1Q 2024 Earnings Release
Cairo 28th May 2024
Robust 1Q24 Results Driven by Price, Volume and Favorable Raw Material Cost.
ORWE's transformation continues to yield favorable results reporting outstanding 1Q24 results, achieving all-time high revenues with a remarkable 22% y-o-y increase. Gross Profit margin reached all time-high of 19.1%, and an EBITDA Margin of 20.5%. Additionally, net attributable income reached EGP 427 million increased by 4.1% y-o-y.
Key Highlights of 1Q 2024
EGP 5,038 m | EGP 961 m |
in Revenues | in Gross Profit |
▲22% y-o-y | ▲71% y-o-y |
19% GP margin |
EGP 1,035 m
EBITDA (Ex-Rebates)▲67% y-o-y 21% margin
EGP 558 m
in Net Income ▲38% y-o-y
Att. Net income ▲4%
1Q 2024 Highlights
Revenue grew by 22% y-o-y (5% q-o-q) in 1Q24 reaching EGP 5,038 million. International sales, constitute 58% of total revenues, increased by 12% y-o-y (4% q-o-q). Meanwhile, Egypt revenues increased by 38% y-o-y (+27% q-o-q). This robust top-line growth was primarily driven by higher average selling prices, volume recovery, and the impact of EGP devaluation.
Gross profit reached EGP 961 million, reflecting a 71% y-o-y increase (+32% q-o-q), with a gross profit margin of 19.1% compared to 13.6% in 1Q23. This marks the highest gross profit margin achieved to date, though we anticipate this figure will normalize throughout 2024. The improvement in gross profit margin is primarily attributed to a rise in average selling prices, which outpaced the increase in raw material costs in EGP terms. The COGS to sales ratio stood at 81% in 1Q24, down from 86% in the same period the previous year, supported by lower-priced inventory, production efficiency and streamlining operations.
EBITDA (ex-Rebates) recorded EGP 1,035 million in 1Q24, representing an increase of 67% y-o-y, EBITDA margin expanded to 20.5%, up from 14.9% in 1Q23. This improvement was driven by enhanced gross profitability, coupled with a reduction in the SG&A/Sales ratio, which reached 4.6% in 1Q24, compared to 4.8% in 1Q23, influenced by the higher proportion of EGP component in the SG&A figure.
Net Income increased by 38% reaching EGP 558 million compared to EGP 404 million in 1Q23. Attributable income recorded EGP 427 million in 1Q24, reflecting a 4.1% increase from EGP 411 million in the same period last year.
Dividends: Leveraging ORWE's consistent performance and healthy cash flow, the company distributed LE1.25 dividends to shareholders in April 2024, highlighting the company's ongoing commitment to delivering superior Total Shareholders Return (TSR).
Summary Consolidated Income Statement (EGP m)
EGP m | 1Q2024 | 1Q2023 | Change |
Revenue | 5,038 | 4,142 | ▲22% |
Gross Profit | 961 | 562 | ▲71% |
% Margin | 19.1% | 13.6% | |
EBITDA | 1,035 | 619 | ▲67% |
% Margin | 20.5% | 14.9% | |
Net Income | 558 | 404 | ▲38% |
% Margin | 11.1% | 9.7% |
1Q 2024 Earnings Release
Cairo 28th May 2024
Results in a Nutshell
ORWE, the world's leading carpet producer by volume, has reported its 1Q24 results today, recording revenues of EGP 5,038 million, up 22% y-o-y. This revenue growth translated into impressive gross profit figures, which surged by 71% y-o-y to EGP 961 million in 1Q24, accompanied by margin enhancement to 19.1%, representing the highest margin achieved to date.
ORWE achieved robust growth in both the international and Egyptian market, capitalizing on its adaptable business model, diverse portfolio, and strong brand equity. In our international markets, the average selling price (ASP) increased by 13%, influenced by EGP devaluation on international revenues. On the domestic front, ASP increased by 20%, driven primarily by implemented price increases.
Volume increased by 6% y-o-y in 1Q24, primarily driven by a notable 15% surge in Egypt sales volume, reflecting the resilience of the domestic consumer market. However, international volumes remained stagnant, influenced by global logistical disruptions caused by the Red Sea region.
Total SG&A expenses for 1Q24 amounted to EGP 230 million, reflecting a 16% y-o-y increase, largely influenced by inflationary pressures. Despite this, the SG&A expenses as a percentage of total sales decreased to 4.6% from 4.8% in 1Q23. This reduction is primarily attributed to EGP-denominated expenses, in contrast to the 58% USD-based revenues.
Net interest income reached EGP 48 million in 1Q24, from an EGP 26 million Net interest expense in 1Q23. Interest income recorded EGP 185 million in 1Q24, up 138% versus 1Q23, surpassing the increase in net interest expense, demonstrating effective cash management strategies. In addition, OW recorded EGP 132 million investment income as a result of GDR translation gain, offsetting a portion of the FX losses reported.
Income tax recorded in 1Q24 were EGP 164 million compared to EGP 54 million in the same quarter of last year. It's important to note that the effective tax rate is distorted by dividends distributed from group entities, reaching 23%. However, we anticipate that this rate will normalize throughout the year.
OW's Net income reached EGP 558 million in 1Q24, marking a 38% y-o-y increase. However, excluding one-offs such as the China facility sale in 1Q23, net income experienced a significant 341% y-o-y surge compared to 1Q23. This demonstrates profitability stemming from pure operational performance.
1Q 2024 Earnings Release | Page 2
1Q 2024 Earnings Release
Cairo 28th May 2024
Revenue Contribution
by region 1Q24
Revenue Breakdown by Segment 1Q24
Revenue Breakdown by Volume 1Q24
I. International Markets
ORWE's global reach extends to exports in up to 130 countries worldwide. In the first quarter of 2024, international sales amounted to EGP 2,933 million, indicating a 12% y-o-y increase (+4% q-o-q). The macroeconomic landscape continues to play a crucial role in shaping global demand and consumer behavior, particularly through inflation rates, interest rates, and housing market dynamics. One of the factors that dragged 1Q results is the disruptions stemming from the Red Sea situation, without these disruptions, we would have seen even better results.
1Q24 Revenue Growth by Region
In 1Q24, America experienced a 25% y-o-y increase in revenues, driven by EGP devaluation. In addition, retailers are actively rebuilding their inventory levels. In 1Q24, European sales grew by 11% y-o-y, driven by local currency devaluation compared to 1Q23. In the GCC region, sales decreased by 31%, primarily as a result of delivery delay due to the red sea situation. Additionally, overstocking in the Saudi market and the reintroduction of Turkish carpets further contributed to the decline.
1Q 2024 Earnings Release | Page 3
1Q 2024 Earnings Release
Cairo 28th May 2024
Egypt Revenue Breakdown by
Distribution Channel 1Q24
Egypt Revenue Breakdown by
Segment 1Q24
II. Egypt:
In 1Q24, Egypt's revenues surged by 38% to EGP 2,104 million, a notable increase from EGP 1,530 million in the same quarter of the previous year, (+7% q-o-q). This growth was predominantly driven by an increase in average selling prices, with volumes rising by 15%. During the first quarter, Egypt performed well across all segments, particularly the tufted segment, which saw an impressive 63% y-o-y increase in revenues, fueled by a 43% increase in volumes. Moreover, the woven products category experienced a 32% y-o-y sales boost, while the non-woven segment recorded a 55% y-o-y surge, both supported by volume and price increases.
A. Direct to Consumer Segment (DTC):
DTC segment, which is sales through our showroom network, accounts for 53% of Egypt's total sales, demonstrated an impressive 29% y-o-y increase. This surge was attributed to a combination of price adjustments, and volume recovery.
B. Sales & Distribution Segment (S&D):
Meanwhile, S&D revenues, which represent OW wholesale channel, accounts for 44% of Egypt sales in the first quarter of 2024, registered an impressive 49% y-o-y growth. This surge was bolstered by heightened wholesale demand as they anticipated further price increases.
C. E-commerce in Egypt
While e-commerce represents a minor percentage of the company's topline, it is experiencing notable growth through sales on the OW online portal and other digital platforms. In 1Q24, e-commerce sales reached LE 4.6 million, marking a 31% increase from LE 3.5 million in the same period last year.
III. Hospitality Segment:
Oriental Weavers' hospitality segment serves several prominent global names while maintaining a strong local presence. In the local segment, sales increased 50% y-o-y in 1Q24, with 54 contracted projects, including hotels, mosques, and universities. One of the most iconic projects of the quarter is the "Sayeda Zainab Mosque" located in the heart of Cairo. In the international segment, sales rose by 14% y-o-y in 1Q24, with 98 contracted projects. Key international projects include Intercontinental El Madina, Hilton UK, and Ritz Carlton Abu Dhabi.
Sayeda Zainab Mosque
1Q 2024 Earnings Release | Page 4
1Q 2024 Earnings Release
Cairo 28th May 2024
Debt Breakdown | Balance Sheet: |
The Company recorded a net debt of EGP 383 million as of 31 March 2024 | |
compared to a net debt of EGP 121 million as of 31 December 2023. OW booked | |
inventories of EGP 9,162 million as of 31 March 2024, up from EGP 6,927 million | |
as of 31 December 2023, impacted by the EGP devaluation. Meanwhile, trade and | |
notes receivable increased to EGP 4,365 million as of 31 March 2024, from EGP | |
3,163 million as at 31 March 2022. This resulted in OW recording FCFE of EGP | |
1.1bn. | |
Recent Developments: | |
Green Corner: | |
OW has made a strategic decision to invest in International Renewable Energy | |
Certificates (IRECs). This investment signifies our unwavering support for | |
renewable energy projects and underscores our contribution to the global | |
imperative of fostering clean energy generation. By committing to 12,200 MWh | |
of IRECs, we anticipate a reduction of 6000 tons of CO2 emissions, a tangible step | |
towards our overarching sustainability goals and our collective endeavor to build | |
a greener, more sustainable future. |
1Q 2024 Earnings Release | Page 5
1Q 2024 Earnings Release
Cairo 28th May 2024
Consolidated Income Statement (EGP million)
Net Sales
Less:
COGS
Gross Profit
Gross Profit Margin*
Less:
Selling & Distribution Expenses
General & Administrative Expenses
Sum
Net Income from Operation Activities Operation Activities Margin
Add / Less:
Provisions & Impairment Provision of ECL Investment Income Interest Income Treasury Income Other Revenues Capital Gain Financing Expenses Foreign Exchange Differences
Reverse Impairment of Assets held for Sale Gain from asset held for Sale
Returns on financial assets at cost Income from financial investment (GDR) Sum
Net Profit for the Period before Income Tax
EBT Margin
Add / Less:
Current Income Tax
Deferred Tax
Income Tax for the Period
Net Profit for the Period
Net Profit Margin
Equity Holders of the Parent
Minority Interest
1Q 2024 | 1Q 2023 | Change | |||
5,038 | 4,142 | 22% | 17,659 | 13,256 | 33% |
4,077 | 3,581 | 14% | 15,109 | 12,000 | 26% |
961 | 562 | 71% | 2,550 | 1,256 | 103% |
19.1% | 13.6% | 14.4% | 9.5% | ||
67 | 47 | 42% | 209 | 172 | 21% |
163 | 150 | 8% | 513 | 437 | 17% |
230 | 198 | 722 | 609 | ||
731 | 364 | 101% | 1,828 | 647 | 182% |
14.5% | 8.9% | 10.3% | 4.9% | ||
-30 | -11.5 | -98.5 | -118.4 | ||
-9.5 | 10.8 | -68.3 | -49 | ||
- | 0.1 | 51.7 | 28.4 | ||
34.7 | 17.9 | 101.7 | 47.9 | ||
133.8 | 59.8 | 240.9 | 150.6 | ||
3.3 | 3.2 | 329 | 800 | ||
4.2 | 9.1 | 24.4 | 12.4 | ||
-137 | -104 | -459.4 | -304 | ||
-157 | -169 | -166.2 | 72.6 | ||
- | 252.36 | 252.4 | |||
- | 24.6 | 34.8 | |||
16.7 | - | 15.01 | |||
131 | - | ||||
-9.9 | 93 | -111% | 257.6 | 495.4 | -48% |
721 | 457 | 58% | 2,085 | 1,142.7 | 82% |
14.3% | 11.04% | 11.81% | 8.62% | ||
-169 | -55 | 207% | -234.4 | -200.1 | 17% |
4.9 | 1.4 | 40.8 | 1.6 | ||
-164 | -53.6 | 206% | -193.6 | -198.5 | -2% |
558 | 404 | -38% | 1,892 | 944 | 100% |
11.1% | 9.7% | 10.7% | 7.1% | ||
427 | 411 | 4.1% | 1,740 | 843 | 106% |
130 | -7 | 151.8 | 101.3 | 50% |
1Q 2024 Earnings Release | Page 6
1Q 2024 Earnings Release
Cairo 28th May 2024
Consolidated Balance Sheet (EGP million)
March-2024 | FY 2023 | |
Long Term Assets | ||
Fixed Assets (Net) | 8,618 | 6,374 |
Projects in Progress | 457 | 269 |
Investments - at Fair Value | 973 | 649 |
Right of use assets | 503 | 455 |
Total Long-Term Assets | 10,552 | 7,748 |
Current Assets | ||
Inventory | 9,162 | 6,927 |
Trades & Notes Receivable | 4,365 | 3,613 |
Debtors & Other Debit Accounts | 897 | 715 |
Treasury Bills | 2,788 | 2,127 |
Financial Assets | 512 | 629 |
Cash on Hand & at Banks | 2,771 | 1,800 |
Total Current Assets | 20,496 | 15,360 |
Current Liabilities | ||
Provisions | 279 | 226 |
Banks - Credit Accounts | 5,791 | 4,191 |
Long Term Liabilities - Current Portion | 364 | 240 |
Lease Contracts Liabilities- Current Portion | 132 | 115 |
Suppliers & Notes Payable | 2,642 | 2,162 |
Dividends Payable | 161 | 57 |
Creditors & Other Credit Accounts | 1,348 | 975 |
Tax Payable | 234 | 179 |
Total Current Liabilities | 10,952 | 8,143 |
Working Capital | 9,544 | 7,218 |
Total Investment | 20,095 | 14,965 |
Shareholder's Equity | ||
Issued & Paid Capital | 665 | 665 |
Reserves | 2,009 | 1,795 |
Retained Earnings | 2,187 | 705 |
Net Profit for the Period | 427 | 1,740 |
Exchange Differences Arising on Translation of Foreign Currency | 11,999 | 7,905 |
Total Equity Attributable to Equity Holders of the Parent | 17,288 | 12,809 |
Non-controlling Interest | 1,949 | 1,362 |
Total Equity | 19,237 | 14,171 |
Long - Term Liabilities | ||
Long Term Loans | 300 | 246 |
Deferred Taxes Liabilities | 123 | 149 |
Lease contract obligations | 436 | 399 |
Total Long-Term Liabilities | 848 | 794 |
Total Shareholder's Equity & Long-Term Liabilities | 20,095 | 14,965 |
1Q 2024 Earnings Release | Page 7
1Q 2024 Earnings Release
Cairo 28th May 2024
Statement of Cash Flows (EGP million)
March 24 | March 23 | |
Cash flows from Operating Activities: | ||
Net Profit for the Period before Income Tax | 722 | 457 |
Adjustments to Reconcile Net Profit to | ||
Net Cash Provided by Operating Activities | ||
Fixed Assets Depreciation | 271 | 225 |
Depreciation of right of use assets | 33 | 30 |
Provisions other than Deprecation | 30 | 12 |
Provision for Expected Credit Loss (IFRS 9) | 9 | -11 |
Interest Income | -35 | -18 |
Reverse provisions | -252 | |
Gain from Liquidation of available for sale assets | -25 | |
Financing Expenses | 137 | 104 |
Treasury bills return | -134 | -60 |
Investment Income | -0.1 | |
Capital Gain | -4 | -9 |
Operating Profits before Changes in Working Capital | 1,029 | 453 |
Change in Working Capital | ||
(Increase) in Inventory | 175 | 344 |
Decrease (Increase) in Trades & Notes Receivable and other Debit Accounts | 989 | -101 |
Decrease (Increase) in Suppliers & Notes Payable and other Credit Accounts | -802 | 459 |
Cash Flows Provided by Operating Activities | 1,392 | 1,155 |
Interest Income | 35 | 18 |
Paid Financing Expenses | -137 | -104 |
Income Tax Expense | -113 | -63 |
Cash Flows Provided by Operating Activities | 1,176 | 1,006 |
Cash Flows from Investing Activities | ||
Payments for Purchase of Fixed Assets and Projects in Progress | -170 | -98 |
Proceeds from Investments | 0.1 | |
Proceeds from Sale of fixed assets | 6 | 19 |
Payment for purchase of treasury bills | -1,632 | -601 |
Payment for financial assets | 410 | |
Proceeds from selling assets available for sale | 296 | |
Proceeds from Sale of Treasury Bills | 1,778 | 609 |
Net Cash Flows (used in) Investing Activities | 392 | 225 |
Cash Flows from Financing Activities | ||
Proceeds (Payment) from Banks - Credit Accounts | 170 | -1,130 |
Dividends Paid | -12 | -56 |
Translation Differences of Financial Statements | -533 | 7 |
Paid for Lease obligations | -28 | -43 |
(Payment) Proceeds in Long Term Liabilities | 22 | -26 |
Net Cash Flows (used in) Provided by Financing Activities | -381 | -1,28 |
Net Change in Cash & Cash Equivalents During the Period | 1,187 | -17 |
Cash & cash equivalents at beginning of the period | 2,273 | 2,195 |
Translation Differences Related to Cash & Cash Equivalents | 458 | 152 |
Cash & Cash Equivalents at End of the Period | 3,918 | 2,330 |
1Q 2024 Earnings Release | Page 8
1Q 2024 Earnings Release
Cairo 28th May 2024
Ownership structure:
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 one of the largest producers of machine-made woven rugs in the world. 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.
(www.orientalweavers.com)
FORWARD-LOOKING STATEMENTS
Certain information contained in this document consists of forward-looking statements reflecting the current view of the Company with respect to future events, and is therefore 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 as well as 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.
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1Q 2024 Earnings Release | Page 9