Oriental Weavers Reports Strong Sales and Income Performance, Margin Growth in 9M2013

Transcription

1 Oriental Weavers Carpets Third Quarter 2013 Results Oriental Weavers Reports Strong Sales and Income Performance, Margin Growth in 9M2013 CAIRO, November 14, 2013 Oriental Weavers Carpets Company, Inc. (RIC: ORWE.CA) the world's largest machine-made rug and carpet manufacturer, reported today its financial results for the quarter ending September 30, Highlights of Third Quarter 2013 Sales rose 3% year-on-year in the third quarter of 2013, reaching EGP 1.3 billion up from EGP 1.2 billion in Q Gross Profit was EGP million in Q3 2013, up 15% from EGP million in Q3 2012, despite a modest rise in COGS. Meanwhile, Gross Profit Margin registered at 10%, a 1 percentage point increase over the same period of last year. Net Income after Minority declined 7% from EGP 70 million in Q to EGP 65.0 million in the quarter just ended. Net Profit Margin was steady year-on-year at 6%. EBITDA rose 8% year-on-year to EGP million from EGP million in Q3 2012, and EBITDA Margin rose 1 percentage point to 12%. Adjusted EBITDA (1) fell 5% to EGP million from EGP million in the same quarter of 2012, while Adjusted EBITDA Margin was down 1 percentage point to 14%. EPS was EGP 0.73 in Q3 2013, an 8% decline from EGP 0.79 in Q Highlights of Nine Months 2013 Sales were EGP 4.0 billion in 9M 2013, a 13% increase over EGP 3.6 million in 9M 2012, while Gross Profit was up 32% at EGP million despite an 11% increase in COGS. Gross Profit Margin rose 2 percentage points to 11% year-to-date. Net Income after Minority rose 33% in 9M 2013 to EGP million, up from EGP million in 9M 2012, while Net Profit Margin registered at 7%, a 1 percentage point increase year-on-year. EBITDA was EGP million, up 32% from EGP million in 9M 2012; EBITDA Margin rose 2 percentage points to 13%. Adjusted EBITDA (1) came in at EGP million, a 25% increase over the same period of last year, while Adjusted EBITDA Margin was up 1 percentage point to 16%. EPS rose 33% year-on-year to EGP 3.10 from EGP 2.33 in 9M (1) Adjusted EBITDA to include other revenues (export subsidies) amounting to EGP 34 million in Q and EGP 118 million in 9M

2 Commenting on the results, Mr. Mohamed Farid Khamis, Founder, said: This year has presented numerous challenges: A second revolution in our home market and the imposition of a nighttime curfew that curbed traditional shopping hours and challenged logistics management; rising COGS; and mixed economic situations in our key export markets. It is a combination of events that could easily have led to paralysis and indecision. However, led by a strong, experienced management team, we have once again delivered solid growth and positive results. I am particularly pleased with our margins, which in 9M 2013 expanded across the board, surpassing industry norms. From sales to profitability, our results year-to-date have exceeded my expectations, with a 13% improvement in our top-line and a 33% improvement in our bottom-line results despite the tumult we saw in our home market in the first nine months of the year. That tumult reached its zenith in early Q3, resulting in a serious drop in consumer confidence and a curfew that dampened local sales. That said, the third quarter was, in many ways, business as usual: Our production facilities remained fully operational in Egypt and around the world; international orders remained on-schedule at all of our facilities; for the most part our logistics network remained undisturbed prior to the curfew; and our domestic retail network remained intact. Although we did experience some shipping delays, all of our 207 retail stores remained open and undisturbed. Indeed, despite two revolutions and stiff economic headwinds, Oriental Weavers has been less focused on surviving the crisis than on managing costs and nurturing sustainable, long-term growth, particularly of our bottom line profitability. Market activity from late Q3 and Q4 to-date in Egypt, as well as the coming holiday shopping season in our key Western markets, lead me to be optimistic regarding our Q4 results. Indeed, I believe that Oriental Weavers is in a stronger position than ever, with a sound financial position coupled with a proven management team. I have confidence that our full-year results will meet the bar we have set in the first nine months. Sales & Markets: In the third quarter, sales reached EGP 1,279.2 million across all lines and markets a 3% increase over EGP 1,240.8 million in Q Sales growth was driven by a focus on diversifying and maximizing our product mix and pricing strength, as well as particularly strong performance in key export markets. In 9M 2013, sales grew an even stronger 13% to EGP 4,030.5 million, as strong 1H 2013 performance across all lines offset the impact of domestic events in Q3. Local Sales: The third quarter is typically high-season for our Egyptian retail presence, with weddings and backto-school shopping driving sales. This year, a fraught political environment mixed with an uncertain security situation and strict 7pm curfew resulted in dampened retail sentiment and curtailed traditional peak shopping hours. Accordingly, sales in our home market fell 5% year-on-year in Q to EGP million. That said, in 9M 2013 local sales were up 8% to EGP 1,718.9 million, bolstered by strong 1H 2013 results. Notably, by mid-september, domestic sales had seen a strong up-tick, and early Q4 results suggest that the market has fully normalized. Given our strong 9M 2013 results, management anticipates that our domestic results for FY 2013 sales will surpass our FY 2012 results. 2

3 Export Sales: Export sales grew 10% year-on-year in Q to EGP million from EGP million in the same quarter last year. This quarter was notable in that sales to all of our export markets saw yearon-year increases, with exports to the Arab world (up 28%) and Africa (up 55%) being the standout performers. In 9M 2013, export sales are up 16% to EGP 2,311.6 million on the heels of three consecutive quarters of excellent performance. Table 1: Sales by Destination (EGP '000) 3Q Q 2012 Change 9M M 2012 Change Local Sales - Egypt 569, ,756-5% 1,718,918 1,5,364 8% Exports 709, ,994 10% 2,311,552 1,991,127 16% Total 1,279,194 1,240,750 3% 4,030,470 3,579,491 13% Segment Analysis: Our Woven line is typically the strongest contributor to sales each quarter, and Q has been no exception. Although volumes are down 9.1% year-on-year, the division saw a marginal increase in sales value to EGP million in the third quarter. That increase was driven by a well-balanced product mix that emphasized sales of our more profitable products. This emphasis on product mix has led 9M 2013 sales to rise 11% despite volumes holding steady. Tufted sales were up 9% to EGP million in Q on a 7.9% improvement in volumes, as effective cost controls and product mix also bolstered the profitability of this key line. These same factors led our Non-Woven Felt division to see a 33% improvement in sales to EGP 55 million on a 2.2% increase in volumes in the third quarter. Table 2: Product Mix in Terms of Value (EGP '000) 3Q Q 2012 Change 9M M 2012 Change Woven 799, , % 2,559,258 2,308,895 11% Tufted 266, ,548 9% 798, ,640 10% Non-woven felt 54,987 41,273 33% 163, ,364 40% Other 158, , % 509, ,592 20% Total 1,279,194 1,240,750 3% 4,030,470 3,579,491 13% Table 3: Product Mix in Terms of Volume (SQM '000) 3Q Q 2012 Change 9M M 2012 Change Woven 12,669 13, % 41,243 41,250 0% Tufted 11,318 10, % 32,409 32,720-1% Non-woven felt 3,597 3, % 11,589 10,170 14% Total 27,584 27,947-1% 85,241 84,140 1% Margins & Profitability: Gross Profit rose an impressive 15% year-on-year in the third quarter to EGP million, and Gross Profit Margin was up 1 percentage point to 10%. EBITDA, meanwhile, rose a more modest 8% year-on-year to reach EGP million in the quarter with margin registering a healthy 12%. Year-to-date, the improvement of both Gross Profit and EBITDA is an even more marked 32% each to EGP million and EGP million, respectively. This improvement in profitability comes even as COGS rose 11% in 9M 2013, with each major category of costs showing increases. In 9M 2013, Gross Profit Margin was 11% and EBITDA Margin was 13%, well-above industry norms. 3

4 Table 4: COGS (EGP '000) 3Q Q 2012 Change 9M M 2012 Change Raw Materials 628, ,207 6% 2,001,036 1,2,554 6% Industrial Exp. 132, ,399 9% 395, ,134 14% Selling Exp. 208, ,584 8% 640, ,828 12% Other 186, ,191-17% 544, ,197 23% Total 1,156,721 1,134,381 2% 3,580,911 3,239,713 11% Net Profit after Minority Interest: Turbulence in our home market and a heavy forex charge led to a 7% year-on-year decline in Net Profit After Minority to EGP 65.0 million from EGP 70.0 million in Q3 2012; Net Profit Margin was stable at 6%. Third quarter difficulties were offset by strong 1H 2013 performance, however, leading to an impressive 33% improvement to Net Profit After Minority to EGP million in 9M As has been the theme throughout the year, management has been working around volatile political and economic conditions to continue its efforts to restructure the company s debt. The ultimate goal is to capitalize on the exceptionally low interest rates on short-term USD debt while mitigating the effects on the Balance Sheet from the devaluation of the Egyptian pound. These efforts are on track and lowering the group s net debt position. For more detail on this, please see the group s Q earnings release, available on our website. Cash and Capital Management Cash and Cash Equivalents at the end of 9M 2013 were up 55% to EGP million from EGP million in 9M This improvement was driven by a number of factors, key among them ongoing efforts to minimize CAPEX, a sharp decrease on the Suppliers & Notes Payable and Other Credit Accounts line, as well as a 68% drop in Net Cash Flows Used in Investing Activities and a 39% drop in Net Cash Flows Used in Financing Activities. Management will continue to keep tight control of CAPEX to enhance free cash flow and returns. Recent Developments OW USA, Oriental Weavers subsidiary in the United States, has signed a licensing agreement with US-based Tommy Bahama Home, the island-inspired lifestyle brand, to create multiple collections of indoor and outdoor rugs. The new collections will debut at the Atlanta Merchandise Mart exhibition in early January 2014 and will be available to consumers through specialty flooring and furniture stores as well as select catalogues in Spring Outlook: As we head into the final quarter of 2013, management is cautiously optimistic that our results will continue to outperform expectations. Sales in our home market are showing steady signs of improvement, and our market analysis of key export markets suggests that sales will continue to be strong. A stabilized polypropylene / polymer supply base for raw materials allows for better capacity utilization planning and continued balanced pricing strategies. Our emphasis going forward will remain on driving profitability rather than solely sales growth. Meanwhile, we are still working to improve margins and efficiencies, building on the momentum year-to-date. 4

5 Income Statement (EGP '000) Three Months Ended 30 September Nine Months Ended 30 September In (EGP, 000) Change Change Net Sales 1,279,194 1,240,750 3% 4,030,471 3,579,491 13% Less: COGS 1,156,722 1,134,423 2% 3,580,911 3,239,755 11% Gross Profit 122, ,328 15% 449, ,736 32% Gross Profit Margin 10% 9% 12% 11% 9% 18% Less: Selling & Distribution Expenses 10,376 10, % 29,963 28,610 5% General & Administrative Expenses 36,972 23,024 61% 94,401 72,363 30% 47,348 33,366 42% 124, ,973 23% Net Income from Operation Activities 75,125 72,962 3% 325, ,763 36% Operation Activities Margin 6% 6% 0% 8% 7% 21% Add / Less: Investment Income #DIV/0! % Interest Income 325 1,082-70% 2,571 4,573-44% Other Revenues 34,522 55,176-37% 118, ,403 3% Capital Gain -- (131) -100% 1,616 5,281-69% Financing Expenses (30,260) (45,652) -34% (91,589) (121,815) -25% Foreign Exchange Differences 5, % (24,302) 3, % 10,006 11,0-10% 6,991 7,326-5% Net Profit for the Period before Income Tax 85,131 84,050 1% 332, ,089 35% EBT Margin 7% 7% -2% 8% 7% 20% Add / Less: Current Income Tax (13,728) (10,472) 31% (41,475) (29,607) 40% Deferred Tax % 705 2,619-73% Income Tax for the Period (12,875) (10,352) 24% (40,770) (26,9) 51% Net Profit for the Period 72,256 73,698-2% 291, ,101 33% Net Profit Margin 6% 6% -5% 7% 6% 18% Attributable to: Equity Holders of the Parent 65,002 69,958-7% 275, ,794 33% Minority Interest 7,254 3,740 94% 16,354 12,307 33% Diluted Earnings per Share for the Period % % 5

6 Balance Sheet (EGP '000) 30-Sep Dec-12 Change Long Term Assets Fixed Assets (Net) 2,163,993 1,752,675 23% Projects in Progress 74, ,186-85% Investments - Available for Sale 102, ,707 0% Goodwill 696, ,836 0% Total Long Term Assets 3,038,181 3,053,403 0% Current Assets Inventory 1,811,479 1,590,236 14% Trades & Notes Receivable 1,030, ,783 12% Debtors and Other Debit Accounts 255, ,704 16% Cash on Hand & at Banks 365, ,724 59% Total Current Assets 3,463,466 2,962,447 17% Current Liabilities Provisions 25,848 26,116-1% Banks - Credit Accounts 1,728,949 1,600,703 8% Long Term Liabilities - Current Portion 95, ,630-20% Suppliers & Notes Payable 675, ,710 9% Dividends Payable 11,526 2, % Creditors & Other Credit Accounts 234, ,733 49% Total Current Liabilities 2,771,427 2,528,552 10% Working Capital 692, ,895 59% Total Investment 3,730,219 3,487,298 7% Financed as Follows: Shareholder's Equity Issued and Paid Capital 450, ,000 0% Reserves 1,457,285 1,446,182 1% Unrealized Profits from Available for Sale Investment % Retained Earnings 665, ,192 14% Net Profit for the Period 275, ,762 1% Exchange Differences Arising on Translation of Foreign Currency 432, ,6 66% Treasury Stocks (14,597) (14,597) 0% Total Equity Attributable to Equity Holders of the Parent 3,266,721 3,000,876 9% Minority Interest 227, ,939 7% Total Equity 3,494,370 3,212,815 9% Long - Term Liabilities long Term loans 231, ,368-14% Housing and Development Bank Loan % Creditors - Purchase of Fixed Assets % Deferred Taxes Liabilities % Total Long Term Liabilities 235, ,483-14% Total Shareholder's Equity & Long Term Liabilities 3,730,219 3,487,298 7% 6

7 Statement of Cash Flows (EGP '000) Nine Months Ended 30 September Cash flows from Operating Activities: Change Net Profit for the Period before Income Tax 332, ,089 35% Adjustments to Reconcile Net Profit to Net Cash Provided by Operating Activities Fixed Assets Depreciation 212, ,857 25% Financing Expenses 91, ,815-25% Gain of Investments (96) (400) -76% Capital Gain (1,616) (5,281) -69% Operating Profits before Changes in Working Capital 634, ,079 19% Change in Working Capital (Increase) in Inventory (221,243) 10, % Decrease (Increase) in Trades & Notes Receivable and other Debit Accounts (149,105) (152,874) -2% Decrease (Increase) in Suppliers & Notes Payable and other Credit Accounts 131,136 16, % Cash Flows Provided by Operating Activities 395, ,3-3% Paid Financing Expenses (93,007) (121,0) -24% Paid Income Tax (30,385) (25,009) 21% Net Cash Flows Provided by Operating Activities 272, ,499 5% Cash Flows from Investing Activities Payments for Purchase of Fixed Assets and Projects in Progress (30,001) (91,156) -67% Proceeds from Sale of Fixed Assets 1,830 4,256-57% Net Cash Flows (used in) Investing Activities (28,172) (86,900) -68% Cash Flows from Financing Activities: Proceeds (Payment) from Banks-Credit Accounts 128, ,890-1% Dividends Paid (181,932) (175,507) 4% (Payment) Proceeds in Long Term Liabilities (60,716) (140,527) -57% Net Cash Flows (used in) Provided by Financing Activities (114,405) (187,145) -39% Net Change in Cash and Cash Equivalents During the Period 129,721 (14,546) -992% Cash and cash equivalents at beginning of the period 230, ,669-13% Exchange Differences Arising on Translation of Financial Statements 5,470 (12,656) -143% Cash and Cash Equivalents at End of the Period 365, ,466 55% 7

8 About Oriental Weavers Carpet Company: Oriental Weavers is a global player in machine-woven rugs and carpets; the company is renowned for superior product design and quality, as well as technological innovation. Today, the company is the largest producer of machine-made woven rugs in the world; and through its MAC subsidiary, the largest producer of printed/tufted rugs. It is management s vision to build a state-of-the-art, internationally-competitive carpet and home textile company characterized by a sharp focus on its customers, and driven by marketing- and export-oriented strategies. ( Capital: Issued and paid-in capital: 450 MEGP Number of shares: 90 million shares Par value of 5 EGP per share Shareholders Structure: The Khamis Family 57% Institutions 37% Retail 6% Investor Relations Contacts: For further information, please contact: Farida Khamis Vice President Corporate Finance & Investor Relations Oriental Weavers Carpet Company Tel (Direct) : +2 (02) Fax : +2 (02) fkhamis@orientalweavers.com Website: Forward-Looking Statements Haitham M.A.Moneim Investor Relations Manager Corporate Finance & Investor Relations Oriental Weavers Carpet Company Tel (Direct) : +2 (02) Fax : +2 (02) hmoneim@orientalweavers.com Website: 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. # # # 8