ORIENTAL WEAVERS CARPETS COMPANY (S.A.E) Earnings Release 2Q 2017/1H2017
2Q 2017 Top Line and EBITDA Figures Strengthened by 50%+ y-o-y
C
AIRO, July 26, 2017 ― Oriental Weavers Carpet Company [ORWE EY; ORWE.CA], one of the world's largest machine-made rug and carpet manufacturers, reported today its financial results for 1H 2017 ending June 30, 2017.
A message from our founder, Mr Mohamed Farid Khamis, to shareholders: |
"We finish the first half of 2017 with record results - a new benchmark for which we can be proud, with the top line and EBITDA figures increasing by more than 50% y-o-y in 2Q 2017, in line with market consensus. This is a result of a gradual recovery in exports, in dollar terms, while our response to the EGP floatation and diverse product range helped maintain our strong position in the local market, and overcome slow market demand. OW continues to explore every opportunity to overcome the inflationary pressures in the local market, while creating new, and expanding current, footholds in available markets. To meet international demand, and to expand our product range, OW has received three state-of-the-art looms, with an additional three looms to be installed in the second half of 2017. Through innovation and our commitment to excellence, OW remains dedicated to our clients, partners, and stakeholders alike. Our multifaceted approach will continue to ensure growth in the current dynamic economic environment. With this, I offer my deepest appreciation to each of you - for it is your vision, your enthusiasm, and your loyalty that makes Oriental Weavers a local and a global leader" |
Sales (EGP mn) 2,389 ▲54% | EBITDA (EGP mn) 388 ▲55% | Net Income (EGP mn) 204 ▲28% |
Export Contribution 64% | EBITDA Margin 16.2% ▲12 bps | Net Margin 8.5% 174 bps |
It is important for the OW management to highlight the potential impact of an EGP appreciation against the USD:
In a 5% EGP appreciation scenario, OW will record better profitability margins on its local sales (36% of net sales). Though, margins on exports will be under pressure slightly, profitability margin, on aggregate, will remain stable;
In an appreciation scenario of over 5%, selling price adjustments will be implemented in the local market, inflation of raw material costs will be hampered, leading to only minor changes in profitability margin on an aggregate basis.
With 15% local currency debt on hand, OW plans to gradually settle its EGP debt facilities to avoid the high finance charges while maintaining a naturally-hedged position on the balance sheet. Furthermore, OW signed forward contracts in March 2017 to sell the excess dollar proceeds and the resulting FX gains from these contracts should offset the high finance charges on the EGP debt facilities.
For purposes of comparison, we have adjusted, in this earnings release, Oriental Weavers' income statement for 2Q2016 to account for the merger of Oriental Weavers Textiles (OWT) with Rosetex for Spinning and Weaving (an almost 100%-owned subsidiary of Oriental Weavers Carpets) that took place in 3Q 2016.
Revenue Performance OverviewThe Group recorded a net sales figure of EGP 4,913 million in 1H 2017, representing growth of 66% over the adjusted revenue figure of the comparable
Revenue Contribution by Market in 2Q 2017Egypt
first six months of 2016. The primary driving factors were a 109% y-o-y growth in export sales, and 21% growth in local sales when compared to the adjusted figures of 1H 2016.
In 2Q 2017, OW recorded a 56% revenue growth y-o-y on an adjusted basis reflecting the impact of the floatation of the EGP that took place in November 2016 on our foreign-currency based export revenues (an export contribution of 64%), and the successive price increases implemented in Egypt in 4Q 2016 and 1Q 2017 to pass on the higher US Dollar cost of our raw materials.
Others
9%
Europe 20%
36%
US
35%
Table 1: Net Sales (Volume and Value) in 2Q 2017 vs. Adjusted 2Q 2016Value (EGP mn) Volume (sqm)
2Q 2017
Woven- Egypt based | 1,351 | 811 | 67% |
OW USA | 454 | 224 | 103% |
OW China | 51 | 21 | 138% |
Tufted | 419 | 258 | 63% |
Non-woven Felt | 89 | 53 | 69% |
Other | 25 | 170 | -85% |
Total | 2,389 | 1,536 | 56% |
Reported
2Q 2016
Adjusted
Change vs. Adjusted
2Q 2017
13 | 14 | -10% |
2.2 | 2.3 | -1% |
0.5 | 0.6 | -13% |
8 | 7 | 4% |
4 | 4 | 4% |
27 | 28 | -4% |
Reported
2Q 2016
Adjusted
Change vs. Adjusted
* For purposes of comparison, adjusted figures of 2Q 2016 include sales value and volumes of OWT.
Table 2: Net Volume & Value in 1H 2017 vs. Adjusted 1H 2016Value (EGP mn) Volume (sqm)
1H 2017
Woven- Egypt based | 2,758 | 1,604 | 72% |
OW USA | 1,016 | 480 | 112% |
OW China | 71 | 35 | 102% |
Tufted | 860 | 439 | 96% |
Non-woven Felt | 179 | 100 | 79% |
Other | 28 | 304 | -91% |
Total | 4,913 | 2,961 66% | |
Reported
1H 2016
Adjusted
Change vs. Adjusted
1H 2017
26 | 29 | -11% |
5 | 5 | 1% |
1 | 1 | -24% |
16 | 15 | 11% |
8 | 7 | 8% |
56 | 57 | -2% |
Reported
1H 2016
Adjusted
Change vs. Adjusted
Revenue Breakdown in 2Q 2017 | Sales Volumes Breakdown (sqm) in 2Q 2017 |
Non- wovenOthers 4% 1% Tufted 19% Woven OW China 62% 2% OW USA 12% | Non- woven 4% Woven 47% Tufted 28% OW China OWUSA 2% 8% |
Our local sales reported a 13% net growth in 2Q 2017 compared to the same quarter in 2016, a total of EGP 860.4 million, resulting mostly from the implemented price increases. The inflationary pressures Egypt experienced, in addition to the slow demand during the second quarter as it coincided with the holy month of Ramadan, and final school exams, led to sales decreasing by 8% in volume. Furthermore, due to imposed import regulations, we have reported a decline in sales of imported hand-made products, and imported machine-made rugs, particularly those produced at OW China that were previously sold locally.
On a segment basis, the local sales of woven, tufted, and non-woven products showed 46%, 22% and 46% y-o-y growth in value respectively in 2Q 2017. In the woven segment, there was a 7% increase in sales volume of Grade A, and a 6% increase of Grade B, whereas volumes of low end products (Grade C, 75% of local woven volumes) declined by 20%. We believe lower sales volumes of Grade C products was a result of: i) A shift in demand, by small traders, from Grade C to MAC's (tufted division) local production given its relatively lower price points, and ii) slow demand during the quarter. Meanwhile, volumes of Grade A and B grew during the quarter as traders were stockpiling merchandise in an anticipation of price increases to take place with the 1% increase in VAT implemented early July 2017 and the gradual phasing out of energy subsidies. Currently, we have seen a relative pick up in local demand coinciding with the regular increase of marriages during the summer months.
Table 2: Percentage Change in 2Q 2017 & 1H2017 Local Sales (Volume and Value)Percentage Change 2Q 2017 vs 2Q 2016 | Volume | Value | Avg. Price | Contribution to Local Revenues | |
2Q 2017 | 2Q 2016 | ||||
Woven | ▼15% | ▲46% | ▲71% | 83% | 65% |
Percentage Change 1H 2017 vs 1H 2016 | Volume | Value |
Woven | ▼16% | ▲53% |
Tufted | ▲14% | ▲22% | ▲8% | 11% | 10% |
Tufted | ▲10% | ▲42% |
Non-woven felt | ▼1% | ▲46% | ▲47% | 4% | 3% |
Non-woven felt | ▲1% | ▲48% |
Others (imported ugs & yarn sales) | ▼92% | 2% | 22% | Others (imported rugs & yarn sales) | ▼95% | ||
otal | ▼8% | ▲13% | 100% | 100% | Total | ▼8% | ▲21% |
r
T
Oriental Weavers Carpet Co. published this content on 26 July 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 26 July 2017 08:25:02 UTC.
Original documenthttp://s3.amazonaws.com/inktankir2/orwe/ORWE 2Q 2017 Earnings Release Final.pdf
Public permalinkhttp://www.publicnow.com/view/D6751AA22CC29BE2869CC20CB4F218F0826339F1
