Oriental Weavers Expects Growth This Year

Cairo, Egypt, May 7, 2009--Despite the financial crisis, Oriental Weavers, the world’s largest producer of machine-woven carpets, says it has been gaining market share at the expense of weaker competitors and that its sales have been increasing.

Farida Khamis, vice-president for corporate finance, told the Financial Times that she is looking at an increase in sales of between 3 and 5 percent this year. “In terms of profits we are projecting relative growth in our bottom line because of the decline in the costs of our raw materials and also our own efforts to cut cost,” she says.

The Khamis family owns 67 percent of the listed company that was founded by Mohamed Farid Khamis, the current chairman, and is now run by his daughters Farida and Yasmine. Oriental Weavers now employs 14,000 people.

The group is vertically integrated. It makes its own synthetic yarns from petroleum products, and has production facilities and distribution subsidiaries in Egypt, China and the US. Most of its output, though, is made in Egypt.

Sales last year increased by 12 percent to $614 million. Exports accounted for 60 percent of sales, with the rest sold in Egypt through a network of 200 shops.

Oriental Weavers is now benefiting from the decline in hydrocarbon prices, though it faces shrinking demand in its main export markets in the U.S. and Europe.

Oil-based products account for some 65 percent of cost, and the company has been particularly helped by the drop in the price of polypropylene, which alone represents a third of its outlays and has been cut in half.

Analysts acknowledge that Oriental Weavers is well positioned to withstand the global economic slowdown, but they sound a cautionary note.

“Although we expect an improvement in Oriental Weavers’ margins and profitability in line with the fall in input costs, the company remains highly exposed to the US and European market,” says Menatalla Sadek, a senior financial analyst at Beltone Financial, an investment bank in Cairo. Sadek says that, in 2008, 28 per cent of sales came from the US and 19 per cent from Europe.