Nile Rating, a member of Fitch Ratings, has assigned a senior unsecured national debt rating of BBB to Lecico Egypt (Lecico). The rating outlook is stable. The rating reflects both Lecico's dominant market position and thorough understanding of its customer needs and the low operating costs in Egypt.
Moreover, Lecico has good access to international markets given its product quality and range. About 40 percent of Lecico's combined sanitary ware production is directed to export markets, mainly the UK, France and other European and Middle Eastern countries. Lecico's growth is seen as sustainable in the short- to medium-term pending on continued effective marketing efforts and favorable market conditions.
Lecico was established in 1975 as a joint stock company. The company focuses on the manufacture of sanitary ware with around 41 percent of the domestic market in 2001. The company also produces ceramic and decorative tiles with an estimated market share of 10 percent in the same year.
Lecico's major shareholder is Ceramic Holdings Middle East, a 50/50 joint venture between the Gargour family and Sanitec, one of Europe's foremost manufacturers of sanitary ware. Currently, Lecico retains majority stakes in five subsidiaries, and a minority shareholding in Aracemco.
The company's strategy is to focus primarily on the sanitary ware sector. In 2001, Lecico reached full utilization capacity of 1.9 million units per annum. As a result Lecico will rely on its subsidiary Lecico For Ceramics' (LFC) Borg El Arab plant to cover any future expansion plans.
Lecico and LFC currently have a combined production capacity of three million units per annum, which management expects to be increased to six million units by 2005. Meanwhile, Lecico reached its capacity of 8,000,000 square meters per annum for ceramic tiles in 2001. However, due to the product shortage and the ability to add capacity cheaply, the company is preparing to increase the capacity to reach 12,000,000 square meters per annum in 2003.
Lecico has resorted to additional bank borrowings in the last four years, which was mainly used to finance the capital expenditure program associated with the set up of the subsidiary LFC plant, which was launched in 1999, and the expansion of the tile production line.
In the year 2000, Lecico's financial profile deteriorated as a result of the slowdown in Egypt's economy and its own sales difficulties, the result of an ineffective marketing strategy. However, things began to improve in 2001, with a substantial upturn in turnover and EBITDA figures reflecting better management and effective sales policies. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
