CAIRO: Lecico Egypt net profit for the second quarter of 2008 rose 38 percent to LE 37.9 million, bringing increases in its net profit for the first half of the year to 33 percent (LE 67.5 million). The company's net profits were also up 32.6 percent from LE 50.9 million during the same period last year. Earnings before interest and tax for the second quarter increased 16 percent to LE 46.6 million, brining the half-year EBIT up 18 percent to LE 88.6 million. Lecico Egypt Chairman and CEO, Gilbert Gargour, commented: "I am pleased to report strong second quarter results, with new record highs in quarterly sales volumes, revenue, operating and net profit. "Margins have also improved, despite Egyptian and global inflationary pressures. Lecico Egypt consolidated revenue for the second quarter of 2008 was up 20 percent to LE 287.4 million, bringing results for the first half of 2008 up 17 percent to LE 551.5 million. Sanitary ware revenues in the second quarter were up 14 percent to LE 180.3 million, driven by 4 percent growth in volumes to 1.44 million pieces (61.4 percent exports), a company statement said. Meanwhile, tile revenue increased 32 percent to LE 107.2 million, while volumes are up by 26 percent to 6.4 million square meters. "We have seen a dip in sanitary ware export volumes as expected - with Sanitec outsourcing volumes beginning to return to regular levels and with European exports suffering from economic conditions in those markets. As in the first quarter, strong growth in Egypt - in both sanitary ware and tiles - on the back of buoyant demand has helped offset the drop in sales to Europe, Gargour added. For the first half of 2008, total sanitary ware revenue was up 11 percent to LE 353.4 million and tile revenue increased 29 percent to LE 198.1 million. "Unfortunately, we do not expect the strong numbers we have seen in the first half to continue for the rest of the year. All indications are that European markets will continue to slow down and - for Lecico - this will be exacerbated by a further drop in outsourcing volumes to Sanitec. "The effect of slowing sales in the second half will be further exacerbated by a significant increase in costs in the second half, he added. Gargour attributed increasing costs to new energy price increases announced by the government effective from July. The ceramics sector is now subject to intensive-energy user prices, which will affect Lecico's operation in Egypt. "We expect [the new prices] will raise overall energy prices for Lecico by 70 percent over the first half, he explained. Coupled with increasing energy costs, Gargour said the company also has to deal with a higher wage bill in the second half and 20 percent inflation in Egypt, which is driving up other costs. The higher energy prices were part of a package of fiscal measures announced on May 5 to finance an increase in spending on wages and subsidies and restructure energy subsidies in general. The higher prices for energy-intensive industries were also part of a plan commenced in September 2007 by the Ministry of Trade and Industry to raise energy prices for the industrial sector to levels closer to the actual cost. In a statement to the press, the company said the outlook for the performance for the full year 2008 also depends on several "external and unpredictable factors, namely exchange rates, the political situation in Lebanon and the extent of any slowdown in the global economy. Despite the slowdown anticipated by the company in the near future, it's long-term prospects remain positive. Earlier this week, Concord International Investments announced that its New York-based private equity funds acquired 8.16 percent of Lecico Egypt's share capital. Coral Growth Investments Limited and Coral Growth Investments (Parallel) Limited collectively purchased 3.26 million shares of Lecico Egypt. In an interview with Daily News Egypt, Abbas Hilmi, senior managing director of Concord International Investments, said the its equity funds eyed Lecico Egypt because of the company's performance, which is expected to continue its positive trend. In related news, Lecico Egypt approved a contract with Sugarlop Holding BV, which owns 6.95 percent of the company's shares, and Sanitec OY, which owns 0.95 percent of the shares, under which Lecico Egypt will purchase their shares in the company as treasury shares at LE 34.775 per share. Lecico Egypt intends to distribute these shares as stock dividends as part of the fiscal year 2008 profit distribution. The $20.5 million treasury share purchase will be financed internally from the company's cash flows. Lecico is one of the world's largest sanitary ware producers and a major ceramic tile producer in Egypt and Lebanon. With a production capacity of 6.7 million pieces in 2008, it stands as the sixth largest sanitary ware producer worldwide. It has 38 percent of Egypt's and 45 percent of Lebanon's market share. The company was first founded in 1959 in Lebanon by the Gargour family. In 1975, they expanded their sanitary ware production to Egypt where they incorporated Lecico Egypt as a shareholding company in Khorshid Alexandria. In 2007, the company recorded consolidated sales of LE 989.5 million.
