Embed Size (px)
Citation preview
An Egyptian Exporter
2Q 2009 Results Presentation
August 2009
Corporate Summary
3
Introduction: An Egyptian exporter
Split of sanitary ware and tiles1Split of domestic and export1
* All production facilities are owned and controlled by Lecico
AlexandriaKhorshid
Borg El-Arab
Cairo
Established 1997
Sanitary ware capacity2.0 million pcs 20054.4 million pcs end 2007
Borg El-Arab
Established 1975
Sanitary ware capacity2.5 million pcs 20051.8 million pcs (inc FC) end 2008
Tiles capacity17.0 million m2 200521.4 million m2 mid - 2007
Khorshid
Established 1959
Sanitary ware capacity:350,000 pcs 2007
Tiles capacity1.1 million m2 2005
Kfarchima
Kfarchima Beirut
• Lecico Egypt S.A.E. is one of the world’s largest sanitary ware
producers and a large tiles producer
• Lecico was founded in 1959 and has been majority owned by
the Gargour family since 1969
• The company has a global competitive advantage making
European quality sanitary ware at Egyptian costs
• The company is a significant exporter with c50% of Lecico’s
sanitary ware sales volume going into Europe
• Lecico finished a major capacity expansion in 2007 which
boosted capacity to 6.7m pieces of sanitary wary and fire clay
• This expansion will make Lecico approximately the sixth largest
sanitary ware producer in the world
• 4.4 m sqm tile expansion (24% additional capacity) also
completed in 2007.
Note: (1) FY 2008
Vitry Le Francois
Established 1894
Fire Clay Sanitary capacity:130,000 pcs 2006
Egypt (42%)
Lebanon (8%)
Export (50%)
Sanitary ware (56%)
Tiles (44%)
Corporate Profile
5
Growing exports
•c 60% of sanitary ware is exported
•SW exports 12% CAGR (2000-08)
•10%+ UK, France & Ireland mkt share
Investment case
Experience
•Brand with over 50 years of history
• Multi-national management
• Partnership with Sanitec
Strong historic growth record
22% Revenue CAGR (2000-2008)
27% Net Profit CAGR
Regional leadership
• Sanitary ware market leader in Egypt and Lebanon
• Largest producer in the Middle East
Significant cost advantage
• USD 9.16/piece cost (50% of peers)
• c USD 2.00/piece shipping to Europe
• European quality product
Supplier for key European brands
Export-led growth
Aggressive expansion program
Tile capacity more than doubled and sanitary ware capacity grew 49% since 2000
Substantial further capacity expansion underway
6
Domestic market leadership
38%
13%11%
8%
8%
8%
7%7%
Lecico
Cleopatra
Gravena
Aracemco
American Standard
Pharaos
Duravit
Others
25%
19%
17%
10%
6%
23% Cleopatra
Pharaos
Lecico
Al Amir
Gemma
Others
15%
30%55%
Lecico
Uniceramic
Imports
Market leadership in Egypt
Market leadership in Lebanon
• Leading sanitary
ware market share
• 2.0m piece Lecico
capacity expansion
ongoing
• Leading sanitary
ware market share
• Branded as
European quality
Sanitary ware market (4.5 million pieces)1 Tile market (80 million m2)1
Sanitary ware market (0.5 million pieces)1 Tile market (8.5 million m2)1
• Competitive pricing to
support distributors’
sanitary ware sales
• 4.4 m sqm Lecico
capacity expansion
ongoing
• Number two market
share in tile sales
• Presence maintained
to complement
sanitary ware sales
Note: (1) Management estimates for 2005
55%
45% Lecico
Imports
7
Growing exports
Growth in group’s exports
Export focus on Europe
• Sanitary ware export volumes grew at 14% CAGR (2001-2008)
• Volumes fell slightly in 2005 due to market slowdown in UK
• Average of over 80% of exports are to Western Europe
• Drop in exports in 2008 due to Sanitec bridge in 2007
Lecico’s total export volumes (sanitary ware) Egypt’s leading sanitary ware exporter
Europe as percentages of total exports Growth of Lecico brand sanitary ware market share in UK
• Lecico exports c60% of its sales vs. 20% for local peers
• Lecico sells to over 50 countries (including OEM sales)
• Approximately 33% of exports (16% of sanitary ware
sales) are for other brands
• Lecico represents 50% of Egypt’s sanitary ware exports
with the balance split among 9 manufacturers
• UK estimated c12% market share in Lecico-branded sales
• A further c13% market share in OEM sales to the UK
400 470 560 650 680 650 725 746 716
4.2%5.8%
6.2%7.8% 7.9% 8.4%
9.7%11.0% 11.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0100200300400500600700800
2000 2001 2002 2003 2004 2005 2006 2007 2008
Number of pieces sold (000 pcs) UK market share (%)
1,229 1,240 1,431 1,982 2,389 2,267 2,884 3,638 3,063 1,571
51%46% 42%
50%56% 59%
62%65%
58% 59%
0%
20%
40%
60%
80%
0
1,000
2,000
3,000
4,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 1H09
Exports/totalPieces (000)
Sanitary ware export volumes Percent of total volume
1,009 1,133 1,622 1,998 1,819 2,313 2,910 2,457 1,260
81% 79% 82% 84% 80% 80%80% 80% 80%
0%
20%
40%
60%
80%
100%
0
1,000
2,000
3,000
2001 2002 2003 2004 2005 2006 2007 2008 1H09
Europe/exportsPieces (000)
European sales volumes Europe/total exports (%)
8
Significant cost advantage
International cost advantage
Lecico produces sanitary ware at an all-in average cost of US$13.5/ piece
– In Egypt, ceramic manufacturing cost averages US$9.1 / piece of sanitary ware
– The difference reflects higher packing costs for EU-destined exports and significantly higher industrial cost in Lebanon
– Our information suggest other low cost producers’ manufacturing cost averages US$15-25 / piece
– While European producers average US$30+ / piece depending on their market
Why is Lecico able to produce so cheaply?
– Egypt: Low energy costs, low labour cost, low investment costs, low effective taxes
– Size: Economies of scale, standard global plant size: 1m pieces
– Experience: Over 45 years as a company and almost 40 years as a sanitary ware producer
– Utilization: 85-90% capacity utilization rate versus 70% industry average in Egypt
– Efficiency: Production per employee is > twice that of our local competitors
Investment, distribution and overheads benefit from regional economies of scale
– Sanitary ware investment cost approx US$15-20 / piece vs. US$25-40 / piece global standard
– Low shipping cost to Europe: US$2 per sanitary ware piece vs. approx US$6+ for Asian manufactures
Growth strategy
10
• Aim to increase market growth
− UK, Ireland, France
Long-term commercial strategy
Build multi-brand and service options solutions for customers
• Local service options in key markets (stock, delivery, tailor-made NPD)
• International manufacturing options: direct container delivery at competitive pricing
• Dual brand + strategy: European brands (Sarreguemines), Commercial brand (Lecico) and OEM
Commercial strategy: Offer more for less
• Strategy based on giving all the benefits of European supplier at best prices
• Consistent and dependable world-class quality, service, manufacturing and design
• Advantages over European peers: Greater flexibility as a partner at better prices
Expand regional and
international exports
• New and expanded OEM contracts – Sanitec, Heritage, SFA and others
• Potential future markets
− Germany, Algeria, Saudi
Arabia, Iraq, Syria
Financial overview
12
1H results overview
1H 09: Weaker sales but growth in operating profits due to cost cutting and weaker Euro and Sterling
• Revenue fell 7% to LE 515m, with sanitary ware revenues down 17% as a result of a the significant decline ASP
due to exchange rates and a decrease in export volumes. This was offset by 12% revenue growth in tiles.
• Gross profit fell by 5% to LE 189m, while the margin was up 0.9 percentage points year-on-year at 36.7%.
Growth in margin coming from tiles whose gross profits rose 140% and margins improved by 8.9 percent points.
• Proportional D&A expenses dropped 1.3 percentage points to 17.5% of sales. In absolute terms, D&A expenses
dropped 13% to LE 90.2m. Drop in SG&A is a combination of cost cutting and FX translation of overseas D&A.
• EBIT grew by 5% to LE 93.4m, with the EBIT margin up 2.0 percentage points at 18.1%.
• Net financing expenses were up 21% to LE 20.4m. The increase in net financing expenses reflects a decision to
reduce gross debt and convert Dollar debt into Egyptian pound debt to minimize foreign exchange exposure.
• Lecico recorded a LE 5.9m foreign exchange loss compared to LE 10.3m gain in 1H 2008.
• Net profit was down by 23% to reach LE 52 million, with the net profit margin decreasing 2.0 percentage points
to 10.1%, compared with 12.2% in the same period last year.
13
Profit and loss
Net sales Cost of sales breakdown (YTD June 2009)
EBIT Net Profit
265 382 559 697 652 720 990 1,081 552 515
39.1%36.3%
44.1%49.6% 49.2%
52.7%
59.9% 51.3% 57.1%51.2%
0%
10%
20%
30%
40%
50%
60%
0
200
400
600
800
1,000
1,200
2001 2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Exports (%)LE million
47 72 108 188 140 118 157 172 89 93
17.9% 18.9% 19.2%
26.9%
21.4%
16.4%15.9% 15.9%
16.1%18.1%
0%
5%
10%
15%
20%
25%
30%
0
50
100
150
200
250
2001 2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Margin (%)LE million
16 28 44 84 136 89 79 107 109 67 52
7.9%
10.7%11.6%
15.0%
19.5%
13.6%
11.0%
10.8% 10.1%12.2%
10.1%
0%
4%
8%
12%
16%
20%
0
40
80
120
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Margin (%)LE million
Raw materials (29%)
Other materials (18%)
Energy (12%)
Salaries and wages (13%)
Depreciation (10%)
Other costs (17%)
14
Quarterly P&L Trends
Net sales Gross profit
EBIT Net Profit
157.7 185.8 183.3 192.6 231.5 239.5 257.2 261.3 264.1 287.4 295.6 233.5 242.4 272.50
50
100
150
200
250
300
350
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
Reven
ues (
LE
m)
56.1 66.4 64.0 65.9 78.3 84.9 91.5 91.6 91.9 106.3 100.1 81.2 86.0 102.8
34.8% 35.5%37.7%
35.6% 35.7% 34.9% 34.2% 33.8%35.4% 35.6% 35.1% 34.8%
37.0%33.9%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
Gro
ss P
rofi
t (L
E m
)
0%
10%
20%
30%
40%
50%
Gro
ss m
arg
in (
%)
Gross profit Gross margin (%)
28.8 35.4 35.5 15.8 35.3 40.0 40.4 41.2 42.1 46.6 48.7 34.6 42.8 50.3
18.3%19.1% 19.4%
15.2%16.7%
15.7% 15.8% 15.9% 16.2% 16.5%14.8%
17.7%18.5%
8.2%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
EB
IT P
rofi
t (L
E m
)
0%
5%
10%
15%
20%
25%E
BIT
marg
in (
%)
Operating profit (EBIT) EBIT margin (%)
23.4 19.5 24.7 17.9 29.6 27.5 27.8 28.3 29.6 37.9 26.2 15.1 21.6 30.3
14.8%
13.5%12.8%
11.5%10.8% 10.8% 11.2%
13.2%
8.9%
11.1%
6.5%
8.9%9.3%
10.5%
0
10
20
30
40
50
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
Net
Pro
fit
(LE
m)
0%
5%
10%
15%
Net
marg
in (
%)
Net profit Net profit margin (%)
15
Segmental analysis
Sanitary ware – sales volumes and revenue Sanitary ware – gross profit and marginSanitary ware – selling price and cost per piece
Tiles – sales volumes and revenues Tiles – selling price and cost per sqm Tiles – gross profit and margin
249 369 469 389 444 668 651 353 293
2.7
2.8
5.35.6
4.6
3.94.3
4.0
3.4
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Reven
ues (
LE
m)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Vo
lum
es (
pcs m
)
Net sales revenue Total sales volume
74 93 110 101 96 119 123 124 11041 51 55 58 61 75 81 79 760
20
40
60
80
100
120
140
2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
LE
per
pie
ce
Av price/piece Av cost/piece
110 168 234 164 161 244 222 129 92
44%46%
50%
36%
31%
34%36%
36%
42%
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Gro
ss p
rofi
t (L
E m
)
20%
30%
40%
50%
60%
Gro
ss m
arg
in (
%)
Gross profit Gross margin (%)
133 191 228 263 276 322 430 198 222
10.8
14.615.3
17.718.4
21.5
25.0
12.1
12.4
0
100
200
300
400
500
2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Reven
ues (
LE
m)
0.0
5.0
10.0
15.0
20.0
25.0
Vo
lum
es (
sq
m m
)
Net sales revenue Total sales volume
12 13 15 15 15 15 17 16 189 9 11 10 10 10 11 10 10
0
5
10
15
20
2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
LE
per
sq
m
Av price/sqm Av cost/sqm
39 54 66 78 91 103 158 69 97
30% 28% 29% 30%
33% 32%
37% 35%
44%
0
20
40
60
80
100
120
140
160
180
2002 2003 2004 2005 2006 2007 2008 1H 08 1H 09
Gro
ss p
rofi
t (L
E m
)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Gro
ss m
arg
in (
%)
Gross profit Gross margin (%)
16
Balance sheet and cash flow
Working capital
Returns and leverage
Project Investment cost (LE m)
2009
Maintenance work and other investments 20.0
Gres Porcellanato Tile plant phase 1 20.0
Total planned specific project capex 40.0
Capital expenditures 2009e
204 266 217 192 209 242 254 210 224 240216 208 129 96 78 110 122 109 80 9598 126 99 103 126 99 135 109 99 109323 348 246 185 160 253 241 210 205 2260
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 1H 09
Days
Inventory days (Inventory/cost of sales) Receivables days (Receivables/net sales) Payables days (Payables/Cost of sales) Net working capital days
.
9% 13% 18% 26% 20% 14% 12% 14% 15% 13%9% 11% 15% 19% 26% 14% 13% 12% 12% 13%
0.91.0
0.80.6
-0.1
0.2
0.6 0.60.6 0.5
-1.0
-0.5
0.0
0.5
1.0
1.5
0%
10%
20%
30%
40%
50%
60%
70%
2000 2001 2002 2003 2004 2005 2006 2007 2008 1H 09
Return on equity ROIC Net debt/equity
17
Revenues and margins
Segmental sales breakdown Sanitary ware export volumes by geographySanitary ware sales volume by geography
Segmental gross profit Tile sales volume by geography
FY 08
Egypt (71%)
Lebanon (8%)
Export (21%)
FY 08
Egypt (39%)
Lebanon (3%)
Export (58%)
FY 08
Europe (80%)
Middle East (15%)
Africa & other (5%)
FY 08
Sanitary ware (58%)
Tile (42%)
FY 08
Sanitary ware (60%)
Tile (40%)
1H 09
Sanitary ware (57%)
Tile (43%)
1H 09
Egypt (38%)
Lebanon (3%)
Export (59%)
1H 09
Europe (80%)
Middle East (15%)
Africa & other (6%)
1H 09
Sanitary ware (48%)
Tile (52%)
1H 09
Egypt (69%)
Lebanon (8%)
Export (23%)
Share performance and data
19
Liquidity has moved from GDR to local share
• Lecico valued at a market cap of US$ 114 million with a 55% free float
– Almost all activity has moved from GDR to local share with GDR trading around 1 day per month since the beginning of the year
– Local share trades US$ 60,000 per day and on 100% of trading days (YTD July 09)
Shareholding structure
Share liquidity overview (GDR) Share liquidity overview (Local)GDR and Local share price
0
5
10
15
20
25
30
35
40
45
50
0
1
2
3
4
5
6
7
8
Jun-07
Jul-07
Aug-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
May-08
Jun-08
Jul-08
Sep-08
Oct-08
Dec-08
Jan-09
Mar-09
Apr-09
Jun-09
Jul-09
GDR (USD, LHS) Local (EGP, RHS)
• Lecico trades at a trailing PER multiple of 5.8x 2008 earnings
– EV/EBITDA of 4.3.
– Price to book value of 0.9x
– Dividend Yield (stock dividend) of 10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1000
1200
1400
Feb-05
Apr-05
Jun-05
Aug-05
Oct-05
Dec-05
Feb-06
Apr-06
Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Av daily value (USD 000, LHS) Days traded (%, RHS)
-10%
10%
30%
50%
70%
90%
110%
0
500
1000
1500
2000
2500
Feb-05
Apr-05
Jun-05
Aug-05
Oct-05
Dec-05
Feb-06
Apr-06
Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Av daily value (LE 000, LHS) Days traded (%, RHS)
Local float43%
GDR float12%
Intage / Gargour
36%
Concord PE9%
20
Thank you
For additional information, please contact:
Taher G. Gargour
Telephone: +203 518 0011
Fax: +203 518 0029
E-mail: [email protected]
Visit our website at: www.lecico.com
Forward-looking statements:This presentation may contain certain “forward-looking statements”, relating to Lecico Egypt S.A.E. business, which can be identified by the use of forward-looking terminology such as “will”, “planned”, “expectations”, “forecast” or similar expressions, or by discussions of strategy, plans or intentions. Such statements may include descriptions of investments planned or currently under development by Lecico Egypt S.A.E. and the anticipated impact of these investments. Such statements reflect the current views of Lecico Egypt S.A.E. with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of Lecico Egypt S.A.E. to be materially different from any future results that may be expressed or implied by such forward-looking statements.
