Oriental Weavers Carpets E : ORWE 1Q 2023 Earnings Release

1Q 2023 Earnings Release

Cairo 15th May 2023

Oriental Weavers Carpet Releases 1Q 2023 Earnings Results

Oriental Weavers Carpet Company [ORWE EY; ORWE.CA], reported 1Q 2023 results showing double digit revenues growth reaching 27% y-o-y, with GP margins reaching 13.6% and EBITDA Margin of 14.9%.

Key Highlights of 1Q 2023

EGP 4,142 mn	EGP 562 mn	EGP 277mn
in Revenues	in Gross Profit	OW China Divestment
▲27% y-o-y	▲57% y-o-y
13.6% GP margin

▲39%

local Revenues

▲21%

Export Revenues

EGP 619 mn	EGP 411 mn
EBITDA	in Attributable Net Income
▲67% y-o-y	▲74% y-o-y
14.9% margin

1Q 2023 Financial Highlights

• Revenues increased by 27% y-o-y (+10% q-o-q) in 1Q 2023 reaching EGP 4,142 million. Export revenue (63% of total revenues), increased by 21% y-o-y (+19% q-o-q). While local sales increased by 39% y-o-y(-2%q-o-q).
• Volumes declined by 22% y-o-y(-2%q-o-q) in 1Q 2023. The drop was attributed to export volumes decline by 33% y-o-y (+5% q-o-q). While local volumes were flat (-11%q-o-q).
• Gross Profit recorded EGP 562 million, an increase of 57% y-o-y (+114% q-o-q) with an associated margin of 13.6% versus 10.9% in 1Q 2022. Margin improvement was a result of COGS rising at a slower pace than the group's top line figure, as a result of lower priced raw material (in dollar terms) during the quarter and increase in selling prices. As COGS/Sales reached 86% in Q1 2023 compared to 89% in Q1 2022.
• EBITDA (1) recorded EGP 619 million in 1Q 2023, representing an increase of 67% y-o-y, with EBITDA margin of 14.9% compared to EBITDA margin of 11.3% in 1Q 2022. The year-on-year improvement comes on the back of higher gross profitability trickling down impact.
• Net Attributable Profit increased by 74% y-o-y (+30% q-o-q) to EGP 411 million compared to EGP 236 million in 1Q 2022.
• Finalizing OW China divestment, financials recorded EGP 277 million as a result of complete sale of OW China facility
• OW opened 1 new showrooms 1Q 2023, bringing the total number of showrooms on a group level to 260 showrooms.

(1) EBITDA is calculated as operating profit plus deprecation

1Q 2023 Earnings Release

Cairo 15th May 2023

Revenue Contribution by Market 1Q 2023 Vs 1Q 2022

Figure 1: Revenue contribution 1Q 2023

Figure 2: Revenue contribution 1Q 2022

Table 1: Net Sales (Volume and Value) in 1Q 2023 vs. 1Q 2022

		Value (EGP million)			Volume (mn sqm)
	1Q 2023	1Q 2022	% Change	1Q 2023	1Q 2022	% Change
Woven- Egypt based	2,485.4	2,061.4	20.6%	13.32	17.47	-23.7%
OW USA	792.4	521.6	51.9%	3.31	3.88	-14.7%
Tufted	667.0	523.4	27.4%	6.66	9.09	-26.8%
Non-woven Felt	168.0	135.7	23.8%	4.15	4.91	-15.4%
Other	29.5	21.7	36.2%
Total	4,142	3,264	26.92%	27.4	35.4	-22.4%

Revenue Breakdown 1Q 2023

Sales Volume Breakdown (sqm) 1Q 2023

1Q 2023 Earnings Release | Page 2

1Q 2023 Earnings Release

Cairo 15th May 2023

Segment Reporting

Local Sales Local Sales (37% of Revenues Including local hospitality)

OW local revenues reported an impressive 39% increase in 1Q 2023 to EGP 1,530 million, compared to EGP 1,102 million in 1Q 2022, (-2%q-o-q), driven primarily by price adjustments in the local market. Meanwhile, local volumes were flat on y-o-y basis (-11%q-o-q).

In the first quarter, woven products experienced a remarkable 44% y-o-y increase in revenues, driven by an 11% increase in volumes and a 30% increase in prices. This growth was fueled by local consumers' purchasing momentum, who made early purchasing decisions due to inflationary dynamics and the anticipation of further price increases. Moreover, Tufted products showed sales recovery of 19% y-o-y, with strong figures from the wall-to-wall segments in particular. However, the tufted segment's volumes declined by 24% y-o-y in 1Q 2023, due to a worker's strike that lasted for ten days. Operations resumed promptly after the strike and have been ongoing in 2Q 2023

In the first quarter of 2023, showroom sales, which constitute 56% of local sales, showed an impressive 32% y-o-y increase (+0.6% q-o-q), driven by OW's marketing initiatives. Meanwhile, wholesale revenues reported a 55% y-oy increase (-6.7%q-o-q) due to wholesalers stocking up on inventory in anticipation of further price increases.

Export & Overseas Operations (63% of revenues)

In the first quarter of 2023, export revenues grew by 21% y-o-y (+19% q-o-q) to reach EGP 2,612 million, supported by local currency devaluation. However, volumes declined by 33% y- o-y (+5% q-o-q), mainly due to two factors. Firstly, the high base effect, as 1Q 2022 was one of the best performing quarters in the company's history. Secondly, 1Q 2023 sales figures represented orders that were placed in 4Q 2022, which were impacted by the global slowdown in discretionary products

In January 2023, OW participated in DOMOTEX, a renowned flooring industry platform held in Hanover, Germany, which paved the way for sales in the year ahead. The OW export team managed to establish business with 25 new active clients in 1Q 2023, primarily in France, Germany, and Brazil, indicating a gradual recovery heading into 2Q and beyond. Overall, management is focused on increasing market share and building long-term customer relationships

1Q 2023 Earnings Release | Page 3

1Q 2023 Earnings Release

Cairo 15th May 2023

1Q 2023 Revenue Performance by Region

			▲142%
			Russia & China
North & South	Europe
▲8%
America
		▲12%
▲16%
Egypt	Asia
		▲39% ▲60%
	▲40%		Arab
		Countries
	Africa

* The three key markets are Egypt, the US & Canada, and Europe.

In the first quarter of 2023, European sales grew by 8% y-o-y (+17% q-o-q), benefiting from a weaker EGP. Sales dropped in dollar terms due to, macroeconomic conditions which played a role on consumer's discretionary spending.

In the first quarter of 2023, the US region experienced a 16% y-o-y increase in sales (+14% q-o- q), benefiting from a weaker EGP. Despite the challenging economic conditions in the US market, there is a slight recovery in demand compared to the trend seen in 2H 2022, which is expected to continue throughout the year.

The GCC region remains one of the strongest performing markets for OW, with sales in Saudi Arabia and the UAE increasing by 60% y-o-y in 1Q 2023. This is mainly because OW export team started exporting Tufted and Non-woven products to the region, previously the Woven products were the main contributor. The contribution of GCC markets to total revenues reached 9% in 1Q 2023, compared to 7% in 2022 and 6% in 2021, indicating a growth in OW's market share in the region. OW export team is also experiencing significant demand from Africa, particularly Libya, Kenya and Tanzania, with sales increasing by 40% y-o-y in 1Q 2023.

In the Tufted Segments, export revenues increased by 31% y-o-y (+55% q-o-q) in 1Q 2023, while volumes declined by 28% y-o-y (+16% q-o-q) due to a worker's strike during the quarter. However, a change in trend is noticeable in the q-o-q figures, which is expected to continue throughout the year.

1Q 2023 Earnings Release | Page 4

1Q 2023 Earnings Release

Cairo 15th May 2023

OW USA

OW's U.S.-based subsidiary reported a 52% y-oy increase in sales and a 15% y-o-y decline in volumes (+79% q-o-q). The decline in volumes was attributed to lower sales orders from the preceding quarter due to macro-specific reasons in the U.S. market

OW Hospitality (3% of Revenues)

Oriental Weavers' hospitality segment serves many prominent global names, in addition to its local presence. In the local segment, sales declined by approximately 10% y-o-y in 1Q 2023 (+2.5% q-o-q). OW completed several installation projects, including hotels, mosques, universities, and projects related to the new administrative capital. One of the most noteworthy projects in the quarter was the "Egypt Mosque" in the new administrative capital, which is the third-largest mosque in the Middle East. In the export segment, sales increased by 171% y-o-y in 1Q 2023, mainly in global chain hotels, particularly in the United States, United Kingdom, and Saudi Arabia

Cost of Goods Sold

OW's COGS increased by 23% y-o-y to EGP 3,581 million in 1Q 2023, rising at a slower pace than the group's top line figure, as a result of lower priced raw material during the quarter and increase in selling prices. Polypropylene prices declined by 33% y-o-y in USD. This resulted in, gross profit for 1Q 2023 increasing by 57% y-o-y (114% q-o-q), with associated margins of 13.6% versus 10.9% in 1Q 2022.

15%

OtherPolypropylene- Nylon 25%

21%	Raw Material		Backing
Selling	51%		13%
	9%
4%	Wages	Wool
	Finishing material
Depreciation		4%
	9%

Raw material costs, which include wool, Polypropylene, backing and finishing materials, reached EGP 1.8 million in 1Q 2023, compared to EGP 1.5 million 1Q 2022, which is a 18% y-o- y increase. While aggregate pricing increased by 63%, including the local currency devaluation, causing the improvement in margins.

1Q 2023 Earnings Release | Page 5