Lecico Egypt Sae · EGX:LCSW
Lecico Egypt Sae — H1 2018 Earnings Presentation
25 slides from Lecico Egypt Sae's earnings presentation, August 2018
Slide 1: 1H 2018 Results Presentation
1H 2018 Results Presentation) West 2018
Slide 2: Corporate Summary
Corporate Summary
Slide 3: Introduction: An Egyptian exporter
Introduction: An Egyptian exporter Lecico Egypt S.A.E. was founded in 1959 and has been majority owned by the Gargour family since 1969 The company has a global competitive advantage making European Kfarchima quality sanitary ware at Egyptian costs Established 1959 c45% of Lecico’s sanitary wa
Slide 4: A major sanitary ware exporter
A major sanitary ware exporter
Slide 5: An export led sanitary ware business
An export led sanitary ware business Large and independent Experience and quality OEM pedigree and history Significant cost advantage •The largest sanware factory in •Over 30 years of exports to Europe •Over 20 years of OEM experience • USD 11.50/piece cost (60% of peers) Europe, Middle East and Afr
Slide 6: Significant cost advantage
Significant cost advantage International cost advantage Lecico produces sanitary ware at an all-in average cost of US$11.50/piece (FY 2017) – In Egypt (without costs of subsidiaries/consolidation) manufacturing cost averages US$8.40/piece of sanitary ware (FY 2017) – Our information suggests other l
Slide 7: Long-term commercial strategy
Long-term commercial strategy Expand in Developed Markets Increase own brand and white label UK, Germany, France, South Africa Expected growth for OEM customers in Europe is an additional volume of 900K+ pieces by 2020 Some new agreements have been established with OEM customers at USA to pr
Slide 8: A major sanitary ware exporter to Europe
A major sanitary ware exporter to Europe Growth in group’s exports Lecico’s total export volumes (sanitary ware) Egypt’s leading sanitary ware exporter • Lecico exports over 70% of its sanitary ware sales value and over 60% of volume vs. 20% for local peers (FY17) • Lecico sells to over 50 countries
Slide 9: Challenges since 2014
Challenges since 2014
Slide 10: Sharp cost inflation began in 2014
Sharp cost inflation began in 2014… Since July 2014, the government has pushed through a series of significant cost increases on energy which have continued on an annual basis. Item Increase since 2014 Impact Natural Gas 517% from an average of EGP Approximately 15% of costs 17.4/mbtu to EGP 107.4
Slide 11: Collapse in regional markets and over-capacity
..met collapse in regional markets and over-capacity Consumer demand in Egypt squeezed since 2H 14 – Consumer inflation squeezed spending on tiles and sanitary ware from 2H 2014 onwards with sales volumes in Egypt down every year since 2014 – Added competition particularly in tiles and sluggish ec
Slide 12: Lecico is cutting costs and unlocking capital
Lecico is cutting costs and unlocking capital In response to these challenges Lecico launched a number of programs to try and cut costs: – Over LE 20 million in cost savings in Lecico Egypt (raw material changes, overtime and expat savings, headcount reductions) – Over LE 20 million in cost saving
Slide 13: Currency floatation returned company to profitability
Currency floatation returned company to profitability LE floatation in 11/2016 led to a significant spike in sanitary ware margins and a return to profitability – Egyptian pound went from LE 8 to the dollar to LE 17.5. Effectively increasing export prices by 100% and leading to a spike in local pr
Slide 14: Financial overview
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Slide 15: Profit and loss
Profit and loss Net sales Cost of sales breakdown (1H 2017) EBIT* Net Profit * * = 1H 2018 EBIT and Net profit includes LE 76.7m in one-off income 15
Slide 16: Quarterly P&L Trends
Quarterly P&L Trends Net sales Gross profit EBIT* Net Profit* * = 2018 includes LE 25.7m in one-off operating profit in 1Q and LE 51.0m in 2Q. 16
Slide 17: P&L Breakdown by Quarter
P&L Breakdown by Quarter Lecico Group 2016 2017 2018 2018 2014 2015 2016 2017 Profit & Loss (LE Million) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY FY FY FY Sanitary Ware 166.3 197.1 194.1 276.5 336.9 359.2 396.7 404.4 393.4 411.1 746.6 718.2 834.0 1,497.3 Tiles 138.8 137.8 129.5 193.4 185.8 212.6 216.2 216.0
Slide 18: Key Segmental Analysis
Key Segmental Analysis Sanitary ware – sales volumes and revenue Sanitary ware – selling price and cost per piece Sanitary ware – gross profit and margin Tiles – sales volumes and revenues Tiles – selling price and cost per sqm Tiles – gross profit and margin 18
Slide 19: Quarterly Key Segmental Trends
Quarterly Key Segmental Trends Sanitary ware sales volumes Sanitary ware average price and cost Tiles sales volumes Tile average price and cost 19
Slide 20: All Segmental Breakdowns by Quarter
All Segmental Breakdowns by Quarter Lecico Group 2016 2017 2018 2018 2014 2015 2016 2017 Sanitary Ware Analysis Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY FY FY FY Egypt (000s pcs) 534 451 553 645 491 418 496 419 438 485 2,066 1,995 2,183 1,825 Lebanon (000s pcs) 37 37 37 41 30 38 41 37 20 27 150 109 151 146
Slide 21: Balance Sheet by Quarter
Balance Sheet by Quarter Balance Sheet 2014 2015 2016 2017 2017 2017 2017 2018 2018 (LE m) YE YE YE 1Q 2Q 3Q 4Q 1Q 2Q Cash and short-term investments 245.7 168.0 377.4 354.3 365.1 297.8 261.3 368.3 284.1 Inventory 667.9 701.0 889.8 1013.2 1092.3 1086.2 1133.8 1183.1 1138.5 Receivables 449.6 496.7 69
Slide 22: Working Capital and Returns
Working Capital and Returns Working capital Returns and leverage Capital expenditures 2018f Maintenance Capex and tile diversification investment LE 110.0m 22
Slide 23: Share performance and data
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Slide 24: Shareholding structure and performance
Shareholding structure and performance Lecico bought and redistributed 10% of shares Lecico share price Lecico Acquired 10% of shares (8m shares) on 31/07/2017 and redistributed them on 09/07/2018 – Shares were acquired at LE 6.0 per share (a premium of 33% to market price at time of offer) – Inve
Slide 25: Thank you
Thank you For additional information, please contact: Taher G. Gargour Telephone: +203 518 0011 Fax: +203 518 0029 E-mail: tgargour@lecico.com Visit our website at: www.lecico.com Forward-looking statements: This presentation may contain certain “forward-looking statements”, relating to Lecico Egypt