On April 7, 2011, EFG Hermes produced its fourth quarter earning’s report on ElSewedy Electric, reiterating a “buy” rating for the Egypt-based company. ElSewedy Electric, the leading integrated cable and electrical products manufacturer in the Middle East, has over 10,000 employees and 30 production facilities in more than 15 countries worldwide.
The company, with market cap/shares (mm) of EGP 7,072/171.86, reported net profit in 2010 totaling EGP 796 million, (up 26% from 2009) including net profit in the fourth quarter totaling EGP 98 million. Total revenue for 2010 was EGP 12,902 billion, including EGP 3.7 billion in the fourth quarter.
Citing current political and economic instability in the region, El Sewedy reported first quarter gross profits, for the period ending on March 31, 2011 totaling LE 3,553 million (down 8% from LE 590 million for the 2010 first quarter), with net profits totaling LE 171 million (down 32% from LE 251 million), and revenue totaling LE 3,553 million (up 21% from LE 2,934 in the first quarter of 2010).
El Sewedy Electric was founded in 1938 by the Elsewedy family to trade electrical equipment. Since then it has grown into the largest listed cable maker in the Arab world.
More recently, the company expanded into the electrical energy measurement/management and wind energy generation markets. It bought Iskraemeco, a Slovenian manufacturer of energy measurement/management and MTorres Olvega Industrial, a Spanish wind turbine manufacturer, entered into a joint venture agreement with Siag, a German windmill tower manufacturer; and entered into a joint venture with WEG to manufacture, assemble, install and commercialize wind turbines as well as operate and manufacture services in Brazil.
Due to the regime change and annulment of pre-existing government contracts, the Egyptian market remains uncertain. Tourism is down and unemployment is high.
According to the International Monetary Fund in April, Egypt’s economy may grow 1% this year.
In March, Moody’s Investors Services lowered the nations credit rating to Ba3, three levels below investment grade and in February, the S&P lowered Egypt’s rating to BB.
Egypt is struggling to raise funds at local government debt auctions forcing it to turn to international markets.
The government plans to raise about $1 billion through foreign notes backed by a U.S. sovereign guarantee. The government is likely to pay more to borrow overseas said Win Thin, the head of emerging-market strategy at Brown Brothers Harriman & Co.
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