Citadel Capital narrows net loss further

While the performance of portfolio companies returned to pre-revolutionary levels, a lack of exits and one-off fees hampered the firm’s performance.

Citadel Capital has reported another net loss during its second quarter, but managed to reduce the loss by nearly a fifth from Q1, it said in a statement.

With negative revenues of $10.6 million in the second quarter of 2012, the Cairo-listed firm reduced its net loss to $20.6 million which is a narrowing of 19.2 percent compared to the previous quarter, and a 45.4 percent improvement from the second quarter in 2011.  

Improvements in the firm’s platform and portfolio companies meant profitability has increased, the firm said.

“The return of our associates [portfolio companies] to pre-revolutionary levels of performance – a time at which the core companies among them were on clear paths towards break-even and profitability – has come through hands-on management during the turbulence of last year,” Citadel Capital’s chairman and founder Ahmed Heikal said in a statement. 

Despite the performance improvements the firm remained in the red. As well as realising no exits in the quarter, Citadel said its overall performance was affected by an $8.1 million in foreign exchange losses as the devaluation of the Sudanese pound impacted the currency obligations of the firm’s portfolio companies.

Additionally, Citadel’s first half year results included interest charges booked in the first quarter of 2012 from a one-off payment related to the firm’s refinanced $175 million loan and a $150 million debt facility backed by the United States Overseas Investment Corporation (OPIC).

Citadel did report a 6.9 percent increase of total invested equity on a quarter-on-quarter basis. Citadel made $138.9 million of new investments this year. The largest part of this sum was a $93.4 million equity investment in petroleum business the Egyptian Refining Company (ERC). 

In June 2012, Citadel arranged a $3.7 billion package for this project, together with other investors including The Gulf Cooperation Council (GCC) and Qatar Petroleum International. Citadel invested directly and indirectly over $155 million in ERC and holds an 11.7 percent equity stake.  

“Financial close on ERC represents a substantial de-risking for Citadel Capital as we closed one of the largest-ever project finance transactions in Africa,” Heikal said in the statement. “We now look forward to a busy autumn and winter period as we continue a strategic transformation that will see us take on more of the characteristics of a traditional investment company.

“Management is fully committed to driving the growth of core platform and portfolio companies that are increasingly on the right side of macro fundamentals, as recent moves toward subsidiary reform and energy deregulation in Egypt suggest,” he said.

Citadel Capital was established in 2004. The firm mainly invests in mining, cement, transportation, food and energy. Citadel’s 19 opportunity-specific funds have invested $9.5 billion in 15 countries.