Corporate Summary Introduction: An Egyptian exporter Lecico Egypt - PowerPoint PPT Presentation

Corporate Summary

Introduction: An Egyptian exporter  Lecico Egypt S.A.E. is one of the world’s largest sanitary ware producers and a large tiles producer  Lecico was founded in 1959 and has been majority owned by Kfarchima the Gargour family since 1969 Established 1959 Vitry Le Francois  The company has a global competitive advantage making Sanitary ware capacity: Established 1894 350,000 pcs 2007 European quality sanitary ware at Egyptian costs Fire Clay Sanitary capacity: Tiles capacity Kfarchima Beirut  The company is a significant exporter with c45 % of Lecico’s 90,000 pcs 2006 1.1 million m 2 2005 sanitary ware sales volume going into Europe  Lecico finished major capacity expansions in tile and sanitary ware in 2007 which boosted capacity to 21.4m sqm of tiles and Alexandria Borg El-Arab 6.7m pieces of sanitary ware and fire clay Khorshid Cairo  In Summer 2010, Lecico began brassware production with a 300,000 piece per annum capacity factory Borg El-Arab Khorshid  In Summer 2011, Lecico began production in its new tile factory Established 1997 in Borg El Arab. The factory is expected to reach 17m sqm Established 1975 Sanitary ware capacity capacity over the coming 4 years 2.0 million pcs 2005 Sanitary ware capacity 4.4 million pcs end 2007 2.5 million pcs 2005 1.8 million pcs (inc FC) end 2008 Tiles capacity Split of domestic and export 1 Split of sanitary ware and tiles 1 6.4 million m 2 mid – 2011 Tiles capacity 17.0 million m 2 mid – 2016 (est) 17.0 million m 2 2005 21.4 million m 2 mid - 2007 Brassware capacity 0.3 million pcs mid – 2010 * All production facilities are owned and controlled by Lecico Note: (1) FY 2011 3

Corporate Profile

Investment case Experience Regional leadership Growing exports Significant cost advantage • Sanitary ware market leader in • c 57% of sanitary ware is exported • USD 13.50/piece cost (40% of peers) • Brand with over 50 years of history Egypt and Lebanon • SW exports 6% CAGR (2000-11) • c USD 1.50/piece shipping to Europe • Multi-national management • Largest producer in the Middle East • 10%+ UK, France & Ireland mkt share • European quality product • Decades of OEM exports to Europe Aggressive expansion program Tile capacity more than doubled and sanitary ware capacity grew 49% since 2000 Strong historic growth record 15% Revenue CAGR (2000-2011) Export-led growth Supplier for key European 20% Net Profit CAGR (thru 2010) brands 5

Domestic market leadership Market leadership in Egypt Sanitary ware market (5.8 million pieces) 1 Tile market (80 million m 2 ) 2 • Leading sanitary • Competitive pricing to 16% 23% 25% Cleopatra support distributors’ Lecico ware market share Pharaos Aracemco 34% sanitary ware sales 5% Cleopatra Lecico 6% Gravena Al Amir 6% Pharaos Gemma 7% Ideal Stnd 19% 10% Others Duravit 9% 8% Other 17% 14% Note: (1) Management estimates for 2009 Note: (2) Management estimates for 2005 Market leadership in Lebanon Sanitary ware market (0.58 million pcs) 3 Tile market (8.5 million m 2 ) 3 • Leading sanitary • Number two market ware market share share in tile sales 24% 36% • Branded as • Presence maintained Lecico European quality Lecico to complement Imports sanitary ware sales Imports 76% 64% Note: (3) Management estimates for 2009 6

Growing exports Growth in group’s exports Lecico’s total export volumes (sanitary ware) Egypt’s leading sanitary ware exporter • Lecico exports c56% of its sales vs. 20% for local peers Pieces (000) Exports/total 4,000 80% 65% 60% 62% 58% • Lecico sells to over 50 countries (including OEM sales) 59% 58% 56% 3,000 60% 57% 51% 50% 46% 42% 2,000 40% • Approximately 30% of exports (20% of sanitary ware 1,000 20% sales) are for other brands 1,229 1,240 1,431 1,982 2,389 2,267 2,884 3,638 3,063 3,364 2,899 2,428 0 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Lecico represents over 50 % of Egypt’s sanitary ware Sanitary ware export volumes Percent of total volume • Sanitary ware export volumes grew at 6% CAGR (2001-2011) exports with the balance split among 9 manufacturers • 2010 and 2011 Volumes fell due to warehouse fire, Egyptian and Libyan revolutions and economic crisis in Europe Export focus on Europe Europe as percentages of total exports Growth of Lecico brand sanitary ware market share in UK 1000 11.3% 10.9% 12.0% Pieces (000) Europe/exports 8.0% 9.3% 7.4% 8.5% 79% 6.6% 10.0% 3,000 100% 800 6.7% 84% 76% 6.6% 82% 82% 81% 79% 80% 76% 76% 6.1% 80% 80% 8.0% 600 5.4% 2,000 4.8% 60% 6.0% 400 40% 4.0% 1,000 200 20% 2.0% 1,009 1,133 1,622 1,998 1,819 2,377 2,858 2,342 2,572 2,216 1,937 400 470 560 650 680 650 725 770 663 744 711 606 0 0% 0 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 European sales volumes Europe/total exports (%) Number of pieces sold (000 pcs) UK market share (%) • UK estimated c9% market share in Lecico-branded sales • Average of over 80% of exports are to Western Europe • A further c12% market share in OEM sales to the UK • 2012 should see improvement on new markets and OEM 7

Significant cost advantage International cost advantage Lecico produces sanitary ware at an all-in average cost of US$15.50/piece – In Egypt, ceramic manufacturing cost averages US$13.50/piece of sanitary ware – The difference reflects higher packing costs for EU-destined exports and significantly higher industrial cost in Lebanon – Our information suggests other low cost producers’ manufacturing cost averages US$15 -30 / piece – While European producers average US$35+ / piece depending on their market Why is Lecico able to produce so competitively? – Egypt: Low energy costs, low labour cost, low investment costs, low effective taxes – Size: Economies of scale, standard global plant size: 1m pieces – Experience: Over 45 years as a company and almost 40 years as a sanitary ware producer – Utilization : 85-90% capacity utilization rate versus 70% industry average in Egypt – Efficiency: Production per employee is over twice that of our local competitors Investment, distribution and overheads benefit from regional economies of scale – Sanitary ware investment cost approx US$20-30 / piece vs. US$25-40 / piece global standard – Low shipping cost to Europe: US$1.50 per sanitary ware piece vs. approx US$6+ for Asian manufactures 8

Growth strategy

Long-term commercial strategy Expand regional and international exports  Aim to increase market growth  UK, Ireland, France  Potential future markets  Germany, Italy, Algeria, Saudi Arabia, Iraq, Poland, Nordics  New and expanded OEM contracts – Sanitec, Heritage, SFA and others Build multi-brand and service options solutions for customers  Local service options in key markets (stock, delivery, tailor-made NPD)  International manufacturing options: direct container delivery at competitive pricing  Dual brand + strategy: European brands (Sarreguemines), Commercial brand (Lecico) and OEM Commercial strategy: Offer more for less  Strategy based on giving all the benefits of European supplier at best prices  Consistent and dependable world-class quality, service, manufacturing and design  Advantages over European peers: Greater flexibility as a partner at better prices 10

Financial overview

Profit and loss Net sales Cost of sales breakdown (1H 2012) EBIT Net Profit 12

Quarterly P&L Trends Net sales Gross profit EBIT Net Profit 13

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 – gross profit and margin Tiles – selling price and cost per sqm 14

Quarterly Segmental trends Sanitary ware average price, cost and profit per piece Sanitary ware sales volume Tile Average Price, Cost and Profit per sqm Tile sales volume 15

Balance sheet and cash flow Working capital Returns and leverage Capital expenditures 2012e Export Warehouse 2.0 Tile Capacity Expansions 3.0 Borg 1& 2 3.0 Borg 3&4 2.0 Borg 5&6 (Sanitary) 1.0 Frit Plant 1.0 Faucet Plant 0.5 Pressure Casting 0.5 Khorshid 10.0 Total planned specific project capex 23.0 16

Share performance and data

Shareholding structure and performance Liquidity has moved to local share and improved Lecico share price  Lecico valued at a market cap of US$ 734 million with a 51% free float – All activity is in the local share although a GDR does exist – Local share trades US$ 70,800 per day and on 99% of trading days (YTD thru end June 2012) – Trading frequency has gone to 99% of market days from c 40% of market days in 2005-2007  Lecico trades at a trailing PER multiple of 8.5x on annualised 1Q 2012 earnings – EV/EBITDA of 4.7x on annualised 1Q 2012 results – Price to book value of 0.6x Shareholding structure Share liquidity overview (Local) Share liquidity overview (GDR) Concord PE 10% Local float 37% Intage / GDR Gargour float 39% 14% 18