cost.

(b) Arab Company for Special Steel

The Group holds the shares of Arab Company for Special Steel through its subsidiary, Al Ezz El Dekheila

for Steel – Alexandria. The management has assessed that the fair value of the afore-said investment, as at

December 31, 2022, is approximately equal to EGP Nil (2021: EGP Nil).

The Group holds the shares of Atlantic Pacific Transport Ltd. through its subsidiary, Iron for Industrial,

Trading and Constructing Steel (Contra Steel). Atlantic Pacific Transport Ltd. has been wound up subsequent

to the reporting date and the investment has been fully derecognised accordingly.

(d) Mazid Investment Fund

During the year ended December 31, 2022, the Group invested in a collective investment scheme with

Mazid Investment Fund with an amount of EGP 13 million.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

10 Financial assets at fair value through other comprehensive income (continued)

Cumulative fair value

The movement in cumulative changes in fair value during the year is as follows:

	2022	2021
	EGP ‘000	EGP ‘000
As at January 1,	717	4,263
Change in fair value during the year – recognized in OCI	-	(3,546)
As at December 31,	717	717

11 Inventories

	2022	2021
	EGP ‘000	EGP ‘000
Raw materials	4,275,038	4,524,310
Spare parts and consumables	2,326,617	1,950,826
Finished goods	1,745,615	2,221,315
Work in process	533,249	704,872
Goods in transit	3,786	160,923
	8,884,305	9,562,246
Less: provision for slow-moving and obsolete inventories	(160,115)	(115,115)
	8,724,190	9,447,131

The movement in provision for obsolete and slow-moving inventory during the year is as follows:

	2022	2021
	EGP ‘000	EGP ‘000
As at January 1,	115,115	27,324
Charge for the year (Note 30)	45,000	87,791
As at December 31,	160,115	115,115

12 Financial instruments by category

	2022	2021
	EGP ‘000	EGP ‘000
Financial assets at fair value through OCI
Unquoted equity investments	2,520,522	7,562
Financial assets at amortised cost
Trade and other receivables	9,100,177	6,109,991
Treasury bills	566,332	132,261
Cash and bank balances	12,815,380	3,481,292
	22,481,889	9,723,544
Financial liabilities at amortised cost
Borrowings	32,770,188	34,839,592
Trade and other payables	20,179,770	10,406,703
Bank overdraft	638,717	270,398
Lease liabilities	65,054	89,748
	53,653,729	45,606,441

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

12 Financial instruments by category (continued)

Trade and other receivables and trade and other payables disclosed above include only financial assets and

liabilities (refer to Notes 13 and 22 for details). Refer to Note 4 for a description of the accounting policies

for each category of financial instruments.

A description of the Group’s consolidated financial statements risk, including risk management objectives

and policies is disclosed in Note 38 and details about fair values of these financial assets and liabilities are

described in Note 39.

13 Trade and other receivables

	2022	2021
	EGP ‘000	EGP ‘000
Financial assets at amortized cost
Trade receivables	2,029,061	2,771,711
Notes receivable	4,244,318	1,607,569
Trade receivables due from related parties (Note 34)	9,297	9,048
Trade and notes receivables – gross (Note 25)	6,282,676	4,388,328
Less: allowance for expected credit losses of trade receivables	(40,559)	(40,559)
Trade and notes receivables – net	6,242,117	4,347,769
Deposits	1,328,660	1,272,913
Letters of credit - cash margins	1,500,737	463,729
Due from related parties (Note 34)	28,498	24,265
Letters of guarantee - cash margins	165	1,315
	9,100,177	6,109,991
Non-financial assets
Refundable taxes	1,711,268	2,039,403
Value added taxes receivables	992,903	1,227,071
Advances to suppliers and employee loans	742,370	954,684
Tax receivables from the Custom Authority	463,995	232,246
Claims receivables	105,097	119,109
Prepayments	267,556	420,519
Other debit balances	60,824	83,611
Less: impairment losses on other receivables	(130,387)	(95,223)
	4,213,626	4,981,420
	13,313,803	11,091,411

Trade and other receivables are classified as follows in the consolidated statement of financial position:

	2022	2021
	EGP ‘000	EGP ‘000
Non-current portion	57,507	47,632
Current portion	13,256,296	11,043,779
	13,313,803	11,091,411

Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They

are generally due for settlement within immediately days and therefore are all classified as current. Details

about the Group’s impairment policies and calculation of the expected loss allowance are provided in Notes

4 and 38, respectively.

Impairment losses on other receivables incurred during the year ended December 31, 2022 amounted to

EGP 35.16 million (2021: EGP 52.82 million).

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

14 Financial assets at amortised cost - Treasury Bills

	2022	2021
	EGP ‘000	EGP ‘000
Gross amounts at redemption	574,143	133,900
Less: unearned interest	(7,811)	(1,639)
Amount of Treasury Bills paid	566,332	132,261
Interest income recognised in profit or loss (Note 31)	34,175	28,095

The average effective interest rate related to treasury bills is 15.61% (2021: 12.31%).

The Group has adopted 12-month ECL model, based on management assessment, there is an immaterial

impact on the outstanding balance of Treasury Bills due to the following factors:

• They are issued and guaranteed by the Government of Egypt;

• There is no history of default; and

• Incorporating forward-looking information would not result in any significant increase in expected

default rate.

15 Cash and cash equivalents

	2022	2021
	EGP ‘000	EGP ‘000
Bank balances - current accounts	12,485,328	3,071,710
Bank balances - time deposits*	5,973	244,160
Cheques under collection	234,779	115,492
Cash in hand	89,300	49,930
Cash and bank balances	12,815,380	3,481,292
Less: bank overdraft (Note 21)	(638,717)	(270,398)
Less: restricted bank balances**	(1,097,208)	(132,059)
Cash and cash equivalents	11,079,455	3,078,835

* The average rate on time deposits is 3 months LIBOR plus 1% during the year ended December 31,

2022 (2021: 3 months LIBOR plus 1%) with a maturity of 3 months.

** Restricted bank balances are withheld with the Group’s bankers under credit facilities’ agreements.

16 Share capital

The Company’s authorized share capital amounted to EGP 8,000 million, represented in 1,600 million

shares of par value of EGP 5 each. As at December 31, 2022 and 2021, the issued and paid-up capital is

distributed as follows:

		2022
		Shares
	No. of	value	Percentage of
Shareholders	Shares	EGP ‘000	ownership
Engineer Ahmed Abd El Aziz Ezz	356,933,139	1,784,666	65.70%
Treasury shares	10,373,195	51,866	1.91%
Others (public stocks)	175,958,693	879,793	32.39%
	543,265,027	2,716,325	100.00%

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

16 Share capital (continued)

		2021
		Shares
	No. of	value	Percentage of
Shareholders	Shares	EGP ‘000	ownership
Engineer Ahmed Abd El Aziz Ezz	356,933,139	1,784,666	65.70%
Treasury shares	10,373,195	51,866	1.91%
Others (public stocks)	175,958,693	879,793	32.39%
	543,265,027	2,716,325	100.00%

A. Dividends

The Board of Directors proposed and shareholders approved dividends of EGP 426.3 million in the

General Assembly meeting held on April 20, 2022 in relation to the net profit for the year ended December

31, 2021 (2021: EGP Nil)

B. Treasury shares

In prior years, the Group had acquired treasury shares at a value of EGP 10.4 million. As at December 31,

2022, these shares are outstanding for more than one year since their acquisition. The treasury shares are

represented as follows:

• 9,462,714 shares (with an acquisition value of EGP 71.92 million). These shares are held in the name

of Al Ezz Rolling Mills (a subsidiary) at the reporting date.

• 910,481 shares (with an acquisition value of EGP 10.38 million), purchased by the Company in

pursuance with the Board of Directors decision on January 5, 2021 for purchase of 1% of paid-capital,

up-to the maximum of one million shares.

17 Reserves

	2022	2021
	EGP ‘000	EGP ‘000
Legal reserve (A)	1,358,163	1,358,163
Other reserves (B)	(1,176,073)	(1,176,073)
	182,090	182,090

A. Legal reserve

In accordance with Company Law No. 159 of 1981 and the Company’s Articles of Association, 5% of

annual net profit is transferred to the legal reserve. The Group may discontinue such transfers when the

legal reserve reaches 50% of the share capital. The reserve is not eligible for distribution to the shareholders.

During the year ended December 31, 2022, the Group did not transfer to statutory reserve (2021: EGP

Nil).

B. Other reserves

In previous years, the Group acquired additional ownership interest in its existing subsidiary i.e. Al Ezz

Dekheila Steel Company – Alexandria from non-controlling interests. Accordingly, the difference in the

amount paid as consideration and the carrying amount of the non-controlling interest acquired has

recognised as other reserve in equity, as follows:

	EGP ‘000
Carrying amounts of non-controlling interest acquired	2,620,756
Consideration paid to non-controlling interest	(3,796,829)
	(1,176,073)

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

18 Borrowings

		2022
	Current	Non-current	Total
	EGP ‘000	EGP ‘000	EGP ‘000
Ezz Steel Company (S.A.E) (18.1)	4,415,908	538,194	4,954,102
Al Ezz Dekheila Steel Company – Alexandria (18.2)	10,119,783	10,566,200	20,685,983
Al Ezz Rolling Mills Company (18.3)	1,113,330	3,896,537	5,009,867
Al Ezz Flat Steel (18.4)	1,385,735	734,501	2,120,236
	17,034,756	15,735,432	32,770,188

		2021
	Current	Non-current	Total
	EGP ‘000	EGP ‘000	EGP ‘000
Ezz Steel Company (S.A.E) (18.1)	4,164,632	890,392	5,055,024
Al Ezz Dekheila Steel Company - Alexandria (18.2)	15,886,533	5,593,873	21,480,406
Al Ezz Rolling Mills Company (18.3)	909,390	5,009,832	5,919,222
Al Ezz Flat Steel (18.4)	1,219,192	1,165,748	2,384,940
	22,179,747	12,659,845	34,839,592

18.1 Ezz Steel Company (S.A.E)

	Term	Credit
	loans	Facilities	Total
	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2022	890,702	4,063,400	4,954,102
December 31, 2021	1,139,072	3,915,952	5,055,024

Term loans

On January 18, 2015, the Group signed an agreement with the National Bank of Egypt and the Arab African

International Bank (“Security Agent”) for a joint long-term loan of EGP 1.7 billion.

The loan has a tenure of 7 years, payable in 26 non-equal quarterly instalments and carries interest at 3.5%

above 3 months’ lending rate of the Central Bank of Egypt. The loan is secured against first degree fonds

de commerce mortgage on the Company including Sadat factory.

Credit facilities

The Group obtained credit facilities from various banks in Egypt amounting to EGP 4,063 million (2021:

EGP 3,916 million). The Group is obligated to pay the due amounts in full whenever the facilities are due.

The interest rate is 1.5% to 2% above corridor rate. The facilities are secured by promissory notes for the

full facility amount.

18.2 Al Ezz Dekheila Steel Company – Alexandria

	Term	Credit
	loans	Facilities	Total
	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2022	5,706,565	14,979,418	20,685,983
December 31, 2021	2,140,168	19,340,238	21,480,406

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

18 Borrowings (continued)

18.2 Al Ezz Dekheila Steel Company – Alexandria (continued)

Term loans

	2022	2021
	EGP ‘000	EGP ‘000
National Bank of Egypt	1,897,290	-
Qatar National Bank	1,287,030	645,645
Arab African International Bank	654,324	555,407
Bank of Alexandria	632,606	526,646
Banque Du Caire	480,175	-
National Bank of Kuwait	286,267	230,841
Hongkong and Shanghai Banking Corporation	204,873	181,629
Export Development Bank of Egypt	264,000	-
	5,706,565	2,140,168

Banks	Guarantees/	Currency	Instalments	Interest rate
	securities
National Bank of Egypt	Restriction on	EGP	20 quarterly	2% above corridor
	disposal of assets		instalments ending on	rate
			June 15, 2028
Qatar National Bank	Right to seize assets	EGP	26 quarterly	1% above corridor
	in case of default		instalments ending on	rate
			January 31, 2029
Qatar National Bank	Right to seize assets	USD	26 quarterly	4% plus LIBOR
(foreign currency loan)	in case of default		instalments ending on	rate
			August 31, 2025
Arab African International	An insurance policy	USD	28 quarterly	4% plus LIBOR
Bank	with 110% of		instalments ending on	rate
	outstanding balance.		November 28, 2025
Bank of Alexandria	Restriction on	USD	26 quarterly	4% plus LIBOR
	disposal of assets		instalments ending on	rate
			January 15, 2026
Banque Du Caire	An insurance policy	USD	28 quarterly	2% above corridor
	with 110% of		instalments ending on	rate
	outstanding balance		December 31, 2028
Banque Du Caire (foreign	Insurance policy	EGP	28 quarterly	3.5% plus LIBOR
currency loan)	with 110% of		instalments ending on	rate
	outstanding balance		December 31, 2028
National Bank of Kuwait	Restriction on	USD	26 quarterly	3.5% plus LIBOR
	disposal of assets		instalments ending on	rate
			August 28, 2026
Hongkong and Shanghai	Collection of foreign	EGP	12 semi annual	2% plus corridor
Banking Corporation	currency proceeds		instalments ending on	rate
	through a designated		January 15, 2026
	bank account
Hongkong and Shanghai	Collection of foreign	EURO	12 semi annual	3.5% plus LIBOR
Banking Corporation	currency proceeds		instalments ending on	rate
(foreign currency	through a designated		January 15, 2026
loan)	bank account
Export Development Bank	Right to seize assets	EGP	24 quarterly	1.25% to 1.5%
of Egypt	in case of default		instalments ending on	above corridor rate
			February 17, 2028

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

18 Borrowings (continued)

18.2 Al Ezz Dekheila Steel Company – Alexandria (continued)

Credit facilities

The Group obtained credit facilities from various banks amounting to EGP 14,979 million (2021: EGP

19,340 million).

These credit facilities have maturities ranging from 1 to 26 months and carry interest rates at prevailing

market rates.

18.3 Al Ezz Rolling Mills Company

	Term	Credit
	loans	Facilities	Total
	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2022	5,009,834	33	5,009,867
December 31, 2021	5,721,105	198,117	5,919,222

Term loan

The Group obtained a loan from National Bank of Egypt amounting to EGP 5,009 million (2021: EGP

5,721 million).

The interest rate is 1.5% to 2% above corridor rate. The loan is secured through mortgage of property,

plant and equipment of Al Ezz Rolling Mills Company.

Credit facility

The Group obtained a credit facility from National Bank of Egypt and Bank Misr amounting to EGP 0.33

million (2021: EGP 198 million).

The credit facility has maturity of 12 months and carry interest rate at 1.5% above corridor rate.

18.4 Al Ezz Flat Steel

	Term	Credit
	loans	facilities	Total
	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2022	1,025,255	1,094,981	2,120,236
December 31, 2021	906,581	1,478,359	2,384,940

Term loans

The Group obtained loans from National Bank of Egypt, Bank Misr and SACE Bank amounting to EGP

1,025 million (2021: EGP 907 million).

The interest rate is 1.5% above corridor rate or 3.5% plus LIBOR rate. The loans are secured through

banks’ right to seize assets in case of default on payments.

Credit facilities

The Group obtained credit facilities from National Bank of Egypt and Bank Misr. amounting to EGP 1,095

million (2021: EGP 1,478 million).

These credit facilities have maturities up to 51 months and carry interest rates at prevailing market rates.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

18 Borrowings (continued)

18.5 Movement in borrowings

	2022	2021
	EGP ‘000	EGP ‘000
As at January 1,	34,839,592	34,764,487
(Repayments of)/proceeds from loan facilities during the year – net	(3,510,195)	81,335
Effect of foreign currency differences	1,440,791	(6,230)
As at December 31,	32,770,188	34,839,592

18.6 Fair values of the loans

Fair value of the loans is approximately equal to their carrying values since the loans are bearing market

prevailing variable interest rates.

18.7 Interest rate benchmark reform

A fundamental reform of major interest rate benchmarks is being undertaken globally, including the

replacement of some interbank offer rates (IBORs) with alternative nearly risk-free rates (referred to as

‘IBOR reform’).

As at December 31, 2022, the Group’s IBOR exposure, indexed to EURO and USD LIBOR, is limited to

multiple existing loans. The management is under discussion with the respective borrowers for necessary

amendments to these loan agreements having contractual terms indexed to EURO and USD LIBOR. The

management believes that the impact of revision of the loan agreements will not have a material impact on

the consolidated financial statements of the Group in future periods (refer to Notes from 18.1 to 18.4 for

details).

19 Employee benefit obligations

Some entities within the Group maintain a Supplementary Pension Scheme for their employees. These

employees are entitled to benefits upon their retirement based on a defined benefit plan. The entitlement

is based on the length of service i.e. minimum number of years served and final remuneration package of

the employee upon retirement (refer to Note 4). The plan is fully funded by the Group and no separately

administered fund has been established in this regard. The defined benefit obligation is calculated using the

projected credit unit method.

The amounts recognised at the consolidated statement of financial position date and movement thereon,

are disclosed as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Balance as at January 1,	246,343	217,500
Provision for employees’ benefit obligations	48,420	31,691
Actuarial (gain)/loss on measurement of defined benefit liability	(63,585)	4,227
Contributions received from employees during the year	7,368	8,486
Payments/adjustments during the year	(19,349)	(15,561)
Balance as at December 31	219,197	246,343

Employee benefit obligations are classified as follows in the consolidated statement of financial position:

	2022	2021
	EGP ‘000	EGP ‘000
Non-current portion	192,482	221,242
Current portion (Note 22)	26,715	25,101
	219,197	246,343

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

19 Employee benefit obligations (continued)

The break-up of provision for the year is as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Current service cost	16,705	2,825
Interest on defined benefit obligation	31,715	28,866
	48,420	31,691

The break-up of actuarial (gain)/loss on measurement of defined benefit liability is as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Impact of changes in financial assumptions	(39,390)	(1,782)
Impact of changes in experience adjustments	(24,195)	6,009
	(63,585)	4,227

Provision for the year has been included in the consolidated statement of profit or loss are as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Cost of sales (Note 26)	38,056	24,865
Administrative and general expenses (Note 27)	7,673	5,068
Selling and marketing expenses (Note 28)	2,691	1,758
	48,420	31,691

Actuarial assumptions

		2022	2021
Discount rate
-	Net benefit obligations	17.00%	14.70%
-	Net cost	14.70%	14.60%
Life table (years)		A49-52	A49-52

20 Deferred taxation

20.1 Recognised deferred tax assets and liabilities

	2022		2021
	Assets	Liabilities	Assets	Liabilities
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Property, plant and equipment	-	(2,887,300)	-	(2,916,691)
Provisions and impairment	134,497	-	107,722	-
Lease liabilities	14,685	-	20,487	-
Carried forwarded tax losses	1,054,216	-	1,095,815	-
Tax on unpaid dividends	-	(258,227)	-	(66,425)
Foreign currency differences	581,987	-	34,144	(41,006)
	1,785,385	(3,145,527)	1,258,168	(3,024,122)

As at the reporting date, the Group has recognized deferred tax assets on carried forward tax losses of Al

Ezz Flat Steel and AI Ezz Rolling Mills Company. The management has assessed that the Group will be

able to adjust these tax losses against profits in the future years, based on the 5 years’ budgets of these

subsidiaries.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

20 Deferred taxation (continued)

20.2 Movement of deferred tax liabilities - net

	2022	2021
	EGP ‘000	EGP ‘000
Balance as at January 1,	1,765,954	875,444
Adjustments during the year	(22,453)	-
Charged to consolidated statement of profit or loss (Note 23.1)	(383,359)	890,510
Balance as at December 31,	1,360,142	1,765,954

20.3 Unrecognised deferred tax assets

	2022	2021
	EGP ‘000	EGP ‘000
Impairment losses on other receivables	11,317	10,850
Provisions	132,341	101,084
Tax losses	481,120	1,017681
	624,778	1,129,615

The deferred tax assets have not been recognised in respect of the above items due to uncertainty of the

utilization of their benefits in the foreseeable future. The Group does not expect tax losses that are available

for offsetting against future taxable profits.

21 Bank overdraft

Bank overdraft amounted to EGP 638.7 million as at December 31, 2022 (2021: EGP 270.4 million). This

facility forms an integral part of the Group’s cash management to finance its working capital. The average

interest rate for bank overdraft was 1.5% to 3.5% above corridor rate during the year ended December 31,

2022 (2021: 1.5% to 3.5% above corridor rate).

22 Trade and other payables

	2022	2021
	EGP ‘000	EGP ‘000
Financial liabilities at amortized cost
Trade payables	11,975,484	4,201,269
Accrued expenses	1,676,588	1,467,563
Notes payable	3,707,701	3,495,255
Payable against acquisition of shares of Egyptian Steel (Note 10)	1,249,980	-
Payable to supplier against acquisition of property, plant and equipment	999,876	820,440
Accrued interest	415,186	259,026
Retention payables	96,747	90,217
Due to related parties (Note 34)	56,596	71,324
Dividends payables	1,612	1,609
	20,179,770	10,406,703
Non-financial liabilities
Advance from customers (Note 25)	1,829,753	1,708,783
Value added tax payables	327,706	236,443
Withholding tax payable	139,889	83,963
Payable to port authorities	96,483	96,483
Current portion of employee benefit obligation (Note 19)	26,715	25,101
Social insurance payable	19,054	14,921
Other credit balances	102,734	10,761
	2,542,334	2,176,455
	22,722,104	12,583,158

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

22 Trade and other payables (continued)

Trade and other payables are classified as follows in the consolidated statement of financial position:

	2022	2021
	EGP ‘000	EGP ‘000
Non-current portion	3,121,114	3,215,353
Current portion	19,600,990	9,367,805
	22,722,104	12,583,158

Trade payables include an amount of EGP 1,847.7 million (2021: 3,339.5 million) payable to electricity and

natural gas supplying companies. These balances had original maturities upto 48 months and carried interest

rates at 8.75% (2021: 8.75%).

Trade payables also include an amount of USD 37 million, equivalent to EGP 915.6 million (2021: EGP

583 million) borrowed by Al Ezz Flat Steel Company, a subsidiary from one of the suppliers of the Group

i.e. Daneili Company. This amount carries interest at variable rates linked to LIBOR plus 1.2%.

Payable to suppliers against acquisition of property, plant and equipment represents amount due to Danieli

Company by Al Ezz Falt Steel and Al Ezz Rolling Mills Company, a subsidiary against purchase of fixed

assets in prior years. The amount is payable in quarterly instalments ending in 2026 and carries interest at

1%. The amount is secured by joint guarantees from the Company and Al Ezz Dekheila Steel Company -

Alexandria.

23 Taxation

23.1 Income tax expense

		2022	2021
		EGP ‘000	EGP ‘000
Current tax expense
- Deferred tax	Current year (Note 23.3)	2,484,140	929,832
-	Origination and reversal of temporary differences (Note 20.2)	(383,359)	890,510
		2,100,781	1,820,342

23.2 Reconciliation of tax expense

	2022	2021
	EGP ‘000	EGP ‘0000
Net profit for the year before income tax	7,945,990	7,376,148
Income tax according to the current tax law (22.5%)	(1,787,848)	(1,659,633)
Tax on dividends from subsidiaries and associates	(40,064)	(289)
Provisions and impairment	(34,760)	(38,051)
Exempted investments income	(23,565)	127
Tax impact on treasury bills	848	679
Adjustments on other items	(122,232)	(56,750)
Previous years’ tax differences	98,640	-
Tax on undistributed profit in subsidiaries and associates	(191,800)	(66,425)
Income tax expense (Note 23.1)	(2,100,781)	(1,820,342)
Effective tax rate	26%	25%

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

23 Taxation (continued)

23.3 Movement of current income tax liabilities

	2022	2021
	EGP ‘000	EGP ‘000
As at January 1,	929,489	34,304
Income tax paid during the year	(143,512)	(34,304)
Withholding tax receivable	(785,975)	-
Income tax for the year (Note 23.1)	2,484,140	929,832
Adjustment during the year	(40,034)	(343)
As at December 31,	2,444,108	929,489

23.4 Tax positions

Due to the nature of tax assessment process in jurisdiction where the Group is operating, the final outcome

of tax liabilities are contingent upon the inspection and final assessment by the tax authorities. Below is a

summary of the tax status of the significant components of the Group as at reporting date.

A. Ezz Steel Company

Corporate Tax

The Company was exempt from income tax for a 10 years’ period from January 1, 1997 to December 31,

2006, in accordance with article No. (24) of Law No. (59) for 1979 related to development of the New

Urban Communities.

The tax inspection was performed for the period from the Company's inception till December 31, 2017,

and all taxes due were paid.

For the years from 2018 to 2020, the Company has filed the tax returns and has paid the related tax liabilities.

However, the tax inspection is still in the process by relevant tax authorities.

For tax years 2021 and 2022, the Company has filed the tax returns and has paid the related tax liabilities.

Further, the Company has not been inspected by the relevant tax authorities yet for these periods.

Sales Tax and VAT

The tax inspection was performed for the period from the Company’s inception till 2015, and all taxes due

were paid.

The tax inspection was done for years from 2016 to 2020 and differences were settled by the tax authorities

through deduction from the Company’s credit balance.

For the years 2021 and 2022, the Company has submitted monthly tax returns on time to the relevant tax

authorities. However, the Company has not been inspected by the relevant tax authorities yet for these

periods.

Salary Tax

The tax inspection was performed for the period from the Company’s inception till 2018, and all taxes due

were paid.

The tax inspection was performed for the years from 2019 to 2020 has been concluded and the settlement

of difference identified is in process.

For the years 2021 and 2022, the Company has submitted annual tax forms and payroll reconciliations on

time to the relevant tax authorities. However, the Company has not been inspected by the relevant tax

authorities yet for these periods.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

23 Taxation (continued)

23.4 Tax positions (continued)

A. Ezz Steel Company (continued)

Stamp Tax

The tax inspection was performed for the periods from inception till the end of December 31, 2018, and

the tax resulting from the tax inspection and assessment were settled and paid to the relevant tax authorities.

For the period from 2019 to 2022, the Company paid all tax dues.

Property Tax

The tax assessment has been issued and paid up to December 31, 2021.

Corporate Tax

The tax inspection was performed till December 31, 2017, and all taxes due were paid.

For the years from 2018 to 2020, EZDK has filed the tax returns in its legal periods and has paid the tax

liability. However, the tax inspection is in process by relevant tax authorities.

B. Al Ezz Dekheila Steel Company – Alexandria (EZDK)

Corporate Tax

For tax years 2021 and 2022, EDZK has filed tax returns and has paid the tax dues. Further EDZK has

not been inspected by the relevant tax authorities yet for these periods.

Sales Tax and VAT

The tax inspection was performed till 2020, and all taxes due were paid.

For the years 2021 and 2022, EZDK has submitted monthly tax returns on time to the relevant tax

authorities. However, EZDK has not been inspected by the relevant tax authorities yet for these periods.

Salary Tax

The tax inspection was performed for the period till 2016, and all taxes due were paid.

The tax inspection was performed for the years from 2017 to 2019 has been concluded and the settlement

of difference identified is in process.

For the years 2020, 2021 and 2022, EZDK has submitted annual tax forms and payroll reconciliations on

time to the relevant tax authorities. However, EZDK has not been inspected by the relevant tax authorities

yet for these periods.

Stamp Tax

The tax inspection was performed for the periods from inception till the end of December 31, 2020, and

the tax resulting from the tax inspection and assessment were settled and paid to the relevant tax authorities.

For the years 2021 and 2022, EZDK paid all tax dues.

Property Tax

The tax assessment has been issued and paid up to December 31, 2021.

Pending disputes: EZDK has submitted a request to the Agamy Real Estate Taxes Authority in order to

benefit from the Prime Minister’s Resolution No. 61 of 2022 which states that the Ministry of Finance will

bear the tax on real estate built for industrial sectors. The request is currently in process.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

23 Taxation (continued)

23.4 Tax positions (continued)

C. AI Ezz Flat Steel (EFS)

Corporate Tax

The tax inspection was performed till December 31, 2018, and all taxes due were paid.

For tax years from 2019 to 2022, EFS has filed tax returns and has paid the tax liability. Further EFS has

not been inspected by the relevant tax authorities yet for these periods.

Sales Tax and VAT

The tax inspection was performed till 2020, and all taxes due were paid.

For the years 2021 and 2022, EFS has submitted monthly tax returns on time to the relevant tax authorities.

However, EFS has not been inspected by the relevant tax authorities yet for these periods.

Salary Tax

The tax inspection was performed for the period till 2019, and all taxes due were paid.

For the years 2020, 2021 and 2022, EFS has submitted annual tax forms and payroll reconciliations on time

to the relevant tax authorities. However, EFS has not been inspected by the relevant tax authorities yet for

these periods.

Stamp Tax

The tax inspection was performed for the period till December 31, 2020, and all taxes due were paid.

For the years 2021 and 2022, EFS paid all tax dues.

Property Tax

The tax assessment has been issued and paid up to December 31, 2021.

D. Al Ezz Rolling Mills Company (ERM)

Corporate Tax

The Company was exempt from tax for the period from its inception till December 31, 1999, in accordance

with article No. (24) from Law No. (59) for 1979 related to development of the New Urban Communities.

The tax inspection was performed till December 31, 2017, and there are no outstanding dues.

For tax years from 2018 to 2022, ERM has filed tax returns, but, not been inspected by the relevant tax

authorities yet for these periods.

Sales Tax and VAT

The tax inspection was performed till 2018, and all taxes due were paid.

The tax inspection was also performed for 2019 and 2020. However, the original tax has been paid pending

the final settlement.

For the years 2021 and 2022, ERM has submitted monthly tax returns on time to the relevant tax authorities.

However, ERM has not been inspected by the relevant tax authorities yet for these periods.

Salary Tax

The tax inspection was performed for the period till 2015, and all taxes due were paid.

The tax inspection was also performed for 2016 till 2018. However, the disputes are pending resolution

under Internal Committee. The tax inspection was also performed for 2019 and 2020. However, the original

tax has been paid pending the final settlement.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

23 Taxation (continued)

23.4 Tax positions (continued)

D. Al Ezz Rolling Mills Company (ERM) (continued)

Salary Tax (continued)

For the years 2020, 2021 and 2022, ERM has submitted annual tax forms and payroll reconciliations on

time to the relevant tax authorities. However, ERM has not been inspected by the relevant tax authorities

yet for these periods.

Stamp Tax

The tax inspection was performed for the period till December 31, 2020, and all taxes due were paid.

For the years 2021 and 2022, ERM paid all tax dues.

Property Tax

The tax assessment has been issued and paid up to December 31, 2022.

24 Provisions

	Government
	and third
	parties’	Employees
	claims	lawsuits	Total
December 31, 2022	EGP ‘000	EGP ‘000	EGP ‘000
As at January 1, 2022	555,547	1,955	557,502
Provisions formed during the year (Note 30)	228,817	-	228,817
Provisions utilized during the year	(173,947)	-	(173,947)
As at December 31, 2022	610,417	1,955	612,372

	Government
	and third	Employees
	parties’ claims	lawsuits	Total
December 31, 2021	EGP ‘000	EGP ‘000	EGP ‘000
As at January 1, 2021	288,583	1,955	290,538
Provisions formed during the year (Note 30)	340,990	-	340,990
Provisions utilized during the year	(74,026)	-	(74,026)
As at December 31, 2021	555,547	1,955	557,502

Provisions relate to claims expected to be made by authorities, employees and third parties in connection

with the Group’s operations and obligations. The provisions are re-assessed and reviewed by management

at each reporting date and the amount provided is adjusted based on latest development, discussions and

agreements with concerned parties.

25 Revenue from contracts with customers

A. Disaggregation of revenue from contracts with costumers

The Group derives revenue from the transfer of goods at a point in time. The Group disaggregate revenue

by products line and by geographical location as disclosed in Note 37 (segment reporting).

B. Contract balances

	2022	2021
	EGP ‘000	EGP ‘000
Contract assets - Trade and notes receivables – gross (Note 13)	6,282,676	4,388,328
Contract liabilities - Advances from customers (Note 22)	1,829,753	1,708,783

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

26 Cost of sales

	2022	2021
	EGP ‘000	EGP ‘000
Raw materials consumed	44,452,101	38,395,588
Utilities	11,366,695	8,720,996
Spare parts and consumables	3,239,717	2,654,796
Direct salaries and wages	2,641,201	2,262,328
Depreciation of property, plant and equipment (Note 6)	1,206,503	1,192,644
Indirect manufacturing overheads	1,078,141	1,154,022
Maintenance	319,131	289,743
Provision for employees benefit obligations (Note 19)	38,056	24,865
Amortization of intangible assets (Note 8)	5,123	5,123
Total manufacturing cost	64,346,668	54,700,105
Changes in finished goods and work in progress	647,323	(864,508)
	64,993,991	53,835,597

27 Administrative and general expenses

	2022	2021
	EGP ‘000	EGP ‘000
Salaries and wages	1,229,574	851,624
Insurance expenses	286,150	218,577
Legal and professional	90,025	58,768
Rent expenses	78,040	74,040
IT expenses	39,017	39,645
Entertainment expenses	26,982	8,860
Security and cleaning expenses	24,858	30,399
Depreciation of property, plant and equipment (Note 6)	18,440	19,260
Depreciation of Right-of-use-assets (Note 7)	18,125	18,125
Subscriptions and postage	16,267	7,239
Repair and maintenance expenses	10,754	8,415
Amortization of intangible assets (Note 8)	10,152	9,807
Provision for employees benefit obligations (Note 19)	7,673	5,068
Utilities	6,353	6,126
Other expenses	77,985	56,263
	1,940,395	1,412,216

28 Selling and marketing expenses

	2022	2021
	EGP ‘000	EGP ‘000
Salaries and wages	134,231	120,851
Exports related expenses	537,118	585,480
Advertising expenses	120,192	92,845
Freight	94,494	72,493
Provision for employees benefit obligations (Note 19)	2,691	1,758
Depreciation of property, plant and equipment (Note 6)	599	686
Other expenses	73,703	73,964
	963,028	948,077

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

29 Other operating income

	2022	2021
	EGP ‘000	EGP ‘000
Scrap sales	123,751	65,527
Gain on disposal of property, plant and equipment	-	900
Others	52,140	13,667
	175,891	80,094

30 Other operating expenses

	2022	2021
	EGP ‘000	EGP ‘000
Donations	527,851	524,010
Provisions formed during the year (Note 24)	228,817	340,990
Provision for slow-moving and obsolete inventories (Note 11)	45,000	87,791
Impairment losses on other receivables (Note 13)	35,164	52,819
Losses on disposal of property, plant and equipment	490	-
Others	63,982	171,628
	901,304	1,177,238

Donations are in normal course of business of the Group and are generally made as part of “Corporate

Social Responsibility” strategy for promotion of sports, education and welfare activities.

31 Finance income

	2022	2021
	EGP ‘000	EGP ‘000
Interest income on time deposits and restricted bank balances	379,999	108,743
Interest income on treasury bills (Note 14)	34,175	28,095
	414,174	136,838

32 Finance cost

	2022	2021
	EGP ‘000	EGP ‘000
Interest expense on borrowings and bank overdrafts	3,349,017	3,376,277
Interest on lease liabilities (Note 7)	14,009	15,320
	3,363,026	3,391,597

33 Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by

the weighted average number of ordinary shares in issue during the year.

	2022	2021
Profit attributable to owners of the Parent (EGP ‘000)	3,721,472	3,620,327
Weighted average number of ordinary shares in issue
Ordinary shares in ‘000 (Note 16)	543,265	543,265
Treasury shares in ‘000 (Note 16)	(10,373)	(10,373)
Weighted average number of ordinary shares in issue (‘000)	532,892	532,892
Basic earnings per share (EGP)	6.98	6.79

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

33 Earnings per share (continued)

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares

outstanding to assume conversion of all dilutive potential ordinary shares. The Group does not have any

categories of dilutive potential ordinary shares. Hence, the diluted earnings per share is equivalent to the

basic earnings per share.

34 Related parties

The Group entered into several transactions with companies and entities that are included within the

definition of related parties, as stated in IAS 24 - Related Party Disclosures. The related parties comprise

the Group’ Board of Directors, their entities, companies under common control, and/or joint management

and control, and their partners and employees of senior management.

The partners of joint arrangement and non-controlling interest are considered by the Group as related

parties. The management decides the terms and conditions of transactions and services provided from/to

related parties, as well as other expenditures.

Balances with related parties as at the reporting date are as follows:

	2022	2021
Amounts due from related parties	EGP ‘000	EGP ‘000
Entities under common control
Trade receivables
Al Ezz for Trading and Distributing Building Materials (Note 13)	9,297	9,048
Due from related parties
Al Ezz for Ceramics and Porcelain	28,487	24,175
Gulf of Suez Development Company	11	90
	28,498	24,265
	37,795	33,313

	2022	2021
Amounts due to related parties	EGP ‘000	EGP ‘000
Entities under common control
Al Ezz Group Holding Company for Industry and Investment	56,584	71,294
Al Ezz for Trading and Distributing Building Materials	12	30
	56,596	71,324

Transactions with related parties during the year are as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Sales to related parties during the year	1,035	2,567
Purchases from related parties during the year	(34)	(99)
Rent paid to related parties	(730)	(928)

Key management compensation

The amounts incurred by the Group as compensation to the Board Members and key management

personnel during the years ended December 31, 2022 and 2021 are as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Salaries and other benefits	375,639	310,501

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

35 Commitments and contingent liabilities

35.1 Capital commitments

The Group has capital commitments of EGP 79.05 million as at December 31, 2022 (2021: EGP 33 million)

in respect of capital expenditure.

35.2 Contingent liabilities

	2022	2021
	EGP ‘000	EGP ‘000
Letters of credit	6,416,094	2,691,394
Letters of guarantee	343,769	25,172
	6,759,863	2,716,566

These represent letters issued by commercial banks in favour of other parties in relation to payments for

materials and acquisition of property, plant and equipment imported during the year.

36 Cash flow information

36.1 Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities arising from financing activities is disclosed in Notes 7 and 18.

37 Operating segments

The Group operates across three segments in the market. No operating segments have been aggregated to

form the below referred reportable operating segments. Inter-segment transactions arise in the normal

course of business.

	Revenue		Gross profit		Operating profit
Segment	2022	2021	2022	2021	2022	2021
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
Rebar	50,835,655	36,595,178	9,856,176	5,097,718	7,582,262	3,166,798
Flat Steel	32,061,614	30,526,775	8,406,415	8,540,222	7,110,016	7,026,768
Others	1,086,964	696,563	727,651	344,979	669,128	331,916
Total	83,984,233	67,818,516	18,990,242	13,982,919	15,361,406	10,525,482

Operating profit is reconciled to net profit as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Operating profit	15,361,406	10,525,482
Finance income	414,174	136,838
Finance cost	(3,363,026)	(3,391,597)
Foreign exchange (losses)/gains	(4,466,564)	105,425
Income tax expense	(2,100,781)	(1,820,342)
Net profit	5,845,209	5,555,806

The segment information disclosed in the table above represents the segment information provided to the

Chief Operating Decision Maker of the Group.

Management has determined the operating segments based on the information reviewed by the Chief

Operating Decision Maker of the Group for the purpose of allocating and assessing resources.

The Group’s Chief Executive Officer is the chief operating decision maker and monitors the operating

results of its business units separately for the purpose of making decisions about resource allocation and

performance assessment. Segment performance is evaluated based on profit or loss and is measured

consistently with profit or loss in the consolidated financial statements.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

37 Operating segments (continued)

All of the segments’ sales are made to external customers. The Group does not sell more than 5% of the

total sales to a single customer.

Geographical segments

The assets and liabilities of the Group are geographically located in Egypt. Therefore, detailed disclosures

have not been provided. Geographical location-wise disaggregation of revenue of the Group are as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Within Egypt	68,690,022	47,481,553
Outside Egypt	15,294,211	20,336,963
Total	83,984,233	67,818,516

38 Financial risk management

The Group’s activities expose it to a variety of financial risks i.e. credit risk, market risk (including foreign

exchange risk, price risk and cash flow interest rate risk) and liquidity risk.

This note presents information about the Group’s exposure to each of the above risks, the Group

objectives, policies and processes for measuring and managing risks, and the Group management of capital.

Further quantitative disclosures are included throughout these consolidated financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group risk

management framework. The Group risk management policies are established to identify and analyse the

risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to

limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions

and the Group’s activities.

The Group aims to develop a disciplined and constructive control environment in which all employees

understand their roles and obligations. The Group’s management focuses on the unpredictability of

financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

The Board provides written principles for overall risk management, as well as policies covering specific

areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and

non-derivative financial instruments, and investment of excess liquidity.

Risk	Exposure arising from	Measurement	Management
Market risk - foreign	Transactions not	Cash flow	by dealing with local banks
exchange	denominated in Egyptian	forecasting,	which offer official
	Pounds	sensitivity analysis	exchange rates and
			matching of long and short
			positions in foreign
			currencies.
Market risk - interest	Long-term borrowing at	Sensitivity analysis	Investment in treasury bills
rate	variable rates		and bank deposits
Credit risk	Cash and cash equivalents,	Aging analysis, credit	Diversification of bank
	trade receivables and	ratings	deposits, credit limits and
	financial assets at amortized		governmental treasury bills
	cost
Liquidity risk	Borrowings and other	Rolling cash flow	Availability of committed
	liabilities	forecasts	credit lines and borrowing
			facilities

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

38 Financial risk management (continued)

38.1 Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause

the other party to incur financial loss. The Group is exposed to this risk for various financial instruments.

The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets

recognised at the reporting date, as summarised below:

	2022	2021
	EGP ‘000	EGP ‘000
Trade and other receivables	9,100,177	6,109,991
Treasury bills	566,332	132,261
Bank balances	12,726,080	3,431,362
Total	22,392,589	9,673,614

Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

The demographics of the Group's customer base, including the default risk has less of an influence on

credit risk.

The Group seeks to limit its credit risk with respect to counter parties by setting various credit limits and

monitoring outstanding receivables. Adequate follow up procedures are followed for the recovery of

receivables as per the terms of the contracts.

Most of Group’s revenue is represented in sales transactions with many customers with close values for

each customer. Hence, there is no concentration of credit risk on specific customers.

Impairment of trade receivables, notes receivables, deposits and letters of credit

The Group applies simplified approach available in IFRS 9 for measuring the expected credit losses which

uses a lifetime expected loss allowance for all the trade and notes receivables deposits and letters of credit.

To measure the expected credit losses, these financial assets have been grouped based on shared link

characteristics and the days past due. The contract assets relate to unbilled work in progress and have

substantially the same risk characteristics as trade receivables for the same types of contracts. The Group

has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation

of the loss rates for the contract assets.

The expected loss rates are based on the payment profiles of sales over a period of 36 months before

December 31, 2022 or January 1, 2022, respectively, and the corresponding historical credit losses

experiences within this period. The historical loss rates are adjusted to reflect the current and forward-

looking information on macroeconomic factors affecting the ability of the customers to settle the

receivables. The Group has identified the GDP and the unemployment rate of the countries in which it

sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates

based on expected changes in these factors.

The loss allowance as at December 31, 2022 and December 31, 2021 was determined as follows:

		Neither		Past due but not impaired
		past due
		not	<30	31 - 90		91 - 180	181 - 360	> 360
	Total	impaired	days	days	days	days	days
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000 EGP ‘000		EGP ‘000 EGP ‘000
December 31, 2022
Expected loss rate	0.45%	0.00%	0.02%	0.02%	1.05%	3.93%	100%
Gross carrying amount	9,100,177	8,601,939	352,022	62,502	17,761	26,756	39,197
Loss allowance	40,559	44	69	12	186	1,051	39,197

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

38 Financial risk management (continued)

38.1 Credit risk (continued)

Trade and other receivables (continued)

Impairment of trade receivables, notes receivables, deposits and letters of credit (continued)

		Neither		Past due but not impaired
		past due
		not	<30	31 - 90	91 - 180	181 - 360	> 360
	Total	impaired	days	days	days	days	days
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2022
Expected loss rate	0.66%	0.00%	0.07%	0.01%	0.34%	3.98%	100%
Gross carrying amount	6,109,991	5,745,199	94,249	150,767	54,173	26,406	39,197
Loss allowance	40,559	44	69	12	186	1,051	39,197

Treasury bills

Treasury bills are issued by the government and are considered with a high credit rating.

Cash at banks and short-term bank deposits

Credit risk relating to bank balances and short-term bank deposits arises from the risk that the counterparty

becomes insolvent, and accordingly, is unable to return the deposited funds.

To mitigate this risk, wherever possible, the Group conducts transactions and deposits funds with financial

institutions with high investment grade and reasonable and acceptable credit ratings.

38.2 Market risk

Market risk is the risk that changes in market prices, such as foreign currency exchange rates, interest rates

and equity prices will affect the Group’s income or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable

parameters, while optimising the return.

Foreign exchange risk

Foreign currency risk is the risk that fair value or future cash flows of a financial instrument will fluctuate

because of changes in foreign exchange rate.

The Group is exposed to currency risk on transactions denominated in a currency other than the respective

functional currencies of the Group, primarily the U.S. Dollars (USD) and Euro. In respect of monetary

assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to

an acceptable level through purchase or sale of the foreign currencies with current prices necessary to cover

mismatch of currency positions.

As at year end, major financial assets/(liabilities) in foreign currencies were as follows:

		2022		2021
	Assets	Liabilities	Net	Net
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
United States Dollars (USD)	123,792	(984,464)	(860,672)	(338,443)
Euros	4,005	(56,149)	(52,144)	(14,333)

Sensitivity analysis

The following table details the Group’s sensitivity to a 30% (2021: 20%) increase and decrease in EGP

against the relevant foreign currencies with all other variables held constant. 30% (2021: 20%) is the

sensitivity rate used which represents management’s assessment of the reasonably possible change in

foreign exchange rates.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

38 Financial risk management (continued)

38.2 Market risk (continued)

Foreign exchange risk (continued)

Sensitivity analysis (continued)

The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts

their translation at the year-end for a 30% (2021: 20%) change in foreign currency rates. A positive number

below indicates an increase in profit or equity where EGP strengthens 30% (2021: 20%) against the relevant

currency. For a 30% weakening of EGP against the relevant currency, there would be a comparable impact

on the profit or equity, and the balances below would be negative.

		Effect on profit and equity
	2022	2021
	EGP ‘000	EGP ‘000
United States Dollars (USD)	258,202	67,689
Euro	15,643	2,867

Other market price risk

Other market price risk is the risk that changes in market prices, such as equity prices, will affect the Group’s

results or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable

parameters, while optimising the return.

Cash flow interest rate risk

The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose

the Group to cash flow interest rate risk which is partially offset by short term treasury bills and bank

deposits which are renewed with the applicable interest rate at the time of renewal. Borrowings measured

at amortised cost with variable rates do not expose the group to fair value interest rate risk.

As at reporting date, the interest rate profile of the Group’s financial instruments is as follows:

	2022	2021
	EGP ‘000	EGP ‘000
Financial instruments with variable interest rates
Financial assets - bank deposits	1,103,181	376,219
Financial assets – treasury bills	566,332	132,261
Financial liabilities – borrowings	(32,770,188)	(34,839,592)
Net exposure	(31,100,675)	(34,331,112)

Sensitivity analysis

The following table illustrates the sensitivity of the Group’s profit and closing equity to a reasonably

possible change in interest rates of ±2% (20201: ±2%) with all other variables held constant. These changes

are considered to be reasonably possible based on observation of current market conditions.

The sensitivity analysis includes only outstanding variable interest-bearing financial assets and liabilities and

discloses the period end impact for a 2% change in the variable rate component of interest. Positive figures

represent an increase in profit or equity.

	Effect on profit		Effect on equity
	+2%	-2%	+2%	-2%
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
2022	622,013	(622,013)	622,013	(622,013)
2021	686,622	(686,622)	686,622	(686,622)

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

38 Financial risk management (continued)

38.3 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient

liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring

unacceptable losses or risking damage to the Group’s reputation.

The Group ensures that the sufficient cash on demand to meet expected operational expenses for a suitable

period, including the service of financial obligations. This excludes the potential impact of extreme

circumstances that cannot reasonably be predicted, such as natural disasters.

Maturities of financial liabilities

The table below summarizes the maturities of the Group’s undiscounted financial liabilities as at December

31, 2022 and December 31, 2021, based on contractual payment dates and current interest rates.

	Within	1 to 5	More than
	1 year	years	5 years	Total
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2022
Borrowings	17,034,756	12,070,673	3,664,759	32,770,188
Trade and other payables	17,058,656	3,121,114	-	20,179,770
Bank overdraft	638,717	-	-	638,717
Lease liabilities	38,704	38,704	-	77,408
	34,770,833	15,230,491	3,664,759	53,666,083

	Within	1 to 5	More than
	1 year	Years	5 years	Total
	EGP ‘000	EGP ‘000	EGP ‘000	EGP ‘000
December 31, 2021
Borrowings	22,179,747	12,014,200	645,645	34,839,592
Trade and other payables	7,191,350	3,215,353	-	10,406,703
Bank overdraft	270,398	-	-	270,398
Lease liabilities	38,705	77,408	-	116,113
	29,680,200	15,306,961	645,645	45,632,806

Loan covenants

Under the terms of the major borrowing facilities, the Group is mainly required to comply with the

following financial covenants:

• Current ratio should not be less than 1

• Net debt to EBITA should not exceed 3 times of total debt;

• Debt coverage ratio should not be less than 1:1;

• Financial leverage should not exceed the range of 3.0:2.5; and

• The cash operating profit after tax over finance cost ratio should not be less than 1 time of the total

payments.

As at December 31, 2022 and 2021, the Group was in compliance with the debt covenants.

38.4 Capital management

The Group’s objectives when managing capital is to safeguard their ability to continue as a going concern

in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal

capital structure to reduce the cost of capital.

Ezz Steel Company (S.A.E) and its subsidiaries

Consolidated Financial Statements

Notes to the consolidated financial statements (continued)

For the year ended December 31, 2022

38 Financial risk management (continued)

38.4 Capital management (continued)

The Board of Directors’ policy is to maintain a strong capital base so as to maintain the confidence of its

investors, creditors and the market and to sustain future development of the business. The Board monitors

the return on capital, which the Group defines as net operating income divided by total shareholders’ equity.

The Board also monitors the level of dividends paid to shareholders.

There were no changes in the Group’s approach to capital management during the period. The Group is

not subject to externally imposed capital requirements. Deficiency of equity is measured at EGP 653 million

as at December 31, 2022 (2021: EGP 5,716 million)

39 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to settle a liability in an orderly

transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or pay the

liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, the most advantageous market for the asset or the liability.

The Group should be able to have access to the principal market or the most advantageous market. In the

absence of principal market, the Group does not need to conduct a thorough search of possible markets

to determine the principal or the most advantageous market. However, the Group takes into consideration

all information reasonably available.

The below shows the financial assets and liabilities at fair value in the consolidated financial statements as

at December 31, 2022 and 2021 within the hierarchy of the fair value, based on the input levels that are

considered to be significant to the fair value measurement as a whole:

Level 1 -

Inputs of quoted prices (unadjusted) in active markets for identical assets or liabilities

which the Group can have access to at the date of measurement.

Level 2 -

Inputs other than quoted prices included within level I that are observable for the asset

or liability, either directly or indirectly.

Level 3 -

Unobservable inputs of the asset or the liability.

The fair values of financial instruments are not materially different from their carrying values. The fair value

of financial assets and liabilities are considered at the amount at which the instrument could be exchanged

in a current transaction between willing parties.

The following methods and assumptions were used to estimate the fair values:

• Cash and bank balances, treasury bills, trade receivables, other financial assets, amounts due from

related parties, trade and other payables and amounts due to related parties approximate their carrying

amounts, largely due to the short-term maturities of these instruments.

• For borrowings, fair value is approximately equal to the carrying amount since these bear variable

interest rate that approximate the market prevailing rates.

• Fair value of financial assets at FVOCI has been disclosed in Note 10.

40 Subsequent events

The Extraordinary General Assembly of Al Ezz Dekheila Steel Company – Alexandria (EZDK) was held

on August 5, 2023, wherein, the shareholders resolved a voluntary delisting of EZDK from the Egyptian

Stock Exchange and to acquire the shares of objecting shareholders at EGP 1,250 per share, following the

afore-said decision to voluntarily delist.