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Lecico Egypt HY 2012 financial results presentation


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Lecico Egypt Listed on the Egyptian Exchange has released its half year results presentation. Check out
Insights into this company in their presentation which appears below.
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Lecico Egypt HY 2012 financial results presentation

  1. 1. Corporate Summary
  2. 2. 3 Introduction: An Egyptian exporter Split of sanitary ware and tiles1 Split of domestic and export1 * All production facilities are owned and controlled by Lecico Alexandria Khorshid Borg El-Arab Cairo Established 1997 Sanitary ware capacity 2.0 million pcs 2005 4.4 million pcs end 2007 Tiles capacity 6.4 million m2 mid – 2011 12.8 million m2 mid – 2013 17.0 million m2 mid – 2016 (est) Brassware capacity 0.3 million pcs mid – 2010 Borg El-Arab Established 1975 Sanitary ware capacity 2.5 million pcs 2005 1.8 million pcs (inc FC) end 2008 Tiles capacity 17.0 million m2 2005 21.4 million m2 mid - 2007 Khorshid Established 1959 Sanitary ware capacity: 350,000 pcs 2007 Tiles capacity 1.1 million m2 2005 Kfarchima Kfarchima Beirut  Lecico Egypt S.A.E. – one of the world’s largest sanitary ware producers and a large tiles producer – 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 c45% of Lecico’s sanitary ware sales volume going into Europe  Lecico finished major expansions in sanitary ware in 2007 which boosted capacity to 6.7m pieces of sanitary ware and fired clay  In Summer 2010, Lecico began brassware production with a 300,000 piece per annum capacity factory  In Summer 2013, Lecico began production of the second (of three) lines at its new tile factory in Borg El Arab. The factory is expected to reach 17m sqm capacity over the coming 3 years Note: (1) FY 2011 Vitry Le Francois Established 1894 Fire Clay Sanitary capacity: 90,000 pcs 2006
  3. 3. Corporate Profile
  4. 4. 5 Growing exports •c 55% of sanitary ware is exported •SW exports 7% CAGR (2000-12) •10%+ UK, France & Ireland mkt share Investment case Experience •Brand with over 50 years of history • Multi-national management • Decades of OEM exports to Europe Strong historic growth record 17% Revenue CAGR (2000-2012) 12% Net Profit CAGR (2000-2012) Regional leadership • Sanitary ware market leader in Egypt and Lebanon • Largest producer in the Middle East Significant cost advantage • USD 14.50/piece cost (40% of peers) • c USD 1.50/piece shipping to Europe • European quality product Supplier for key European brands Export-led growth Aggressive expansion program Tile capacity more than tripled and sanitary ware capacity grew 49% since 2000
  5. 5. 6 Growing exports Growth in group’s exports Export focus on Europe • Sanitary ware export volumes grew at 7% CAGR (2001-2012) • 2012 growth driven by Middle East exports with sales to Europe only marginally higher • Average of over 70% of exports are to Western Europe • Growth of Middle East exports and slowdown in Europe have reduced percentage in last few years 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 c55% of its sales vs. 20% for local peers • Lecico sells to over 50 countries (including OEM sales) • Approximately 24% of exports (13% of sanitary ware sales) are for other brands • Lecico represents over 50% of Egypt’s sanitary ware exports with the balance split among 9 manufacturers • UK estimated c10% market share in Lecico-branded sales • A further c12% market share in OEM sales to the UK
  6. 6. 7 Significant cost advantage International cost advantage Lecico produces sanitary ware at an all-in average cost of US$14.47/piece – In Egypt, ceramic manufacturing cost averages US$9.57/piece of sanitary ware – The difference reflects higher packing costs for EU-destined exports and significantly higher industrial cost in Lebanon – Our information suggests other low cost producers’ manufacturing cost averages US$15-30 / piece – While European producers average US$35+ / piece depending on their market Why is Lecico able to produce so competitively? – 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: 80-90% capacity utilization rate versus 70% industry average in Egypt – Efficiency: Production per employee is over twice that of our local competitors Investment, distribution and overheads benefit from regional economies of scale – Sanitary ware investment cost approx US$30-40 / piece vs. US$35-55 / piece global standard – Low shipping cost to Europe: US$1.50 per sanitary ware piece vs. approx US$8+ for Asian manufactures
  7. 7. Growth strategy
  8. 8. 9  Aim to increase market growth  UK, Ireland, France and Egypt Long-term commercial strategy Build multi-brand and service options solutions for customers  Local service options in key markets (stock, delivery, tailor-made NPD)  International manufacturing options: direct container delivery at competitive pricing  Dual brand + strategy: European brands (Sarreguemines), Commercial brand (Lecico) and OEM Commercial strategy: Offer more for less  Strategy based on giving all the benefits of European supplier at best prices  Consistent and dependable world-class quality, service, manufacturing and design  Advantages over European peers: Greater flexibility as a partner at better prices Expand regional and international exports  New and expanded OEM contracts – Sanitec, Heritage, SFA and others  Potential future markets  Germany, Italy, Algeria, Saudi Arabia, Iraq, Poland, Nordics
  9. 9. Financial overview
  10. 10. 11 Profit and loss Net sales Cost of sales breakdown (1H 2013) EBIT Net Profit
  11. 11. 12 Quarterly P&L Trends Net sales Gross profit EBIT Net Profit
  12. 12. 13 Segmental analysis Sanitary ware – sales volumes and revenue Sanitary ware – gross profit and marginSanitary ware – selling price and cost per piece Tiles – sales volumes and revenues Tiles – selling price and cost per sqm Tiles – gross profit and margin
  13. 13. 14 Quarterly Segmental trends Sanitary ware average price, cost and profit per piece Sanitary ware sales volume Tile Average Price, Cost and Profit per sqm Tile sales volume
  14. 14. 15 Balance sheet and cash flow Working capital Returns and leverage Capital expenditures 2013e
  15. 15. Share performance and data
  16. 16. 17 Shareholding structure and performance  Lecico valued at a market cap of US$ 85 million with a 51% free float – All activity is in the local share although a GDR does exist – Local share trades US$ 22,700 per day and on 90% of trading days (YTD thru end July 2013) – Trading frequency has gone to 90% of market days from c 40% of market days in 2005-2007 Share liquidity overview (GDR) Share liquidity overview (Local) Liquidity has moved to local share and improved Lecico share price  Lecico trades at a trailing PER multiple of 6.4x on annualised 6M 2013 earnings – EV/EBITDA of 4.1x on annualised 6M 2013 results – Price to book value of 0.67x – Dividend Yield of 6.7% based on 2012 dividend Shareholding structure
  17. 17. 18 Thank you For additional information, please contact: Taher G. Gargour Telephone: +203 518 0011 Fax: +203 518 0029 E-mail: Visit our website at: 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.