Oriental weavers carpet [ORWE]
Operating margins improve despite COVID-19, thanks to lower PP and nylon prices
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Egypt/ consumer discretionary/ Q1 2020 results
●Revenues fall on weaker local sales volumes and lower prices ...: Gross profit grew to EGP282mn in Q1 2020 (+19.6% y/y, -4.4% q/q) despite lower revenues of EGP2.27bn (-12.8% y/y, -11.1% q/q) which were mainly driven by a lower average blended price of EGP78/sqm, excluding “fibers & others" item (-10.9% y/y, -5.8% q/q). Meanwhile, volumes remained almost flat, slipping to 29.1mn sqm (-0.7% y/y,
-4.9% q/q). Exports volumes were 5.4% higher y/y, thanks to the tufted segment, but a stronger EGP (+8% y/y), according to ORWE’s management, pulled export revenues lower 12.5% y/y to EGP1.41bn in Q1 2020 (representing 62% of total revenues). On the local front, both price and volumes pulled local revenues lower (-13.5% y/y, -8.2% q/q), driven by (1) lower local average blended price (-3.9% y/y, -7.7% q/q) and (2) lower local volumes (-10.0% y/y, -0.5% q/q) in both tufted and woven volumes (-27.9% y/y and -11.8% y/y, respectively), given (a) the unexpected lower demand caused by COVID-19 outbreak and (b) an increase in imported Turkish and Chinese carpets with competitive prices to compete on tufted segment.
Nada Wagdy
Equity Analyst
Tel.: +202 3300 5726