It s time for Domotex-Hannover January 17-20

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1 It s time for Domotex-Hannover January Investor Presentation - 3Q2014 Oriental Weavers exhibition hall in Domotex Fair in Hannover, Jan 2014

2 Oriental Weavers: Global Market Leader 1981 Established in Manufacturing facilities in Egypt, China and the US. 116 mn sqm produced in We export our products to 130 countries worldwide 803,500 m2 of warehouses across 3 continents Showrooms and wholesale outlets spread all over Egypt INVESTOR PRESENTATION - ORIENTAL WEAVERS 2

Key Milestones Founding of OWI, the group's export arm OW Fibers was established US manufacturing facility was established US retail arm was launched EFCO was

emulates the look and feel of silk 2011-2012 Establishment of the new yarn plant, King Tut OW Hospitality is established in London Opening of a showroom in New York

3 Key Milestones Founding of OWI, the group's export arm OW Fibers was established US manufacturing facility was established US retail arm was launched EFCO was established OW opened the first showroom in the USA OW & MAC were established OW USA obtained patent rights for 100% acrylic rug production, which emulates the look and feel of silk Establishment of the new yarn plant, King Tut OW Hospitality is established in London Opening of a showroom in New York City OW was named as best in the Design and Service categories in the US Floor Focus. Partnering with Pantone & Tommy Bahama INVESTOR PRESENTATION - ORIENTAL WEAVERS 3

4 Group Structure Oriental Weavers Carpets 100% 100% 58.3% 79% OW USA OW International MAC Carpet Fiber Factory EFCO 100% 100% 69% OW China New MAC Modern EFCO INVESTOR PRESENTATION - ORIENTAL WEAVERS 4

5 A Vertically Integrated Business Model A Pillar for Global Competitiveness Controlling supply chain enables greater cost control and production flexibility. From sourcing polypropylene granules, converting them into fibers, spinning and dyeing yarn, to weaving, distributing and delivering the end product. Our domestic retail outlets, our dedicated distribution arm, OW USA (Sphinx), and our worldwide warehousing facilities in the US, Germany, and Canada support our local and international leadership. Raw Materials Production Distribution EPPC* 80-90% of polypropylene Oriental Weavers USA Modern EFCO 50% polypropylene fibers Oriental Weavers International 50% of polypropylene fibers King Tut % nylon yarn Oriental Weavers China Oriental Weavers Carpets Oriental Weavers International MAC Carpet Oriental Weavers Carpets Oriental Weavers USA * The founder of OW established EPPC in It is not a part of OW. INVESTOR PRESENTATION - ORIENTAL WEAVERS 5

Our Growth Strategy Stems From Our Unique Business Model Full integration backward and forward smoothes and minimizes costs. Economies of scale and scope.

6 Our Growth Strategy Stems From Our Unique Business Model Full integration backward and forward smoothes and minimizes costs. Economies of scale and scope. A vertically integrated producer A large diversified supplier Global experience and presence ensures unmatched global market intelligence. A global, low-cost producer using efficiency, technology and geography to deliver strong profitability. A local and global leader An innovative manufacturer INVESTOR PRESENTATION - ORIENTAL WEAVERS 6

7 Product Mix Covers Different Segments with Various Price Points 9M 2014 Revenue Mix (by volume) 9M 2014 Revenue Mix (by value) Non-woven felt, 14% Tufted Pieces, 30% Woven Grade A, 2% Woven Grade B, 22% Tufted Pieces 16% Non-woven felt 4% Fibers 11% Woven Grade A 8% Woven Grade B 33% Tufted Wall- Wall, 4% Woven Grade C, 28% Tufted Wall- Wall 1% Woven Grade C 27% INVESTOR PRESENTATION - ORIENTAL WEAVERS 7

Average price Nonwoven felt Wall- Wall Tufted Pieces woven: Grade C woven: Grade B woven: Grade A Product Mix Covers Different Segments with Various Price Points 9M2014 Average

8 Average price Nonwoven felt Wall- Wall Tufted Pieces woven: Grade C woven: Grade B woven: Grade A Product Mix Covers Different Segments with Various Price Points 9M2014 Average selling prices (EGP/sqm) Local Export Average Woven Tufted Non-woven Average price INVESTOR PRESENTATION - ORIENTAL WEAVERS 8

9 Europe America & Canada Arab Countries Asia Russia & China Africa Other A Prominent Leader in the Local and Export Markets The Pharaoh of Egyptian exporters 9M2014 Revenue Mix (by destination) Time Magazine Dominant position in the Egyptian market with an 85% market share. An export oriented company with c 60% export contribution. Africa, 1% Arab Countries, 3% Russia & Asia, 3% Other, 4% Local Sales, 39% A global renowned player with strong position in the US and European markets Export Performance (EGP mn) 1,401 1,360 America & Canada, 23% Europe, 27% INVESTOR PRESENTATION - ORIENTAL WEAVERS 9

International Premier Partners Relationships count Oriental

retailers, clients, resorts and other lifestyle centers

1 % of Group Sales ~1% of Group Sales ~6% of Group Sales 27%

10 International Premier Partners Relationships count Oriental Weavers enduring relationships with the world s best retailers, clients, resorts and other lifestyle centers ensure continued market leadership. 1 % of Group Sales ~1% of Group Sales ~6% of Group Sales 27% of Group Sales 23% of Group Sales 39% of Group Sales INVESTOR PRESENTATION - ORIENTAL WEAVERS 10

11 American & Canadian Premier Partners: Retail Segment Oriental Weavers covered 38% of Canadian rug imports in 2013 INVESTOR PRESENTATION - ORIENTAL WEAVERS 11

12 Premier Partners: Commercial Segment OW Hospitality, the London-based hospitality carpeting arm of Oriental Weavers Group which manufactures broadloom carpets for luxury hotels worldwide is the preferred supplier for Four Seasons and several other major players in the hospitality sector. INVESTOR PRESENTATION - ORIENTAL WEAVERS 12

13 2014 FLOOR FOCUS RETAILER SURVEY

14 Expansion plan Oriental Weavers International Industrial zone, 10 th of Ramadan City INVESTOR PRESENTATION - ORIENTAL WEAVERS 14

15 Future Capacity Expansions: A five year plan to add c. 60% additional woven capacity Target to add 11 new looms till March 2015 which will add 12% to the woven capacity Plan to construct two rug manufacturing plants that will consequently add c.50% of additional woven capacity by Total investment could reach up to EGP695mn. Plan to establish a new yarn plant to ensure production self sufficiency with total investment cost of EGP470 with an annual capacity of 55k tons. INVESTOR PRESENTATION - ORIENTAL WEAVERS 15

Recent Expansions: Inauguration of the fiber plant King Tut: Increasing control of the supply chain, in 2011 the Group launched the trial phase of a new yarn production facility (King Tut) with an

16 Recent Expansions: Inauguration of the fiber plant King Tut: Increasing control of the supply chain, in 2011 the Group launched the trial phase of a new yarn production facility (King Tut) with an annual capacity of 150 tons daily. Actual production started in The new factory produces nylon, which is the primary raw material used by MAC printed and tufted carpets. Oriental Weavers is targeting to export excess capacities. Total Capex spent on the first phase was EGP435mn. INVESTOR PRESENTATION - ORIENTAL WEAVERS 16

17 Financial and Operational Performance OW launched an exclusive partnership agreement with Pantone, most well known in the world of interior designs. OW has 2014 Pantone color of the year rug ready to ship. INVESTOR PRESENTATION - ORIENTAL WEAVERS 17

18 Consistent Growth in a Cyclical Industry The Group showed a CAGR of 10% between 2007 and Total Sales Growth: 13% year-on-year in 2013 to EGP 5,521 million Export Sales Growth: 14% growth year-on-year in 2013 to EGP 3,163 million Local Sales Growth: 11% year-on-year in 2013 to EGP 2,358 million 9M 2014 Total Sales Growth: 8% year-on-year to EGP 4,349 million Export Sales Growth: 6% growth year-on-year to EGP2,641million Local Sales Growth: 11% year-on-year to EGP1,708 million Flexible Market Driven New Products & New Markets Scale Oriental Weavers produces at all price points and can quickly respond to market trends. Our technology allows unparalleled flexibility each machine can produce any number of product types and we produce what the market demands with very short lead time. We only manufacture on confirmed orders Oriental Weavers costs are naturally hedged in challenging economic climates. Oriental Weavers broad international footprint allows it to shift its focus to markets that are growing. Furthermore, with 33 fulltime designers living in Egypt, the UK, China and the US, Oriental Weavers produces, on average, a unique, new product every two weeks. Our scale and efficiency advantages support our position as a cost-efficient competitive producer. INVESTOR PRESENTATION - ORIENTAL WEAVERS 18

19 % 60% 56% 57% 62% 61% 40% 40% 44% 43% 38% 39% Financial Summary Top Line Performance (EGPbn) Sales Volumes (mn sqm) Export vs. Local Revenue Contribution EGPbn Export Local mn sqm Export Local % 75% 50% 25% Export Local M M M M2014 0% M M2014 EBITDA (EGPmn) Net Income (EGPmn) Net Debt (EGPbn) EGPmn EBITDA EBITDA margin % 10% 11% 13% 13% M % 9M % 14% 12% 10% 8% EGPmn % Net income 5% 6% 6% Net margin 7% M % 9M % 8% 6% 4% 2% EGPbn Net debt Net debt/ebitda M M INVESTOR PRESENTATION - ORIENTAL WEAVERS 19

20 USD/ton Cost Structure: Polypropylene Polypropylene is the main raw material for Oriental Weavers with its prices trending down. Oriental Weavers sources internally 70-80% of its polypropylene granule needs through EPPC a local supplier. This helps in achieving the following: Reducing stocking period from 4 months to only 1-2 months Lowering transportation expenses Lowering finance charges Guaranteeing supply The model offers significant competitive strength in the global carpet and rugs industry. 9M2014 COGS breakdown Average PP Costs (in Metric Tons $) Polypropylene used in synthetic and blended rugs and carpets is an oil derivative and is particularly significant cost variable, representing around 33% of total costs incurred in 9M Polypropylene prices are driven in large part by: Petroleum prices Market demand for polypropylene Selling Exp. 18% Other 15% Raw materials 55% Polypropylene 33% wool 3% 1,800 1,600 1,400 1,200 1, ,217 1,348 1, ,363 1,629 1,456 1,585 1,596 Depreciation 4% Wages 8% Sources: Company Backing & finishing material 19% INVESTOR PRESENTATION - ORIENTAL WEAVERS 20

21 Recent increase in energy cost Energy cost Old prices New prices % increase OW costs (EGP000) and % % US$/mmbtu before increase after increase Natural gas % 17,342 38, % EGP/KW 0.45% 0.78% Electricity % 77, , % Diesel/litres 1.6% 2.0% Transportation costs % 55,000 72, % 1.1% 1.4% Total energy costs 150, , % % of costs 3.0% 4.2% Total costs In ,953,549 5,015, % Sources: Company INVESTOR PRESENTATION - ORIENTAL WEAVERS 21

22 Export incentive program 60 days Accounts Receivables USD & EUR Exports Subsidies 3.5-4% of value of exports Sources: Company EGP INVESTOR PRESENTATION - ORIENTAL WEAVERS 22

23 Shareholders Value Earnings Per Share & Dividends (in EGP) EPS DPS Oriental Weavers solid balance sheet and steady cash flow growth have provided investors with steady dividends EPS based on separate statements Source: Company INVESTOR PRESENTATION - ORIENTAL WEAVERS 23

24 Share Fact Sheet Stock Data 90 (mn )at par value of 5 EGP per share Listed on EGX September Month average daily value USD0.55mn 52 week- high / low EGP 67.5/ 29.3 Market Cap USD820mn (as of Jan 6, 2015) Last Div. / Ex. Date EGP2 on 5 May 2014 Issued and Paid up Capital 450 MEGP Reuters; Bloomberg ORWE.CA; ORWE EY % 38 % 5 % 57 Khamis Family Institutions Retail Share Price Performance ORWE EGX 30-rebased EGP/share Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 INVESTOR PRESENTATION - ORIENTAL WEAVERS 24

25 Global Environment OW USA factory, Dalton, Georgia

26 Oriental Weavers Long Standing Position in the US Where does OW stand in the US market? By market players US producers US %78 producers %78 Other importers Other %20importers %20 OW entered the US market in 1988 and established the US manufacturing facility in Imports 22% Imports 22% Sells to big boxes and home furnishing stores. OW exports to the US (EGPmn) OWC %2 OWC %2 Secured partnership agreements with Tommy Bahama, Pantone and Roger Thomas ,039 1,039 1,146 1,146 1,225 1,225 1,360 1,360 America s most magnificent rug award in Atlanta Floor covering exhibition. Opened corporate showrooms in 2012 in Fifth Avenue, New York and Las Vegas INVESTOR PRESENTATION - ORIENTAL WEAVERS 26

27 EGPbn Egypt: A Buoyant Market Stimulated by Demand for Housing Favorable Demographics Population in Egypt Supply of new residential units in Egypt Sizeable population with annual marriages of 600,000. Rest of Population Addressable market e 2015e 2016e 2017e Source: IMF Egyptian Carpets Market (2012) Luxury Upper middle Middle e2015 e units Source: Jones Lang LaSalle, Industry analysts Annual housing units supplied hovers around 150,000. Delivery of housing units related to projects that were put on hold. Ministry of Housing will build 224k housing units till end of 2015 By market size Woven Non-woven Tufted Residential new construction 80% By demand type Residential replacement 20% Source: OW Source: OW INVESTOR PRESENTATION - ORIENTAL WEAVERS 27

28 EGPmn Oriental Weavers: A Dominant Player in the Local Market Number of showrooms and wholesaler in Egypt Showrooms Wholesale Sells directly through a network of 175 showrooms and 64 wholesalers all over Egypt A plan to open small retail concept in 2014/ 2015 targeting mid to low income segments in Egypt 0 Source: OW OW local sales (EGPmn) 2,500 2,132 2,358 2,000 1,500 1,000 1,072 1,381 1,570 1,630 1, INVESTOR PRESENTATION - ORIENTAL WEAVERS 28

29 With Local Showrooms Spanning the Egyptian Governorates OW has a large network of showrooms in each of the Egyptian governorates. THIRD QUARTER INVESTOR PRESENTATION - ORIENTAL WEAVERS 29

30 Oriental Weavers Brands Our brands cater to a wide spectrum of customers ranging from big box retailers to five star hotels. La Boutique is a division of Oriental Weavers, catering to higher-end and topniche markets. Developed around the simple concept of customer involvement, La Boutique allows customers to commission custom rugs and carpets by matching a swatch of fabric or sketch, which are then transformed into an exquisite rug or carpet. OW Hospitality caters to the hospitality and entertainment industries, producing highquality woven Axminster carpets using a blend of wool and nylon for optimum performance, luxury and comfort, and has established markets in the US and Europe, with offices in London, Dubai, Dalton, Atlanta, New York and Las Vegas. The company aims to manufacture Axminster carpets on three continents by 2015 as it adds three new high-speed looms to its Cairo manufacturing facility, three high-speed Axminster machines to the Tianjin, China, plant, and two looms in the US manufacturing facility to better serve that marketplace. OW Life Style is the Group s line of contemporary rugs that includes a large variety of shag carpeting in various textures, styles and colors. Designed around today s life style, the company offers only the finest materials combined with the highest production standards. The OW Life Style name has come to be synonymous with quality and value, bringing a unique and truly distinguishable touch to any decor. Like La Boutique and OW Classics, Life Style provides a brand outlet for Oriental Weavers to market products with specific themes, in this case the ultra modern and abstract. The company sells its increasingly popular products locally through its own retail outlets and also exports to countries around the globe. INVESTOR PRESENTATION - ORIENTAL WEAVERS 30

1,993 projects Projects by status 5,000 4,000 3,000 2,000 1,000 0 Progress Delayed Cancelled

31 Huge Potential for the Hospitality Industry : 5,365 Projects Worldwide Projects by region A boom in the Gulf region Europe 1,953 projects Africa Americas 328 projects 1,091 projects APAC 1,993 projects Projects by status 5,000 4,000 3,000 2,000 1,000 0 Progress Delayed Cancelled Opened Vision Recently completed projects reached 90 in 2014 INVESTOR PRESENTATION - ORIENTAL WEAVERS 31

32 Appendix & Profiles OW opened an automated warehouse in 1H2013 with storage capacity of 3mn sqm. Total capex spent on the warehouse reached c. EGP80mn. INVESTOR PRESENTATION - ORIENTAL WEAVERS 32

Case Study: Woven Grade A 1 Raw Materials 2 Weaving Raw materials for our Woven Grade A products consist of 100% wool, or 80% wool and 20%

These are woven into yarn at our facilities in Egypt, US and China and sent to the looms.

The carpets are woven at one of our facilities in Egypt, China or the US, depending on the end user.

3 Distribution The carpet is then sent to the customer, either an Oriental Weavers retail outlet or showroom such as the one pictured above or

33 Case Study: Woven Grade A 1 Raw Materials 2 Weaving Raw materials for our Woven Grade A products consist of 100% wool, or 80% wool and 20% polypropylene. The wool is sourced from suppliers in Egypt, New Zealand Libya and UK; the PP is sourced locally or imported from GCC. These are woven into yarn at our facilities in Egypt, US and China and sent to the looms. 4 End User Uncompromising vertical integration and constant innovation are pillars of Oriental Weavers global competitiveness. The carpets are woven at one of our facilities in Egypt, China or the US, depending on the end user. The designs are determined by the customer needs; we offer more than 4 million copyrighted designs to choose from. 3 Distribution The carpet is then sent to the customer, either an Oriental Weavers retail outlet or showroom such as the one pictured above or to one of our customers for retail at their establishments. Once the carpet has been woven, it is moved to a warehousing facility to await shipping to one of our main distribution points. These are on four continents Africa, Asia, North America. INVESTOR PRESENTATION - ORIENTAL WEAVERS 33

Profiles The Oriental Weavers Group Oriental Weavers Carpet Company was founded in 1980 by industrialist and entrepreneur Mohammed Farid Khamis and today is the holding company for a fully vertically

34 Profiles The Oriental Weavers Group Oriental Weavers Carpet Company was founded in 1980 by industrialist and entrepreneur Mohammed Farid Khamis and today is the holding company for a fully vertically integrated producer of rugs, mats and carpets. As a manufacturer, Oriental Weavers produces three grades (A, B and C) of machine woven carpets and rugs for the Egyptian market, with annual capacity for the group presently reaching 115 million m2. Oriental Weavers has been traded on the Egyptian Exchange since 1997 and today its shares represent the consolidated earnings of the company s holding companies. ORIENTAL WEAVERS CARPET EGP 1.6 bn 2013 Sales Value 8% Sales Growth 28% Contribution to Group Sales Oriental Weavers International (OWI) was established in 1999 as an exportoriented free trade zone company in 10th of Ramadan City. The company s vertically integrated facilities encompass the scope of extrusion of synthetic fibers, dyeing and spinning wool as well as the weaving and finishing of products. The majority of the Group s diversified products related to home textiles are produced within this facility (carpets, rugs, Axminster, Gobelin, gun-tuft and fibers). The total annual capacity of the plant reached 34 million m2 in 2012 and targets mainly export markets. OWI increased its total sales by 15% to over EGP 1.97 billion, two-thirds of which constituted exports to OWI s main export markets including North America, Europe, and the Middle East, while the company also delivers to more than 60 countries worldwide. Specifically, OWI fully owns OW China with an eye on developing its market share in the emerging Asian market. ORIENTAL WEAVERS INTERNATIONAL EGP 1.97 billion 2013 Sales Value 15% Sales Growth 36% Contribution to Total Group Sales INVESTOR PRESENTATION - ORIENTAL WEAVERS 34

35 Profiles The Oriental Weavers Group Oriental Weavers USA manufactures in the company s plant in Dalton, Georgia, and also markets and distributes products it imports from the company s Egyptian plants. Oriental Weavers USA sells to mass merchants and big-box retailers such as Home Depot, Lowes, Bed Bath & Beyond, Nebraska Furniture Mart, among others, as well as to independent retailers, furniture retailers, catalogues and department stores such as Macy s and JCPenny. In recent years the company has been awarded America s Most Magnificent Rug award through its high-end brand, Sphinx. ORIENTAL WEAVERS USA EGP 608.9million distribution arm 2013 Sales Value 9% Sales Growth 11% Contribution to Total Group Sales Oriental Weavers China was established in 2006 in anticipation of China s growing importance in the global economic scene. OW China occupies 170,000 m2 in the Tianjin industrial zone, 80 km south of Beijing. The producer is a vertically integrated facility with fiber extrusion capacities as well as rug and carpet manufacturing facilities. As domestic demand continues to drive the growth of China s economy, Oriental Weavers intends to capitalize on the rise of the country s large middle class by leveraging relationships with global retail customers such as IKEA and Wal-Mart, which have seen notable growth in China in recent years. Following the events in Egypt in early 2011, group management quickly responded by ramping up production at OW China s facilities, growing total annual capacity to 3.2 million m2. OW China s production is intended to supply both the local Chinese market as well as neighboring export markets. ORIENTAL WEAVERS (TIANJIN) 16% Sales Reduction 1% Contribution to Total Group Sales INVESTOR PRESENTATION - ORIENTAL WEAVERS 35

36 Profiles The Oriental Weavers Group MAC Carpets is Oriental Weavers foothold in the wall-to-wall tufted carpeting segment, a key division that further diversifies the Group s product mix beyond the rugs and mats categories. MAC operates out of four sites in Egypt including three production plants and an electricity facility, all in 10th of Ramadan City. Since its establishment in 1980, MAC s output hovered around 43 million m2 of carpeting worth EGP 1 billion in Today MAC represents roughly 19% of total group sales. A leading Egyptian exporter, MAC s products are delivered to more than 107 countries, supplying some of the world s largest retailers such as Wal-Mart and IKEA. In addition to wall-to-wall carpeting, MAC s diversified product offerings include, door and kitchen rugs, rubber backed bathroom mats, multilevel textured mats for outdoor applications, car mats, children s rugs and mats, scatter rugs and club rugs. MAC also manufactures three-dimensional advertising floor panels, runners and artificial turf for indoor and outdoor applications. MAC CARPETS EGP 1 billion 2013 Sales Value 12% Sales Growth 19% Contribution to Total Group Sales EGYPTIAN FIBERS COMPANY 16 million m Production Capacity Egyptian Fibers Company (EFCO) is the Group s polypropylene business and engages in the manufacture of polypropylene fibers and polyester threads. It also manufactures and exports different types of non-woven plastic rugs and carpets and other related polypropylene and plastic products. EFCO has a 69% interest in Modern EFCO Fibers Company, which produces polypropylene, polyester and silk products, as well as non-woven carpets. EGP 247 million 2013 Sales Value 54% Sales Growth 4% Contribution to Total Group Sales INVESTOR PRESENTATION - ORIENTAL WEAVERS 36

37 Disclaimer Certain information contained in this document consists of forward-looking statements reflecting the current view of the Company 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 the Company to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including worldwide economic trends, the economic and political climate of Egypt and the Middle East and changes in business strategy and various other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in such forward-looking statements. Recipients of this document are cautioned not to place any reliance on these forward-looking statements. The Company undertakes no obligation to republish revised forward-looking statements to reflect changed events or circumstances. INVESTOR PRESENTATION - ORIENTAL WEAVERS 37

38 For More Information: Ingy Eldiwany Investor Relations Manager

% One of the world leading players. countries sales. Manufacturing facilities in Egypt (90%), China and the US. years in the industry

% One of the world leading players. countries sales. Manufacturing facilities in Egypt (90%), China and the US. years in the industry Fourth One of the world leading players Europe, 24% Russia & Asia, 3% +30 years in the industry 10 Manufacturing facilities in Egypt (90%), China and the US. America & Canada, 25% Africa, 1% 2Arab Countries,