Oriental Weavers reported a 12.85% sales decline in the first quarter (1Q) of 2020, to record total revenues of EGP 2,268m, due to the ongoing coronavirus (COVID-19) pandemic.
The company founder Mohamed Farid Khamis said the decline comes on the back of the worldwide economic slowdown that started in February. As a result, Khamis noted, the company was forced to face difficult choices due to their geographical exposure.
He added that the company anticipates a further decline in sales in 2Q 2020, but is making plans to maximise 3Q results.
“We will continue to enhance our online portals in the local market,” Khamis said.
Naeem Research said that as expected, the results were pressured by the onset of the coronavirus pandemic.
Revenues came in at EGP 2.27bn, in-line with their estimate, but short of the consensus, reflecting an 11% decline quarter-on-quarter (q-o-q) and 13% year-on-year (y-o-y).
Oriental Weaver’s net profits (after minority interest) amounted to EGP 174m during the quarter, in line with Naeem Research’s estimate but exceeding consensus, reflecting a decline of 27% q-o-q and 14% y-o-y.
Local sales, which accounted for 38% of total sales, amounted to EGP 854.2m, down 8% q-o-q and 13% y-o-y. Sales volumes stood at 10,526 ksqm, reflecting a flat figure q-o-q and down 10% y-o-y. Average prices amounted to EGP 81.15/sqm, down 13% q-o-q and 12% y-o-y.
Meanwhile, export sales, which account for 62% of total sales, amounted to EGP 1.41bn, down 13% q-o-q and 12% y-o-y. This also takes into account the impact of the 8% appreciation in the Egyptian pound.
Sales volumes of 18,581 ksqm, were down 7% q-o-q and up 5% y-o-y. The average price stood at EGP 76.10/sqm, down 6% q-o-q and 17% y-o-y.
The gross profit margin (GPM) came in at 12.4%, up 90bps q-o-q and 3.4pps y-o-y. The improvement in the GPM was attributed to lower prices of raw materials, especially polypropylene.
During 1Q 2020, the company received EGP 54.2m of export rebates, which were paid to MAC, Oriental Weaver’s tufted carpet segment, as part of a protocol that was signed in early 2020.
While Oriental Weaver’s results for 1Q 2020 still showcases a sturdy performance, Naeem Research still expects a sizable drop in earnings in 2Q 2020. This will be driven by the expected decline in export orders, which started at the end of March and are likely to have lasted until mid-May.