Earnings Release: El Sewedy Electric Reports Consolidated Results for FY2011, ended December 31 st, 2011. April 2 nd, 2012 Cairo- Egypt. El Sewedy Electric posts an 18% increase in Revenues, flat EBITDA and Net Income decrease of 36% in FY 2011 versus FY 2010 despite difficult local and regional market conditions. El Sewedy Electric (SWDY.CA on the Egyptian stock exchange) the leading Wire & Cable and Integrated Energy Solution Provider in the Middle East and Africa, announced its consolidated financial results for the full year ended December 31 st, 2011. FY 2011 versus FY 2010 Revenues in FY 2011 increased by 18% to reach EGP15.2 billion versus EGP12.9 billion in FY 2010, whilst Gross Profit decreased by 4% to reach EGP1.91 billion in FY2011 versus EGP1.99 billion in FY2010. EBITDA in FY 2011 remains flat at EGP 1.38 billion versus EGP 1.37 billion in FY 2010. Net Profit after Minority reached EGP 509 million during FY2011 versus EGP 796 million during FY2010. Q4 2011 versus Q4 2010 Consolidated Revenues increased by 3% to reach EGP 3,799 million for Q4 2011, versus LE 3,690 million in Q4 2010. Gross Profit decreased by 26% to reach EGP 366 million during Q4 2011, versus EGP 494 million in Q4 2010. EBITDA decreased by 21% to reach EGP 207 million in Q4 2011, versus EGP 261 million in Q4 2010. Net Profit after Minority Interest dropped by 120% to reach EGP negative 19 million in Q4 2011 versus EGP 97 million for Q4 2010. 1
Consolidated Results Highlights EGP (000) s FY 2011 FY 2010 % Q4 2011 Q4 2010 % Revenue 15,169,204 12,902,020 18% 3,799,450 3,690,470 3% Gross Profit 1,911,691 1,987,830 4% 366,387 494,004 26% Gross Profit Margin 13% 15% 10% 13% EBITDA 1,384,828 1,366,317 1% 207,324 261,327 21% EBITDA Margin 9% 11% 5% 7% Net Income After Minority 509,119 795,529 36% 19,200 97,469 120% Net Income After Minority Margin 3% 5% 1% 3% FY 2011 versus FY 2010 Revenues in FY 2011 increased by 18% to reach EGP 15.2 billion versus EGP 12.9 billion in FY 2010. The Wire and Cable segment achieved revenues of EGP 11.3 billion in FY 2011, 15% higher than FY2010. Turnkey Revenues in FY2011 were 49% higher than FY2010 reaching EGP 2.54 billion. Meters and Transformers revenues YoY were 3% and 17% higher respectively, whilst Electrical Products revenues were 41% lower YoY. Gross Profit declined by 4% to reach EGP 1.91 billion in FY2011 versus EGP 1.99 billion in FY2010. The Gross Profit in the Wire and Cable segment was 19% lower in FY2011 versus FY2010, (EGP 1.0 billion versus EGP 1.3 billion). Turnkey Gross Profit increased 38% in FY2011 to reach a Gross Profit of EGP 569 million versus EGP 413 million in FY2010. The Meters division achieved a 4% increase in gross profit in FY2011 versus FY2010 reaching EGP 140 million. The transformers division increased 26% in FY2011 to reach EGP 97 million. Electrical products gross profit reached EGP 102 million in FY2011, 14% lower than FY2010. EBITDA in FY 2011 remains flat at EGP 1.38 billion versus EGP 1.37 billion in FY 2010. SG&A/Sales improved to 5.9% in FY 2011 versus 6.6% in FY 2010 (EGP 901 million versus EGP 851 million in FY 2010.) Net Income after Minority reached EGP 509 million during FY2011 versus EGP 796 million during FY2010. The decline in the Net Income during FY2011 versus FY2010 was mainly due to the Net Interest expense increasing from EGP 163 million in FY2010 to reach EGP 310 million in FY2011, an increase of EGP 147 million. The substantial increase in interest expense in FY 2011 was due to a decision taken during Q2 2011 to convert a portion of US$ debt to Egyptian pound borrowings. The interest rate differential between the US$ and the EGP was the main reason for the increase in interest expense in addition to an increase in debt in several of the international subsidiaries. During FY 2011, the Company also realized foreign exchange losses of 2
EGP 111 million versus a loss of EGP 13 million in FY2010. The foreign exchange losses stem mainly from the depreciation of the EGP against both the US$ and the Euro, in addition to the depreciation of the Sudanese Pound. During FY 2011 the effective Income Tax increased to 15.3% versus 10% in FY 2010 mainly as a result of one of the Egyptian subsidiaries starting to pay taxes from the beginning of 2011 and the increase of corporate tax rate from 20% to 25% Q4 2011 versus Q4 2010 On the top line the fourth quarter managed to post an increase in overall revenues of 3%, however on the gross profit level there was a 26% decline in gross profit. It was a challenging quarter overall, however the Wire and Cables segment was able to achieve a 17% increase in revenues, whilst gross profit declined 12% on the back of lower gross profit margin. Turnkey results were lower q-o-q in both revenues and gross profit (-10% and -43% respectively) as a result of a drop in booked revenues from projects during the quarter in addition to a drop in gross profit margin. Transformers revenue and gross profit were both lower during Q4 2011 versus Q4 2010 (-64% and -76% respectively.). Whilst in the Meters, revenues during Q4 2011 were 2% lower YoY, whilst gross profit declined 14% to reach EGP 40 million. EBITDA during Q4 2011 was 21% lower YoY to reach EGP 207 million. Net Loss After Minority reached EGP 19.2 million in Q4 2011 versus a profit of 97.5 million in Q4 2010. The main reason for the Net loss in Q4 2011 was higher interest expense (EGP89 million in Q4 2011 versus EGP 56 million in Q42010) and an increase in foreign exchange loss (EGP -33 million in Q4 2011 versus EGP -17 million in Q4 2010.) Commenting on the 2011 results, Ahmed El Sewedy C.E.O. of EL Sewedy Electric stated: I believe that despite all the challenges that we encountered during 2011, the operational performance of the group was solid. A significant number of markets in which we operate in either as manufacturers or exporters were impacted during 2011, yet we were still able to achieve positive results during the year. Our Egyptian operations saw a drop in local sales which was to be expected given the revolution which occurred in the first quarter of 2011 followed by a period of uncertainty with an interim government during which a number of projects were put on hold and new government projects were reduced significantly. On the export side, during 2011 our Libyan exports were suspended overnight, yet we were still able to maintain similar export quantities to 2010 levels through a growth in our exports to the GCC and Europe with a slight trade off in margins. As for our operations in Syria, whilst the factories are still operational we have stopped our sales to the government on the back of the currency devaluation and are focusing on exports and local sales on a cash basis. Our other cables 3
operations most notably Qatar, Algeria and Ethiopia witnessed strong growth during 2011 versus 2010. As for the other segments, the turnkey performed well this year and most notably we were able to increase revenues significantly from 2010 levels, around 50% whilst maintaining the gross profit margin. We continue to focus on turnkey projects in Africa, offering the complete solution to our customers, as well as the GCC, and Mena region. We also saw an increase in business this year in both our transformers and meters business. As for 2012, I remain less concerned on the future of our cables business in the GCC and Europe. As for Egypt, and Libya, both these markets are extremely important core markets for us, yet for the short term it remains unclear how quickly the recovery in these markets will begin to materialize. We believe that we are well positioned to greatly benefit from any pickup in demand either in our core or new markets. During 2012 we will continue to focus on further streamlining the operations through further cost reductions and further improvement of the cash cycle. During the fourth quarter the measures that we took resulted in a reduction of debt from EGP 5.4 billion on September 30 th, 2011 to EGP 4.3 billion on December 31 st, 2011 and we expect a further reduction in net debt during 2012. Summary of Revenues by Segment LE (000) s FY 2011 FY 2010 % Q4 2011 Q4 2010 % Wire & Cables 11,306,128 9,802,879 15% 2,852,030 2,431,686 17% Turn Key Projects 2,524,617 1,690,100 49% 650,470 726,674 10% Meters 630,302 612,518 3% 194,409 198,714 2% Transformers 482,194 412,268 17% 56,387 154,915 64% Other electrical products 225,964 384,255 41% 46,153 178,481 74% Total 15,169,204 12,902,020 18% 3,799,450 3,690,470 3% 4
FY 2011 Revenue By Segment FY 2010 Revenue by Segment 4% 3% 2% Wire and cables 5% 3% 3% Wire and cables 16% Turnkey 13% Turnkey Meters Meters 75% Transformers 76% Transformers Electrical products Electrical products Summary of Gross Profit by Segment LE (000) s FY 2011 FY 2010 % Q4 2011 Q4 2010 % Wire & Cables 1,003,554 1,245,260 19% 218,168 248,807 12% Turn Key Projects 569,038 412,942 38% 85,222 149,106 43% Meters 139,987 134,302 4% 40,106 46,507 14% Transformers 96,767 76,737 26% 6,514 27,572 76% Other electrical products 102,345 118,589 14% 16,376 22,012 26% Total 1,911,691 1,987,830 4% 366,387 494,004 26% FY 2011 Gross Profit by Segment FY 2010 Gross Profit by Segment 5% 6% 7% Wire and cables Turnkey 4% 7% 6% Wire and cables Turnkey 52% Meters 21% Meters 29% Transformers 63% Transformers Electrical products Electrical products 5
Wires & Cables Segment Wires & Cables segment revenues increased by 15% to reach EGP 11,306 million in 2011 versus EGP 9,802million in 2010. Gross profit in FY2011 decreased 19% to reach EGP1.0 billion versus EGP 1.2 billion in FY2010. In terms of volumes, the segment sold 159,078 tons of cables in 2011 versus 150,964 tons in FY2010, an increase of 5%. The main growth market in volumes during FY2011 versus FY2010 was from Qatar, KSA and Algeria, whilst Egypt saw a 10% decline in volumes. Gross profit per ton decreased 11% in FY2011 to reach EGP 5,271 versus EGP 5,916 per ton in FY2010. Revenues in Q4 2011 were 17% higher on the back of increased volumes YoY reaching EGP 2.9 billion, however gross profit declined by 12% to reach EGP 218 million. As of December 31 st, 2011 our cables backlog reached 97,000 tons geographically diversified in the Gulf, Egypt, Europe, Africa and the Middle East. Wire & Cables Segment Financial Highlights Revenues EGP (000) s Gross Profit EGP (000) s Cables Sales Volumes (tons) Cables Gross profit per ton EGP Gross Profit Margin FY 2011 FY 2010 % Q4 2011 Q4 2010 % 11,306,128 9,802,879 15% 2,852,030 2,431,686 17% 1,003,554 1,245,260-19% 218,168 248,807-12% 159,078 150,964 5% 41,899 33,660 24% 5,271 5,916-11% 5,078 4,306 18% 8.9% 12.7% 7.6% 10.2% Turnkey Projects The Turnkey and Contracting business had a strong performance during FY 2011 with revenues increasing 49% and gross profit increasing 38% versus FY2010. Gross Profit Margin remained relatively flat in FY 2011 at 23% versus 24% in FY 2010. During the fourth quarter of 2011 both revenues and gross profit declined as a result of a drop in booked revenues, whilst gross profit margin declined from 21% in Q4 2010 to 13% in Q4 2011. Backlog as of December 31 st, 2011 stands at EGP 4.7 billion, including EGP 2 billion of high voltage cables. The backlog number includes projects in Egypt, GCC, Middle East and Africa for power generation, distribution and transmission lines. 6
Meters Segment Revenues from the meters segment reached EGP 630 million in 2011 versus EGP 613 million in 2010. Gross profit reached EGP 140 Million in 2011, 4% higher than 2010. Gross profit margin improved to 22.2% in 2011 versus 21.9% in FY2010. Backlog as at December 31 st 2011 reached Euros 15.2 million. Meters Segment Financial Highlights Revenues EGP (000) s Gross Profit EGP (000) s Sales Volumes (meters) Gross profit per meter EGP Gross Profit Margin FY 2011 FY 2010 % Q4 2011 Q4 2010 % 630,302 612,518 3% 194,409 198,714-2% 139,987 134,302 4% 40,106 46,507-14% 2,853,608 2,853,060 0% 805,835 911,809-12% 49 47 4% 50 51-2% 22.2% 21.9% 20.6% 23.4% Transformers Segment Revenues from the transformers segment increased 17% from FY 2010 to FY2011 to reach EGP 482 million whilst gross profit increased 26%. As at December 31 st 2011 our backlog in the transformers segment stood at USD 56 million (not including an additional US$ 22 million for Syria which was suspended.) Transformers Segment Financial Highlights Revenues EGP (000) s Gross Profit EGP (000) s Sales Volumes (MVA) Gross profit per MVA EGP Gross Profit Margin FY 2011 FY 2010 % Q4 2011 Q4 2010 % 482,194 412,268 17% 56,387 154,915-64% 96,767 76,737 26% 6,514 27,572-76% 5,443 3,815 43% 1,152 1,403-18% 17,757 20,128-12% 5,654 19,636-71% 20.1% 18.6% 11.6% 17.8% 7
Other Electrical Products Revenues from the Electrical products segment decreased by 41% in FY 2011 versus FY 2010, whilst gross profit declined by 14% to reach EGP 102 million. Net Debt Net debt dropped by 19% on December 31 st, 2011 to reach 4,340 million versus 5,361 as of September 30 th, 2011 on the back of a reduction in the working capital from September 30 th 2011 figures. Forward-looking Statements This document may contain certain forward-looking statements relating to the company s business. These may be identified in part through the use of forward-looking terminology such as will, planned, expected and forecast. Any such statements reflect the current views 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, decisions or achievements of the company to be materially different from any future results that may be expressed or implied by such forward-looking statements. Investor Relations contact Information: Mr. TarekYehia, Investor Relations Officer Email :tarek.yehia@elsewedy.com Address : Plot 27, 1 st district, 5 th settlement, New Cairo Tel. +202 27599700 701 Fax +202 27599731 8
El Sewedy Electric Consolidated Financial statements Income statement 000's L.E Q4-10 Q4-11 2010 2011 Sales Wires & Cables 2,457,350 2,852,030 9,828,544 11,306,128 Electrical Products 506,446 296,950 1,383,377 1,338,459 Turnkey Projects 726,674 650,470 1,690,100 2,524,617 Total Sales 3,690,470 3,799,450 12,902,020 15,169,204 COGS (3,196,466) (3,433,063) (10,914,190) (13,257,512) Gross Profit 494,004 366,387 1,987,830 1,911,691 Gross Profit Margin 13.4% 9.6% 15.4% 12.6% SG & A (221,406) (260,641) (851,159) (900,599) Other Operating Income 22,812 28,407 139,444 85,711 Other Operating Expenses (110,054) (14,896) (188,883) (42,642) EBITDA 261,327 207,324 1,366,317 1,384,828 EBITDA Margin 7.1% 5.5% 10.6% 9.1% Depreciation (75,972) (88,068) (279,086) (330,666) Fx Gain (17,463) (32,984) (12,717) (110,733) Provisions (1,295) (8,156) (3,257) 731 EBIT 166,597 78,116 1,071,257 944,160 Interest Expense (74,491) (112,284) (220,798) (371,671) Interest Income 17,869 23,248 57,320 61,193 EBT 109,975 (10,920) 907,779 633,682 Tax (20,132) (11,982) (91,142) (97,134) Net Income 89,843 (22,902) 816,637 536,548 Minority Interest 7,626 3,702 (21,108) (27,429) Net Income After Minority Interest 97,469 (19,200) 795,529 509,119 9
El Sewedy Electric Consolidated Financial statements Balance Sheet 000's L.E 31-12-2010 30-09-2011 31-12-11 Assets Fixed Assets 3,814,071 3,780,221 3,735,736 Investments 25,753 29,059 27,478 Other long term Assets & Good will 437,335 452,539 468,231 Total Long term Assets 4,277,159 4,261,819 4,231,445 Inventories 3,699,614 4,278,559 3,553,647 Receivables 3,549,771 3,790,575 3,781,384 Other Debt balance 565,198 763,348 609,350 Due from Related Parties 283,312 274,972 155,894 Cash & Cash Equivalents 1,569,112 1,342,473 1,643,904 Total Current Assets 9,667,007 10,449,927 9,744,178 Bank Overdraft & Short Term loans 4,765,411 5,893,858 5,158,252 Accounts Payable 1,165,755 863,820 1,123,732 Other Credit balance 1,150,350 1,028,780 806,077 Due to Affiliates 156,313 213,812 240,461 Provisions 71,806 64,660 49,138 Total Current Liabilities 7,309,634 8,064,930 7,377,659 Working Capital 2,357,373 2,384,996 2,366,519 Total Investments 6,634,532 6,646,815 6,597,964 Issued and Paid Capital 1,718,600 2,234,180 2,234,180 Retained Earnings 1,857,580 1,797,776 1,798,990 Net Profit of the year 795,529 528,319 509,119 Others 969,603 1,073,392 1,032,197 Total Equity 5,341,312 5,633,667 5,574,486 Long Term Loans 1,073,036 809,882 825,370 Other long term Liabilities 220,184 203,266 198,108 Total long term Liabilities 1,293,220 1,013,148 1,023,478 Total long term Liabilities & Equity 6,634,532 6,646,815 6,597,964 10