El Sewedy Cables - Zawya

PRIME EGYPT SALES TEAM 

El Sewedy Cables 

Power Cables Producer 

Initiation of Coverage 

Tamed Energy, but Growth Still Wild 

• Sewedy Cables operates in three segments. The power cable segment is the 

company’s largest segment representing over 93% of the company 2006 sales. 

The other two segments are turn key projects and electrical products representing 

5% and 2% of 2006 sales respectively. 

• El Sewedy cables benefits from lower cost per ton compared to its major competitors 

in Europe and the GCC through its accessibility to cheaper labor, energy 

cost and SG&A. 

• Sewedy Cables is Egypt’s largest power cable provider with a market share 

reaching 56%, while only 21% of the consolidated company sales of power 

cables are sold locally, while the remaining balance is either exported or produced 

in the companies regional affiliates. 

• The power cable segment produces power cables, special cables and winding 

wires, currently produced through five Egyptian companies and two regional 

plants in Syria and Sudan. The segment also produces copper along with other 

raw materials that is used in the cable production. However, the current cable 

production capacities require only 49% of the raw materials produced and the 

remaining balance is sold. 

• During 2008, three new companies in Saudi Arabia, Libya and Zambia will commence 

production. The Saudi company will be 60% owned by Sewedy Cables 

with an investment cost of US$80 million and an annual capacity of 25k tons of 

power cables. The Libyan subsidiary’s investment cost is estimated at US$64 

million, 55% owned by Sewedy cables and will produce an output of 13.6k tons 

of power cables per annum. 

• Revenues and net income witnessed a robust growth during Q1 FY07, reflecting 

97% and 53% increase respectively over Q1 FY06, driven mainly by better 

selling prices and to a lesser extent by volumes, conforming with the company’s 

historical performance. Consequently, we expect FY07 revenues and net 

income to grow by 38% and 27% respectively over FY06 reported figures. 

• We have concluded a consolidated DCF value of LE103/share driven by the 

company’s ability to transfer cost increases to its customers, maintain leadership 

in its local market given its low cost structure and the expected expansions 

especially in Saudi Arabia and Libya enabling the company to take advantage of 

the regions’ improved economy and utilities need to expand its infrastructure 

layout so to come close to global peer countries levels. 

FY ending December 2005a 2006a 2007e 2008f 2009f 

Revenues (LE 000) 3,168.6 5,746.3 7,912.8 9,451.6 10,771.4 

Growth 36.4% 81.3% 37.7% 19.4% 14.0% 

EBITDA margin 13.2% 11.1% 10.6% 10.6% 10.7% 

Net Income 330.4 533.5 680.2 806.2 854.8 

Net Attr. Income 330.2 508.1 647.8 764.0 787.6 

EPS (LE) 5.5 4.2 5.4 6.4 6.6 

EPS Growth 23% -23% 28% 18% 3% 

DPS (LE) 0.00 0.00 0.00 0.00 0.00 

P/E x 29.1 18.9 14.8 12.6 12.2 

Yasmine Guindy � yguindi@egy.primegroup.org 

+202 300 5666 

Mohamed Fouad � � mfouad@egy.primegroup.org 

(25 lines) 

Tarek Khayat � talkhayat@egy.primegroup.org 

90 

80 

70 

60 

50 

40 

30 

20 

PRIME UAE SALES TEAM 

EGYPT 

July 22, 2007 

STRONG BUY 

Target Price 

Recent Price LE 80 

Upside Potential 29% 

Investment Grade Growth 

Share Data 

Exchange Rate LE5.7/1US$ 

Reuters Code SWDY.CA 

Most Recent Shares (mn) 120 

Par Value/Share EGP 10 

Financial Year End December 

Mkt. Cap (EGP mn) 9600 

Free Float (Post IPO) 25% 

Weight to PAMI n/a 

Av. Daily Volume (000) 252 

52 Wk. Low – High (LE) 31 –84 

Shareholders 

LE103 

Ahmed El Sewedy 23.6% 

Mohamed El Sewedy 17.5% 

Sadek El Sewedy 23.6% 

Other Family Members 8.7% 

Hassan Salam 1.7% 

Free Float 25.0% 

Stock Performance (EGP) 

M- J- J- J- A- S- S- O- N- N- D- J- J- F- M- M- A- M- M- J- J- 

06 06 06 06 06 06 06 06 06 06 06 07 07 07 07 07 07 07 07 07 07 

Prime Research 

3005700 - 3005730 

inforesearch@primegroup.org 

Ahmad Hamdy � +971-2-6910701 � ahamdy@primeemirates.ae

El Sewedy started regional 

expansion from 

2002 starting with two 

plans located in Sudan 

followed by expansions in 

Syria and Iraq 

Turnkey project segment 

is picking up momentum 

and expected to play a 

positive role in company’s 

consolidated margins 

El Sewedy underwent 

impressive growth in top 

line figure with CAGR of 

56% over last 3 years, 

while bottom line for Q1 

FY07 surged by 54.5% yo-y 

On May 23, 2006, El 

Sewedy Cables Co., 

executed a private placement 

of its shares 

amounting to LE1.29 

billion on the CASE. 



INVESTMENT SUMMARY 

Egypt 

El Sewedy family has long operated in trading electrical construction materials since 1930s. However, 

they established Egypt’s first private sector cable company, Arab Cables, in 1984, capitalizing 

on their experience in the field. In 1996, after Arab Cables capacity had quadrupled and become 

feasibly profitable the company entered into a period of fast expansion in which it opened several 

plants specialized in power cables, special cables, winding wires. 

Moreover, between 1996 and 1998, the group also moved into manufacturing raw materials required 

for its products such as copper rods, the main component in the production of cables as 

well as PVC, representing another input in the production of cables. 

Capitalizing on their local success and their products ability to penetrate regional and global markets, 

the company moved regional in 2002 and built two plants in Sudan during this and the later 

year. Following this, the company opened two plants in Syria in order to capitalize on the growing 

demand for infrastructure spending in Syria and Iraq. 

During 2008, two major new partnerships specialized in producing power cables are expected to 

commence production in Saudi Arabia and Libya, which are positioned to witness strong growth in 

both infrastructure layout and real estate spending in the coming years. The investment cost of 

both projects is estimated at US$144 million and their culminated revenues are expected to contribute 

around 11% of FY09 revenues. 

In addition to its wire and cable segment, the company is currently offering other related products 

and services, which provide attractive gross profit margins of over 30% versus 12% in the wire 

and cable segment. The Turnkey projects segment is growing at a fast pace establishing a track 

record in prominent local and international projects, which offers its clients a one stop solutions 

whereby it provides supplying, planning, designing and contracting. The segment sales have 

grown from LE78 million in FY05 to LE266 million in FY06 and currently 2007 backlog stands at 

LE625 million. The segment’s revenue contribution of 5% in 2006 and 8% in 2007 will have a 

positive impact on the company’s consolidated margins. 

The other segment that the company is operating in is the electrical products, in which the company 

produces modular terminators, power cables joints, transformers, substations and fiber glass 

poles. The segment’s revenues represented around 2% of 2006 revenues and this ratio is expected 

to continue at this rate driven by the expected higher growth in the other segments. 

El Sewedy was able to generate an aggressive growth in the top line over the last 3 years, hiking 

by a CAGR of 56% to come in at LE5.75 billion in 2006, up from LE1.51 billion in 2003. EBITDA 

margin was at relatively high level of 21% in 2003, which severely deteriorated gradually in the 

coming years, because of the hike in copper prices coupled with the company’s inability to pass 

the whole cost increase, to record 11.1% in 2006. Interest expense was almost tripled in 2006 to 

record LE94.6 million because of the aggressive leverage to finance expansions. Bottom line 

growth was severely affected by copper prices, following the suit of EBITDA margins. It only increased 

by a CAGR of 8.8% over the last 3 years to record LE508 million in 2006, versus LE395 

million in 2003. With reference to the latest quarter released, El Sewedy realized a top-line figure 

of LE1.995 billion in Q107 versus LE1.014 billion in Q106, yielding a y-o-y growth of 96.8%. Our 

top line estimate for 2007 is around LE8 billion. The company recorded a 62.3% growth in the 

EBITDA figure from LE130.4 million in Q106 to LE211.7 million in Q107. However, the EBITDA 

margin deteriorated to record 10.6% in Q107, down from 12.9% in Q106. Our EBITDA margin 

estimate for 2007 is 10.64%, which is in line with the realized results of Q107. Bottom line for the 

Q107 came in LE155.6 million versus LE100.8 million in Q106, indicating a y-o-y growth of 54.5%. 

Our bottom line estimate for 2007 is LE648 million. 

On May 23, 2006, El Sewedy Cables Co., executed a private placement of its shares amounting to 

LE1.29 billion on the CASE. The Offering was priced at LE43/ share. Total number of shares offered 

was 30,000,000 representing 25% of the share capital of the company. The Offering comprises 

a secondary offering of shares sold by Sadek El Sewedy, Ahmed El Sewedy, Mohamed El 

Sewedy, Mohamed Hassan Kamal Abdel Salam, Azza El Sewedy, Mona El Sewedy and Zeinab El 

Sewedy through an offering of shares to institutional buyers from Egypt and abroad. The Selling 

Shareholders were committed to use LE600 million of the proceeds to fund their subscription of 

new shares in the capital increase of the company. The capital increase consists of a rights issue 

by the company pursuant to Egyptian law of 60 million new shares at a par value of LE10/share 

exclusively to the selling shareholders on a pro rata basis. The selling shareholders subscribed for 

and purchased at par value, the new shares by paying 100% of the subscription price at the time 

the new shares were issued. Pro forma the Capital Increase, the company will have 120,000,000 

shares outstanding at a par value of LE 10 per share. The shares are currently listed on the CASE. 

It started trading on the 28th of May 2006. 

2

Experts estimate an 

additional 68k MW of 

electricity capacity will be 

added tin MENA region 

throughout 2006-2010 

Region average installed 

capacity of 430W is 

expected to increase due 

to electricity expansions 

throughout the region 

Several independent 

power providers (IPP) 

have been assigned to 

undertake significant role 

in the new capital investments 

required to establish 

new power stations 

Egypt, Algeria, and Morocco 

are the top nominees 

to attract the largest 

investment outlays in 

the region, based on the 

high population figures 

and below average MENA 

installed capacity per 

capita 



REGIONAL ELECTRICITY INDUSTRY OVERVIEW 

Egypt 

Empowered by the Need for Power 

Driven by the trend for urbanization and industrialization in the MENA region necessitating the 

revamp and development of the region’s infrastructure, in conjunction with the ongoing construction 

boom, and rapid population growth; the advancement in the regional power consumption 

doubled the world average rate of 3%. As the economic development in the region is expected to 

maintain its pace, experts estimate that during 2006 to 2010 period additional 68 thousand mega 

watts (MW) of electricity capacity will be added to the currently installed 162 thousand MW capacity 

in the MENA region. This trend of above average growth rate is expected to continue at least 

till 2015. 

Electricity Capacity 

As mentioned above, the total capacity of MENA in 2005 reached 162 thousand MW, representing 

only 4.5% of the global installed capacity. Egypt, with around 20 thousand MW, comes third in 

terms of total installed power capacity in the region following Iran and Saudi Arabia with installed 

capacities exceeding 36 and 29 thousand 

MW, respectively. The region average 

installed capacity per capita is 

Estimated MENA Electricty Expansions (MW) 

430W, which is way below the world 

average of 550 W. Egypt’s range of 250 

50,000 

W per capita installed power capacity 

lies within the low-end of the region. 

40,000 

Qatar tops the regional list by 3,881 W, 

followed by UAE, Kuwait, and Bahrain. 

30,000 

The GCC average per capita installed 

capacity stands at 1,835 W similar to 

20,000 

ratios in many developed countries. On 

the other hand, Sudan with less than 

10,000 

30% population coverage (29 W per 

capita), as well as Palestine, and Yemen 

stand as the lowest installed capacity 

per capita in the region. Chart 1 dis- 

0 

Series1 

Gulf Expected 

47,216 

N. Africa Expected 

30,000 

Levant Expected 

4,100 

plays the expected electricity expansion Chart 1 Source: Zawya 

throughout the MENA region. 

The power sector in the region is dominated by governmental entities or government controlled 

companies. Recently, however, due to the lack of professional expertise in many of the region’s 

countries coupled with the immense investment costs required for establishing new power stations, 

several independent power providers (IPP) have been assigned to undertake significant role 

in the new capital investments in this industry. The IPPs work by operating under Build, Own, 

Operate, and Transfer (BOOT), in parallel to the governmental agencies operating in the electricity 

field. 

Demand—Unlimited Growth Potential 

The persisting low rates of electricity consumption per capita, along with the aggressive industrialization 

and real estate development plans, guarantees a sustainable increase in the consumption of 

electricity, hence, the need for further electrical capacity. Egypt, Algeria, and Morocco are the top 

nominees to attract the largest investment outlays in the region, based on the high population 

figures and below average MENA installed capacity per capita. 

Iran is expected to lead the increased capacities in absolute terms by 2010 with incremental addition 

of 19 thousand MW, followed by Saudi Arabia with 8.5 thousand MW and Egypt with additional 

7.8 thousand MW. In line with these expansions, the regional capacities is expected to grow 

by over 68 thousand MW, increasing by 42% over a 5-year period, with over 50% of the expected 

growth in the region (excluding Iran) generated from growth in Saudi Arabia, Egypt, and UAE. 

3



Egypt 

Power Grids—All for one and one for All 

The Unified Arab Electricity Grid is being established with the purpose of interconnecting national grids 

of Pan Arab countries. The purpose of this web is to minimize the investments required by each individual 

country in the power industry achieved through satisfying the seasonal demand of member 

countries by channeling excess electricity from other members during the same point of time, since 

the peak demand varies from one country to another due to time, and socio-economic differences. For 

instance, demand peaks in Egypt and Levant from 6-10 p.m., while in GCC between 1-5 p.m. Also, 

Pan Arab electricity grid 

Iraq demand peaks in summer versus Levant peak in winter. This shall generate additional demand on 

to be established with 

net investment of 

transmission cables. The grid will also allow low-cost electricity producers to export to members with 

US$1.78 billion higher production costs. 

The pan Arab Grid will be formed through linking three territorial grids, the GCC Interconnection Grid, 

Arab Electricity Grid, and the North Africa Grid. The first phase of the GCC Interconnection Grid is 

expected to be completed by mid-2008 with a cost of around US$ 1.18 billion. In this phase Kuwait, 

Saudi Arabia, Qatar, and Bahrain will connect their power grids, to be followed by UAE and Oman in 

the second phase. At a cost of US$ 600 million, the Arab Electricity Grid is designed to connect 

Egypt, Syria, Jordan, Lebanon, Iraq, and Turkey, while the North African Grid includes Libya, Tunisia, 

Algeria, and Morocco. 

Copper prices have 

witnessed a surge 

throughout FY06 up 

until Q1 FY07, however 

prices are expected to 

increase due to supply 

outstripping demand 

Copper Pricing 

For the year 2006, copper 

prices witnessed all time highs 

reaching as high as US$8,788/ 

ton and averaging at around 

US$6,730/ton. As Copper is the 

essential raw material for 

power cable production, naturally 

it would have a predominant 

effect over the industry’s 

cost structure and ultimately 

over the final product’s wholesale 

& retail pricing. For the 

year 2007, copper prices are 

expected to average at 

US$7,330/ton as prices surpassed 

the $8,000/ton benchmark 

during the month of May 

2007. However, copper supply 

is expected to surpass global 

demand therefore yielding an 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

2,801 

Copper Avg. Price (US$/ton) 

Chart 2 Source:El Sewedy & Bloomberg 

FY07 average price of US$7,330 and a continual decline in FY08 to average at US$7,060. Chart 2 illustrates 

the raw material’s price movements through out 2004 up until 2006 and provides the years 

2007 and 2008’s projected average price. 

As for aluminum which is another essential raw material used in the manufacturing of power cables, 

the raw material is currently priced at US$2,675 and is undergoing a robust global demand which 

could supersede supply, therefore causing its prices to hike within the coming period. 

3,684 

6,730 

7,330 

2004a 2005a 2006a 2007e 2008f 

7,060 

4

Egypt has several privately-owned 

power 

plants currently under 

construction which were 

financed under Build, 

Own, Operate, and 

Transfer (BOOT) financing 

schemes 



OVERVIEW OF THE EGYPTIAN ELECTRICITY INDUSTRY 

Industry Background 

Egypt 

Egypt's installed power generating capacity stands at around 20 thousand MW, with plans to add 

8.38 GW by mid-2012. Around 84 percent of Egypt's electric generating capacity is powered by 

natural gas, with the remaining 16 percent hydroelectric, mostly from the Aswan High Dam. All oilfired 

plants have been converted to run on natural gas as their primary fuel, and thermal power 

plants now account for roughly 65 percent of Egypt 's total gas consumption. 

With electricity demand growing, Egypt is building several power plants and is considering limited 

privatization of the electric power sector. Egypt's power sector currently comprises seven regional 

state-owned power production and distribution companies, which were held by the Egyptian Electricity 

Authority (EEA). In July 2000, the EEA was converted into a holding company, though still 

owned by the state. Egypt has several privately-owned power plants currently under construction 

which were financed under Build, Own, Operate, and Transfer (BOOT) financing schemes. 

Alternative Sources of Electricity Generation 

Egyptian authorities established a company named New and Renewable Energy Authority (NREA), 

which was incorporated to develop the renewable energy. NREA’s current strategy is to satisfy 3% 

of energy demand from renewable resources, mainly Solar and Wind generated. In line of this, 

Egypt is planning to build a part-solar power plant at Kureimat as a BOOT project, which will have 

30 MW of solar capacity out of a total planned capacity of 150 MW. The World Bank will provide a 

financing package from its Global Environmental Facility which will offset the cost difference between 

the solar capacity and thermal capacity. A Netherlands-funded project is building 60 MW 

worth of wind power units in the Suez Canal area. 

Nuclear power has been recognized lately as another alternative source of power supply in Egypt. 

Egypt currently has a 22-MW nuclear research reactor at Inshas in the Nile Delta, built by INVAP 

S.A. of Argentina, which began operation in 1997. As per the National Democratic Party’s initiative, 

more weight will be provided for generating energy from this resource. 

Low-Cost Environment 

El Sewedy's Global Advantage 

Egypt’s Electrical sector Cost is a crucial element in the highly- 

has the advantage of competitive, capital-intensive power 

cheap labor , energy and 

cable industry. Egyptian producers en- 

infrastructure costs comjoy 

both low labor and infrastructure 

pared to the global market 

costs. Egypt is far from poor when it 

comes to labor force, with around 18 

60,000 

50,000 

40,000 

30,000 

2,000 

4,123 

8,793 

million people qualifying as an excellent 20,000 40,455 40,455 40,455 

source of productive and inexpensive 

labor with varying skills. 

10,000 

0 

The labor force in Egypt grows at an 

El Sewedy Cables GCC Europe 

annual approximate rate of 2.7%, which 

sustains the availability of labor. Egypt’s 

average labor cost per hour is US$0.9 

RM Costs Manufacturing & SG&A Costs 

much lower than that of Europe and Chart 3 Source: El Sewedy Cables 

Mediterranean countries. Moreover, 

Egypt enjoys relatively low infrastructure and utility costs (building, electric power, gas, and water). 

El Sewedy Cable serves as a good example to Egypt’s overall cost advantage when it comes to producing 

cables as can be displayed in chart 3. 

Proximity to End User Markets 

The closer the distance between the buyer and the supplier, the faster and cheaper the supply 

chain process is. Consequently, this allows Egypt to offer competitive lead times as well as reduction 

in freight charges, which are added costs to the buyer. Egypt has competitive shipping times to 

Europe compared to the GCC and Far East. 

Preferential Trade Agreements 

As a result of a number of regional and international trade agreements, including Egypt-EU trade 

Preferential trade agree- 

partnership, Egypt has been able to exploit export-oriented opportunities. That said, El Sewedy will 

ments between Egypt 

and Europe paves way sell to Europe free of tariffs, while the European exports to Egypt are subjected to tariffs. This privi- 

for greater export orilege also exists in export markets in Arab Countries by virtue of the Arab Free Trade Agreement, 

ented opportunities. 

and to members of COMESA agreement in the African content. In turn this, combined with El 

Sewedy’s lower production costs, grants a price competitive edge for its products. 

Cost Per Ton (LE) 

5

A dominant Egyptian 

cable company, and 

leading regional player 



COMPANY OVERVIEW 

El Sewedy Group’s Brief History 

1938 El Sewedy family started its operations through trading in Electrical equipments. 

1960 

1986 

1996 

1997 

Egypt 

El Sewedy Cables is an Egyptian joint stock company incorporated for the purpose of establishing 

and operating production facilities for power cables, transformers, terminators, joint accessories, 

copper and aluminum terminators, lightning fiber poles, in addition to the production of polyvinyl 

chloride “PVC”. The Company is also engaged in designing, building, managing, operating and 

maintaining power generation units and power grids. 

The company has over four thousand employees and holds majority stake in over a dozen companies 

all of which are operating in the Electric cables and appliances production. Its subsidiaries 

include Arab Cables Co., United Metals Co., Sedplast Co., Egytec Cables Co., United Industries 

Co., Elastimold, El Sewedy Electric Co., United Metals Co., Egyplast Co., El Sewedy Cables-Syria, 

Sudanese Egyptian Electric, Giyad-El Sewedy Cables Co., El Sewedy Electric Ghana, El Sewedy 

Electric-Qatar, El Sewedy Cables-Algeria and El Sewedy Electric-Syria. 

The operations extended into the distribution of cables manufactured by the sole local producer at that 

time. 

The business undertook a major leap through the establishment of Arab Cables Co., the first Egyptian 

private sector cable factory with a capacity of 6 K tons of copper cables per annum . 

Arab Cables capacity quadrupled to 23 K ton of copper cables per annum 

The group also established its second factory, Egytech Cables, a state of the art facility with annual production 

capacity of 14.4 K tons of copper and 8.4 K tons of aluminum. 

Later, it incorporated Sedplast, El Sewedy’s first PVC production plant used to supply PVC compounds 

and master batch for cables isolation which constitutes a major portion of the production inputs . 

El Sewedy family established United Industries, constituting of three factories, the first designed for the 

production of special cables, the second for Magnet wires, and the third for fiber glass poles. 

Also, in the same period, it established of Elastimold Egypt as a joint venture with Elastimold, a unit of 

Thomas & Betts, one of the leading companies in the field of cable accessories worldwide. The company’s 

key product is power cable joints. 

1998 El Sewedy family established El Sewedy Sedco specialized in producing cables accessories. 

2000 

2002 

2003 

2005 

2007 

2008 

United Metals Co, Egypt’s first high grade copper rod producer and the largest in the Middle East, commences 

operations. The produced copper rods represents the main components in cable production. 

Establishment of first regional cable factory, Giad El Sewedy Cables, in partnership with Sudanese Company 

– Giad, for the production of power and telephone cables. 

El Sewedy Cables expanded its regional facilities by establishing Sudanese Egyptian Electrical Industries 

Co. in partnership with the Sudanese Electricity Authority. The new entity in turn inaugurated two subsidiaries: 

Sudatraf, specialized in manufacturing transformers and electrical panels; and Sudaconcrete, 

specialized in producing concrete panels 

El Sewedy Cables-Syria, specialized in manufacturing of power cables up to 400 Kv, planned to capitalize 

on the growth potential in Levant and Iraq. 

El Sewedy further penetrates Africa, through opening El Sewedy Electric-Ghana, designed to produce 

fiber glass road lighting poles. 

El Sewedy is in the process of establishing three new factories: El Sewedy Electric Syria, United Wires, 

and Egyplast. 

The company plans to further open three additional factories in 2008, namely: El Sewedy Electric Zambia, 

Libya Cables, and El Sewedy Cables Saudi Arabia. 

Table 1 Source: El Sewedy 

6

A leading Egyptian cable 

company, following a vertically 

integrated model 

Unique duality: 

Profound history and 

ongoing rapid expansion 

brought together 



COMPANY OVERVIEW 

Corporate Strategy 

Egypt 

The company aims to maintain its current position as the leading power cables manufacturer in the 

Middle East and Africa. In its pursuit to achieve this goal, El Sewedy primarily focuses on organic 

growth in local and regional markets through the erection of Greenfield projects, while acquisitions 

settles as a secondary option. 

El Sewedy is structured as a vertically integrated pure play electric products manufacturer. This 

comes inline with its adopted strategy to maintain low-cost production as a cornerstone for market 

penetration. The substantial portion of raw materials developed in-house thus enables it to achieve 

price differential while offering quality similar to that of the competing international players. To 

that end, the group identifies markets with competitive cost environments on both investment and 

production frontiers as well as proximity to major importing markets as its optimal investment 

habitat. Meanwhile, it addresses environments with vast demand for infrastructure and real estate 

development and renovation as their prime sales markets. 

More recently, El Sewedy Cables increased it emphases on integrated solutions through offering 

customers turn key packages including: engineering, transmission and distribution services. 

Chart 4 Source: El Sewedy 

Historical Overview 

The group has commenced its operations in electric supplies industry since the late 1930s. Up till 

the mid 1980s, El Sewedy’s operations were limited to trading in electrical equipments and cables, 

thereby evolving in 1986 as the first private power cable producer in Egypt. Since then, the business 

has rapidly emerged capitalizing on the extensive infrastructure revamp, while at the same 

time Egypt was undergoing developments as a backbone to attract FDI targeted by the consecutive 

Egyptian governments. The group now employs over 4,000 workers in its various companies. 

In 1996, the group initiated its vertical integration through expanding into the production of PVC, 

an essential raw material in cable production, meanwhile horizontal integration continued to gain 

momentum as annual production capacity reached over 45 k tons of power cables. 

Capitalizing on their operational experience, established brand-name and solid position in the local 

market, the group spotted the opportunity to invade regional markets. As realized by the group’s 

executives, the potential opportunities in the Middle East and African markets offered exponential 

growth for the company. The driver behind the ongoing expansion remains the favorable cost 

differential providing El Sewedy group a competitive edge over European and GCC competitors. 

As much as the unique duality used in the company’s new advertising campaign brings flavor to its 

client base: Power & Safety coming along, the group has clearly succeeded in achieving another 

distinct duality appealing to its shareholders: profound history and ongoing rapid expansion. 

7

Power Cables segment 

accounts for 93% of El 

Sewedy Cable’s total 

turnover 

Turn Key projects will 

expand due to opportunities 

in foreign markets 

El Sewedy benefits from 

being the sole producer 

of fiber glass poles in 

Africa 



OPERATIONS ANALYSIS 

Egypt 

The group operates in three main segments of the electric equipments industry: Wire & Power 

Cables, Turn Key Projects, and Electric Appliances. 

Power Cables 

The wire & cable segment is the most significant one within the group as it represents the main 

stream of the group’s operations accounting for over 93% of its turnover. The segment specializes 

in the production of power, special cables & winding wires. Copper, aluminum, and plastic products 

represents the main components of the wire and cable industry. In accordance with its vertical 

integration strategy, the group manufactures copper rods and plastic material required for 

coating (mainly PVC) in-house out of which around 54% is consumed in the production of cables 

within the group. This figure is expected to increase to 60-70% during FY07. The group currently 

has cable production facilities in Egypt, Syria, and Sudan. El Sewedy enjoys the benefit of owning 

one of the largest copper plants throughout the MENA region as it holds a production capacity of 

120k tons of copper per year which can be converted into a 8 mm diameter rod. Additionally, to its 

advantage, the company’s production cost is 50% lower than that of its competitors in the GCC 

countries. 

Turn Key Projects 

The second line of business performed by the group lies in comprehensive turn key projects where 

El Sewedy engages in huge contracting projects including infrastructure projects, distribution and 

transmission projects and rural electrification projects. This segment offers clients a one-stop solutions 

to undertake large projects including planning, designing, supplying, and contracting largescale 

projects both in Egypt and internationally. Although this line merely represents 5% of the 

group’s aggregate revenues, El Sewedy plans to augment the percentage of contribution of this 

segment in order to tap the higher profit margins characterizing this field. 

Electrical Appliances 

Electrical appliances stands as the final operational segment of the group representing 2% of its 

sales. The electrical products includes cables accessories such as modular terminators, power 

cable joints, transformers and substations. Additionally, El Sewedy owns a fiber glass poles production 

facility in Egypt with a capacity of 10,800 poles/year. The company’s fiber glass poles 

plant was the only plant in Africa producing poles, however due to strong demand, El Sewedy has 

established a second plant in Ghana for fiber glass poles production. El Sewedy also has manufacturing 

facilities in Sudan which produces electrical appliances. 

Cable Production Process in a Nutshell 

El Sewedy imports refined copper cathodes from various London Metal Exchange “LME” registered 

sources, primarily from Zambia, Spain, Cyprus, Chile, & USA. The cathodes with purity of approximately 

99.9% are bought based on LME declared prices plus fixed premium covering freight, insurance, 

and freight. Cathodes are charged into furnace where they are placed into a bucket 

which hoisted to the charge level & tilt the cathode in the furnace. 

The metal is then melted and then cast. The flow of molten metal in a continuously rotated casting 

ring at fixed speed and is cooled from outside by specially designed water spray transforming 

the molted metal into cast bar. The cast bar formed is milled through hot rolling mills into copper 

rod. The rod is then cooled and passed through magnetic coil which detects imperfection/damage 

on the surface of the rod. Afterwards, a plastic coat of sufficient strength over the coil to prevent 

atmospheric oxidation. 

The pricing of the copper rod manufactured by the group is based on copper cathode purchase 

cost plus the rod transformations cost incurred within their facilities, while the power cables produced 

is charged by the additional cable transformation costs. Both rods and cables’ prices are 

marked-up by both a fixed premium per ton and a variable premium. 

8

El Sewedy is currently 

the second largest regional 

market player and 

is on its way to being the 

largest market player due 

to expansion plans 



El Sewedy — The Right Place, the Right Time 

El Sewedy is by far the dominant 

market player for power cables in 

Egypt. It is one of two highvoltage 

cables producers in 

Egypt, the other being Giza Cables. 

The company succeeded in 

raising its stake in the power 

cables’ local market (high, medium, 

and low-voltage) up to 

56%, while its first competitor’s 

share—Giza Cables—is as low as 

11%. The remaining 33% are 

fragmented among 7 local producers. 

Egypt 

Despite the fact that power ca- 

Chart 5 Source: El Sewedy Cables 

bles is a capital intensive industry 

placing hindering barriers to entry, the regional markets remain highly competitive. The major 

rivals are GCC manufacturers who have gained respectable market presence in their home markets. 

Indian manufacturer represent serious competition in the GCC markets, while Tunisia, and 

Morocco are the main rivals in European export markets. 

Currently, El Sewedy is the second 

largest regional market player by 

capacity, yet it is expected to recapture 

the leadership in terms of 

capacity upon the completion of its 

undergoing expansions. El Sewedy, 

succeeded in capitalizing on its 

cost advantage, its size, its brand 

name and, most importantly, its 

integrated solutions to gain distinguished 

market position in the GCC 

markets. Other producers in the 

region, namely in Syria, Lebanon 

and Jordan are comparatively 

small in size. 

Others, 

33% 

Giza 

Cables, 

11% 

Power Cables Local M arket 

El Sewedy, 

56% 


However, it should be noted that El Sewedy has an ambitious regional expansion plan whereby 

we expect to see El Sewedy Cables production capacity to increase by a CAGR of 91% over FY07 

and FY08 as can be seen in chart 7 

FY08 

FY07 

FY06 

FY05 

FY04 

180,000 

160,000 

140,000 

120,000 

100,000 

80,000 

60,000 

40,000 

20,000 

0 

Regional Cables Capacity ( tons) 

Riyad Cables 


El Sewedy Capacity Expansion 

0 50000 100000 150000 200000 250000 

Cables (Tons) 

Capacity Production 

DUCAB 

Saudi Cables 

Jeddah Cables 

Oman Cables 

Chart 7 Source: El Sewedy & Prime Estimates 

Gulf Cables 

MESC 

9

Company enjoyed 

high growth rate in its 

Cable venture in Syria 

and will become the 

sole manufacturer of 

transformers within 

the country 

Sudan has an untapped 

market as only 

30% of population 

have access to electricity 



AMBITIOUS INVESTMENT STRATEGY 

Egypt 

Abiding by its corporate strategy to maintain the well deserved leadership position as one of the 

largest power cables manufacturers in the Middle East, the group is undergoing daring expansion 

plan that is expected to double its capacity during the foreseeable future. 

Strong Presence in Regional Markets coupled with Expansion 

Syria 

El Sewedy seized the opportunity to establish green field projects in Syria, namely El Sewedy Cables 

Syria which started operations in 2005 and the establishment of El Sewedy Electric Syria which is 

expected to commence operations by July 2008. El Sewedy Cables was capable of filling in a market 

gap through becoming the sole producer of high & extra high voltage cables, whereas prior to its 

inception the demand for high and extra high voltage cables in Syria was previously catered by 

exports. It should be noted that El Sewedy Cable is one out of four producers of cables in the Syrian 

market and not only intends to capitalize on its growing need for power cables, but has the benefit 

of being in good proximity to Iraq and other markets such as Jordan, Lebanon and Iran. Accordingly, 

El Sewedy Syria realized revenues of LE334 million of which 73% were exports (65% of exports 

directed to Iraq). As for El Sewedy Electric Syria, it intends to commence its production activities 

by July 2007 with a production capacity of 2k transformers per year which is expected to increase 

to 4k transformers per year. The plant will be the sole manufacturer of transformers in Syria 

and is expected to sell both locally and to the neighboring countries. 

El Sewedy Cables Syria 

•Total investment cost of US$80 million 

•Ownership structure: El Sewedy (92%) 

Syrian shareholders (8%). 

•Capacity of 17 thousand tons/annum of low & 

medium, high & extra high voltage cables. 

(13.5k copper & 3.6k aluminum) 

•In 2006, realized revenues of LE 334 million. 

El Sewedy Electric Syria 

•Total investment cost of US$ 12 million. 

•Ownership structure: El Sewedy Cables (94%) - 

Syrian shareholders (6%). 

•Capacity of 2 thousand transformers per year 

with expectations to increase capacity to 4 

thousand transformers per year. 

•Commencement of production is expected by 

July 2008. 

Sudan 

Additionally, El Sewedy has established a strong presence in Sudan through the establishment of 

Giad Cables and Sudatraf which specializes in the production of transformers. First off, Giad Cables 

was established in 2003 for the purpose of producing the full range of power cables. Accordingly, 

Giad has a total capacity of 9k tons (3.6k copper and 5.4k aluminum) which is fully consumed by 

the local market due to high demand as El Sewedy has the opportunity to capitalize on being the 

sole local producer of cables. For FY06 Giad Cables realized revenues of LE174 million versus 

LE102million in FY05, displaying a significant leap of 70.5%. As for Sudatraf which has a annual 

capacity of 1.5k transformers and is currently the sole producer of transformers in Sudan, it realized 

revenues of LE64 million in 2006 versus LE16 million in FY05. a 300% growth. It should be noted 

that provided that Sudan’s electricity coverage only supplies 30% of the population gives greater 

value to El Sewedy’s investment as an additional power capacity of 700MW is expected to complete 

by 2008. 

Giad Cables 

•Total investment cost of US$25 million 

•Ownership structure: El Sewedy (45%) - Suda 

nese government (55%) 

•Capacity of 9 thousand tons/annum of low & 

medium, high & extra high voltage cables. 

(3.6k copper & 5.4k aluminum) 


Sudatraf 

•Ownership structure: El Sewedy Cables (70%) 

- National Electricity Corporation (30%). 

•Capacity of 1.5 thousand transformers per year 


10

New ventures in the 

MENA region and Africa 

which will cause El 

Sewedy to become a 

regional leader 

Company has a backlog 

of LE3.1 billion for the 

year 2007. 



El Sewedy Cables Saudi Arabia 

•Total investment cost of US$ 80 million 

•Ownership structure: El Sewedy (60%) - 

El Raghy Group (40%). 

•Capacity of 25 thousand tons/annum of power 

cables up to 400 KV. 

•Commencement of production is expected in 

H2 2008. 

Libya Cables 


Egypt 

Green field expansions within the Middle Eastern and African region are taking place with the intention 

to penetrate underdeveloped markets where benefits can be reaped through tapping markets 

equipped with cheaper variable costs (including labor) and energy costs in order to maintain it’s 

global cost advantage and attain a greater return on investments. 

New Ventures and Production Facilities 

El Sewedy Electric Zambia 

•Total investment cost of US$ 8.4 million. 

•Ownership structure: El Sewedy (60%) - 

Zambian Authorities (40%). 

•Capacity of 1.2 thousand transformers per year. 


H2 2008. 

•Ownership structure: El Sewedy Cables (55%) - 

Libyan Authorities (45%). 

•Capacity of 13.6 thousand tons/annum of high 

voltage power cables. 


H2 2008. 

Tenth of Ramadan Factory 

Tenth of Ramadan Factory 


•Production facility of El Sewedy Cables. 

• Capacity of 600 dry-type transformers and 105 

power transformers. 

• Commencement of operations is expected by 

March 2008 and beginning of 2009 for, drytype 

and power transformers respectively. 

For the year 2006, El Sewedy attained consolidated revenues of LE5.7 billion and as of now, the company 

has a backlog of LE3.1 billion for the year 2007. However, it should be noted that large part of 

El Sewedy’s segments does not sell upon contracts, such as the plastics and the electrical products 

and almost 50% of the copper sales are not based on contracted revenues either. Chart 8 breaks 

down the cable producer’s backlog for 2007 into the segments it belongs to. 

1600 

1400 

1200 

1000 

800 

600 

400 

200 

0 

741 

Export Cables 

Orders 

Backlog Revenues in 2007 (LE mn) 

242 


625 

1500 

Local Cables Orders Turnkey Projects Copper Export 

Contracts 

11

Revenues escalated from 

EGP 1.5 billion in FY03 by 

a CAGR of 55.95% to 

EGP 5.7 billion in FY 06 

Q1 FY 07 witnessed QOQ 

growth in excess of 96% 

Shrinking trend of 

EBITDA margins by over 

2 percentage points in 

FY05 and FY 06 

EBITDA Margin decrease 

attributable to increase in 

COGS/Sales ratios in 

power cables and electrical 

appliances segements 



FINANCIAL ASSESSMENT 

Consolidated Revenues & Margins 

El Sewedy succeeded in generating exponential 

growth in its consolidated revenues over 

the last four years under review. It advanced 

from LE1.5 billion in FY03 to reach EGP 5.7 

billion and recognized a CAGR of 55.95% 

over the last four years. In 2006 alone the 

company surged it top-line figure by over 

81.3% due to El Sewedy’s realized positive 

returns from investments made in Syria, 

Sudan and Ghana as well as an impressive 

hike made in export sales as it witnessed a 

CAGR of 87% from years FY03 to FY06 

reaching LE3.1 billion for FY06 versus 1.7 

billion in the prior year. 

Furthermore, Q1 FY07 demonstrated LE2 

billion top-line figure which is a 96.8% q-o-q 

hike over Q1 FY06 of which LE1.2 billion 

constitutes of exports making up 60% of 

total sales. Chart 9 displays the company’s 

export growth from FY03 up until Q1 FY07. 

Positive yet declining EBITDA margin 

El Sewedy maintained positive EBITDA over 

the past 4 years, advancing in absolute 

terms from LE323 million in FY03 to LE637 

million in FY06 with CAGR of 25.38%. However, 

the margins tend to follow a declining 

rate of around 2 percentage points per annum 

during this period. The EBITDA margins 

was brought down due to the steady inflation 

of COGS/Sales ratio from 74.5% in FY03 

to 86% in FY06 attributable to an increase in 

energy prices that took place during July 

2006 as a means for the government to 

decrease the amount subsidized to energy 

resources. Furthermore, the cable producer’s 

Q1 FY07 EBITDA Margin stands at 10.6% 

versus 12.9% during the same period of last 

year as the COGS/Sales ratio witnessed a 

230 bps increase to reach 87.3% compared 

to 85.0% during Q1 FYO6. 

INCOME STATEMENT SUMMARY 

Egypt 

LE 000‘s Q1 FY06 Q1 FY07 

Revenues 1,013,841 1,995,225 

Growth 96.8% 

COST OF GOODS SOLD 862,233 1,742,497 

COGS/Revenues Ratio 85% 87.3% 

SG&A Expenses 21,187 41,040 

EBITDA 130,421 211,688 

EBITDA Margin 12.9% 10.6% 

Depreciation 8,651 19,824 

Sundry Revenues 432 7,209 

Interest Expense 17,835 53,212 

Net Income 100,808 155,756 

Growth 54.5% 

NPAT Margin 9.9% 7.8% 

Table 2 Source: El Sewedy Cables 

LE mn 

El Sewedy's Export Growth 


The lowest GPM margin figure accounts for the power cables and raw materials segment which 

amounted to 10% for Q1 FY07. From the year 2005 to date, the above mentioned segment has 

witnessed a 200 bps annual decrease in its GPM as it stood at 14% in 2005 only to decrease to 

12% by the end of FY06. This positively correlates with the noticeably increased COGS/Sales ratio 

pertaining to that segment, which occurred due to the increased global prices in its essential components 

which are copper and aluminum. Accordingly, the company’s power cables and raw materials 

segment witnessed a 400 bps surge of 85.6% in its COGS/Sales from FY05 to Q1 FY07 and 

increased to 89.6%. 

Meanwhile, the electrical appliance segment underwent a similar trend as it’s GPM margin witnessed 

a significant drop of 2000 bps to land at 35% for Q1 FY07 versus 55% in FY05. Accordingly, the 

company witnessed a change in its COGS/Sales ratio from 44.6% as of FY05 to 65.3% for Q1 FY07. 

The upward trend experienced by the electrical appliances and power cables segment in the COGS/ 

Sales figure are main contributors to the company’s declining EBITDA margin. However, as global 

copper prices are expected to become less volatile through out the coming period, in addition to the 

expected commencement of the company’s green field projects in countries that benefit from cheap 

energy resources and labor, we could witness improved outcomes pertaining to the company’s 

overall COGS/Sales ratio and ultimately its EBITDA Margin. 

3500 

3000 

2500 

2000 

1500 

1000 

500 

0 

471 

1,180 

1,762 

3,101 

1,816 

FY03 FY04 FY05 FY06 Q1FY07 

12

Power cable segment 

represents the bulk of El 

Sewedy’s operations. 

However, Turn Key projects 

are on the rise. 

The increase in the interest 

expense was brought 

by the increase in the 

interest-bearing debt to 

fuel the undergoing 

expansions 



FINANCIAL ASSESSMENT (Cont’d.) 

Sector Segmental Analysis 

The company operates in 3 power segments: 

power cables (including both copper and aluminum), 

electrical appliances, and comprehensive 

turn key projects. 

126,369 

Power Cables 

Revenues of power cables segment represents 

about 93% of the total turnover of El Sewedy Cables. 

This contribution is almost split equally between 

cables sales and raw materials. The power 

cables sales (including raw materials) are generated 

from three different avenues: exports with 

49.3% contribution, local sales with 43.5%, and 

regional operations with only 7.2% share. 

Turn Key Projects 

Egypt 

El Sewedy business strategy focuses on comprehensive 

turn key projects as a premier field for Chart 10 Source: El Sewedy Financials 

growth relying on two key factors; significance of 

brand recognition empowering El Sewedy to undertake landmark projects and the associated higher 

profit margins. 

As such, turn key projects expanded its input share to the groups sales from 4.65% in Q1 FY06 up to 

5% in FY06 and 7.3% in Q1 FY07. 

Electric Appliances 

The share of Electric appliances to the total sales of the group amounts to a humble 2%. Q1 in FY 07 

did not witness material deviation from this level. 

ROIC Hikes Up and Increased Operational Efficiency 

Despite having witnessed a declining EBITDA Margin in FY06, the company’s ROIC has witnessed a 

544 bps increase to reach 29.39% versus 23.95% in FY05. Furthermore, the company executed a 

stronger level of efficiency as its cash conversion cycle witnessed an overall decrease of 36 days to 

reach 162 days in FY06 versus 198 days in FY05 which can be credited to the company’s ability to 

improve its collection capabilities as the average collection period decreased from 88.48 days for the 

year 2005 to 57.37days in FY06. It should also be noted that as the group moves away from stock 

pilling towards forward contracts as a hedging tool, raw materials average days on hand followed suit 

declining from 72 to 55 days from FY03 to FY 07. 

Interest Expense 

In FY06, interest expense incurred by the group amounted to EGP 94.6 million, representing 16.75% 

of the EBIT. This leap in interest expense by over 158% from FY05 level of EGP 36.6 million amid the 

increase in interest-bearing debt from EGP 789 million in FY05 to EGP 1,975 million in FY06 stems 

from the hyper increase in funding requirements to accommodate for the capital expansions in addition 

to expansion of working capital to factor for the increase in raw material prices, in particular 

copper and aluminum. However, the net interest expense amounts to only EGP 48.87 million as funds 

acquired to finance capital expenditures were locked in marketable securities; namely treasury bills 

and CBE certificates up till due disbursement dates. 

Effective Tax Rate 

Revenue Generators (LE '000s) 

266,350 

5,353,552 

2 

Cables Turn Key Projects Elect rical Appliances 

El Sewedy Cables is itself enjoys a 10-fiscal-years tax holiday following its first year of operations, 

subject that actual operation starts before June 2008. The company’s local and regional subsidiaries 

include various entities that are tax exempted or that enjoy tax holiday’s expiring at varying duration. 

Up till FY06 the only subsidiary subjected to taxation is Arab Cables Co, El Sewedy Cables Qatar, and 

El Sewedy Cables Algeria. Accordingly, the effective tax rate during the last two years was a minimal 

rate of 2.78% in FY05, and 2.11% in FY06. 

13

Surge in bottom line 

figure of 53.8% for FY06 

and a greater bottom line 

growth of 54.5% for Q1 

FY07. 



FINANCIAL ASSESSMENT (Cont’d.) 

Dividends Payout 

Egypt 

Being in supernatural growth phase, El Sewedy Cables did not distribute dividends to its shareholders 

over FY06. It is expected that the company will follow suit in the foreseeable future. 

Bottom-Line Surged over the 

Last Two Years 

El Sewedy Cable's Bottom Line Growth (LE '000) 

Rapid expansion in the group’s 

operations was able to realize a 

strong growth in its bottom-line, as 600,000 

shown from the performance of the 

net attributable income (NAI) over 

the last two years. Net profit real- 

500,000 

400,000 

ized 23% y-o-y from FY04 to FY05 

reaching EGP 330 million and further 

surged by 53.8% to material- 

300,000 

200,000 

ize EGP 508 million in profits for 

FY06. As for Q1 FY07, the company 

realized a bottom line figure 

100,000 

0 

of LE155.7 million compared to Q1 

FY04 FY05 Q1FY06 FY06 Q1FY07 

FY06’s bottom line figure of 

LE100.8 million displaying a y-o-y 

Chart 11 

growth of 54.5%. Chart 9 provides 

Source: El Sewedy Financials 

a yearly historical outlook at the company’s bottom line performance in addition to a comparison 

outlook of Q1 FY06 and Q1 FY07’s realized net profits. 

Capital Structure & Leverage Level 

Leverage increasing as 

El Sewedy’s current ratio fell down from 1.86x in FY05 to 1.68x during FY06. However, given the 

expansions are on the 

rise and company holds 

quality of the group’s trading assets indicates the acceptable liquidity levels and effective perform- 

adequate current ratio. ance in terms of a more efficient capital base. The group is moderately leveraged were the debt 

ratio is constantly increasing from 23.8% in FY04 to 53.8% in FY06 which is properly perceived in 

the context of the rapid expansion plans undergone by the group. 

14

Consolidated revenues 

expected to grow 46% in 

FY07 



GROWTH DRIVERS 

REVENUES 

El Sewedy group’s revenues come from various 

sources, out of which cables (copper & Aluminum) 

contributes with the lion’s share in the top line figure. 

We will provide full analysis of copper & aluminum 

cables revenues broken down into capacity, production, 

and prices. 

PRODUCTION CAPACITY 

Table x shows the current & projected production 

capacity in Egypt and other ventures in the region. 

Egypt production facilities will witness huge expansions 

in both copper & aluminum. In 2008, copper is 

expected to reach 76.5k tons, up from 45.35k tons in 

2006. In addition, aluminum is expected to reach 

41.4k tons, up from 20.4k tons in 2006. Total capacity 

shall grow over the two years by 18.6% in 2007 and a 

2.7x growth of 51.15% in 2008. Sudan facility expected 

to remain stagnant over the coming 2 years at 

3.6k tons for copper and 5.4k tons for aluminum. 

Syria venture will enter an aggressive expansion 

phase of the copper faculties only. In 2008, copper is 

expected to reach 20.4k tons, up from 12k tons in 

2006. Meanwhile, aluminum is expected to remain 

unchanged at 3.6k tons level. The Libyan subsidiary is 

planning to commence operations in 2008 and it will 

possess 11.2k tons in copper capacity and 2.4k tons in 

aluminum capacity. Following in suit, the Saudi affiliate 

with Al-Raghy is expected to become on line in 

2008, but with much higher capacity in copper that is 

expected to be 22.3k tons, while aluminum capacity 

will come in at 2.7k tons. The UIC facilities are expected 

to witness mild growth. The special cables 

facility is expected to remain at the same level of 12k 

tons, while the winding wires facility will increase only 

in 2008 to stand at 10.5k tons compared to 8.54k tons 

in 2006 & 2007. 

UTILIZATION 

Due to aggressive demand on the company’s products 

and aims to expand the export market, utilization rates 

are expected to remain high as historical trends indicate. 

Only when there is a capacity addition, the utilization 

will dip accordingly and rebound in the next 

year after start-up operations succeed. 

PRICES 

Copper cables prices witnessed a 51.7% hike in 2006 

backed by substantial increase in the copper materials. 

However, we anticipate a slower hike in selling 

prices to reach LE58.1k/ton in 2007, before it slightly 

grows at 4%/annum thereafter. We anticipated a 

20% hike in the aluminum cables prices to reach 

LE37.5k/ton in 2007. thereafter, we foresee it also to 

rise by 4%/annum. Special & Winding wires’ prices 

witnessed an aggressive hike in 2006 to reach 

LE54.2k/ton and LE40.5k/ton, respectively. However, 

expectations foresee a slow down in 2007 and prices 

to march forward slightly with 4%/annum to reach 

LE60k/ton and LE47.9k/ton in 2008. 

Egypt 

Production Capacities 

In Tons 

Egypt 

2006 2007 2008 

Copper 45,350 51,600 76,500 

Aluminum 20,400 26,400 41,400 

Total 65,750 78,000 117,900 

y-o-y % 

Sudan 

18.63% 51.15% 

Copper 3,600 3,600 3,600 

Aluminum 5,400 5,400 5,400 

Total 9,000 9,000 9,000 

y-o-y % 

Syria 

0.00% 0.00% 

Copper 12,000 13,500 20,400 

Aluminum 3,600 3,600 3,600 

Total 15,600 17,100 24,000 

y-o-y % 

Libya 

9.62% 40.35% 

Copper 0 0 11,200 

Aluminum 0 0 2,400 

Total 

y-o-y % 

Saudi 

13,600 

Copper 0 0 22,300 

Aluminum 0 0 2,700 

Total 

y-o-y % 

UIC 

25,000 

Special Cables 12,000 12,000 12,000 

Winding Wires 8,540 8,540 10,512 

Total 20,540 20,540 22,512 

y-o-y % 0.00% 9.60% 

Table 3 Source: Sewedy & Prime 

Average Prices per Ton 

LE/Ton 2006a 2007e 2008f 

Copper 46,681 58,157 60,483 

% Change 51.7% 24.6% 4.0% 

Aluminum 31,212 37,464 38,963 

% Change 0.4% 20.0% 4.0% 

Special Wire 54,225 57,668 59,975 

% Change 50.7% 6.4% 4.0% 

Winding Wire 40,541 46,040 47,882 

% Change 47.0% 13.6% 4.0% 

Table 4 Source: Sewedy & Prime 

15

Consolidated revenues 

expected to grow 46% in 

FY07 



GROWTH DRIVERS (Cont’d.) 

Egypt 

Second, the turnkey projects constitutes the secondary growth driver in turnover. This comes in 

line with the groups plans and supported by the existence of LE 625 million backlog for FY 07 (as 

per the company’s records) up from LE 266 million of revenues generated in FY 06. Thereafter, 

turnkey projects’ revenues will increase at a moderate rate of 5%, while its contribution to the top 

line will diminish after huge expansions expected in the cables segment. 

Finally, El Sewedy group is expected to generate a growing top line backed by cables sales that are 

expected to record LE7.69 billion in 2007 and march forward at a CAGR of 23.39% over the next 4 

years to come in at LE17.82 billion in 2011. 

EBITDA 

Operating profit margins are expected to sustain, to a great extent, its level in FY06. EBITDA margin 

of 11% realized in FY 06 will be exposed to two new counter eliminating elements. The first 

being the increased weight of exports and international operations (specially in GCC and Europe) 

characterized by high competition accompanies by relatively tight profit margins. The second element 

represents a reliving factor as the increased weight of turnkey projects to total revenues 

positively contributes to the group’s profitability. 

CAPEX 

The group is adopting extensive expansion plan requiring substantial capital expenditures, bearing 

in mind the nature of cables production as a capital intensive industry. The group is currently establishing 

four major projects in Egypt, Saudi Arabia, Libya, and Zambia (see page 8). The aggregate 

investment cost of these projects is expected to amount for US$ 132 million. El Sewedy’s 

Capex stream is deemed to be very aggressive in order to cope with the group’s expansionary 

plans. The formula for estimating the capex is directly related to the incremental cost of ton, which 

is estimated at US$1500/ton of cables. Table xx shows expected incremental capacity and related 

capex during the next 5 years. Note that 2009 will incur no capex related to the capacity upgrade, 

but it will include another capex related to the maintenance. 

2007 2008 2009 2010 2011 

Incremental 

Capacity Increase 13,750 87,372 0 34,475 36,949 

CAPEX 117,563 747,031 68,400 294,761 315,916 

Table 5 Source: Prime estimates 

Taxes 

El Sewedy Cables enjoys a 10-years tax holiday starting from its first year of operations. While 

several of its subsidiaries are also tax exempted, a number of which will expire during the projected 

period. Accordingly, the effective tax rate in the projected years is expected to escalate 

from 2.11% in FY06 to 3% in 2007 and 2008 and inclining by 2 pct points onwards until reaching 

20% by 2018 (not included in our projections). 

Net Attributable Income 

NAI will witness a slower growth over the coming years because of financial burden on the company. 

Although top line is expected to hike over the coming 5 years, high leverage used for funding 

expansions hinders the bottom line from accelerated growth like the top line. NAI is expected 

to march forward at a CAGR of 21%, to come in at LE1.3 billion in 2011. 

Dividend Payout Policy 

The company locks-in all generated profits to finance the exponential growth and it is anticipated 

that the company will continue to do so in the projected period. 

Increase in Capital 

Noting that the funding mix of the new expansions is estimated at 70:30 - debt: equity ratio, while 

most of these projects are formed as joint ventures with other investors (providing funds through 

minority interest on consolidated basis), consequently, the retained profits are sufficient to fund 

the owners’ contribution required in all of the new investments. As such, no capital increases is 

expected to be undertaken by the group in the projected period. 

16



GROWTH DRIVERS (Cont’d.) 

Egypt 

New Copper Project 

On June 27, 2007 El Sewedy Cables announced establishing a new venture named “Red Sea Copper” 

with Glencore International AG. The idea to establish the project originated 2 years ago, with 

Glencore International who are one of the worlds largest commodity traders that have been conducting 

business with El Sewedy Cables during the last 10 years. 

If the project is approved, it will cost around US$850 million, while the funding scheme is yet to be 

determined with the assistance of HSBC, by virtue of being the project's Financial Advisor. However, 

it is expected to be highly leveraged probably over 60:40 and up to 90:10. The venture ownership 

will be controlled by EL Sewedy Cables with 74% vs. 26% to Glencore International. 

El Sewedy Cable shall finance its stake through full retention of its profits within the coming 3 years 

in order to avoid any need for capital increase. The venture will produce two key products: copper 

cathode with a capacity of 300 k ton/annum and 1 mn ton/annum of sulfuric acid. The sulfuric acid 

output will be sold locally benefiting from the local demand from phosphate fertilizers producers. 

Copper cathode, on the other side, is the major raw material for producing copper electrical cables 

as well as an ingredient of many other metallurgical industries including steel production. Sulfuric 

acid, on the other hand, is a feed stock in the fertilizers industry. 

Accordingly, 120k tons/annum of the copper cathode will be consumed within El Sewedy Cables in 

power cable production. The remaining 180k tons/annum will be off-taken by Glencore International 

and marketed internationally mainly to EU and ME (primarily GCC, and Turkey). The project would 

contribute to El Sewedy Cables consolidates performance in a double effect, increased sales volume 

by the annual 180k ton marketed by Glencore, and cost reduction by the 120k ton consumed within 

the group in cable manufacturing. 

Upon its completion, the project will be the 5th largest copper cathode producer world wide. No 

significant competition exists in the region, as the demand for copper cathode is estimated at 800k 

tons/annum, while the nearest copper cathode producers exist in Iran, India, and Kazakhstan. Accordingly, 

the output will be much more price competitive due to the dual effect of lower production 

(characterizing Egyptian manufacturing environment) and transportation costs (due to proximity to 

customers). 

Glencore International AG, being the largest trader world wide with turnover exceeding US$ 116 bn 

in 2006, shall provide 1 million tons of copper concentrates to Red Sea Copper through a long-term 

supply agreement. The project shall source raw materials from other traders as well. 

In order to go ahead with developing the project, it still has to prove feasible in the study that is to 

be completed by early 2008. If all turns well, the construction of the project will extend over 30 

months following the approval. Production is expected to gain its momentum by the second operational 

year to reach 90% of the nameplate capacity. 

17

We issue a buy recommendation 

with a target 

price of LE103/share 



VALUATION 

Egypt 

Utilizing our consolidated forecasts of El Sewedy Cables Company into our DCF model, and using a 

WACC of 13.14% and perpetual growth of 5%, we reached a total value of LE12.3 billion for the 

company’s equity. By dividing the value by 120 million shares, it yields a fair value of LE103/share. 

Hence, based on a current market price of LE80/share, we issue a ‘buy recommendation’ on El 

Sewedy share, offering an upside potential of 28.75%. 

18

Financial Summary 

Figures (EGP mn) 

FY ending December 



Egypt 

Income Statement 2005a 2006a 2007e 2008f 2009f 

Revenues 3,168.6 5,746.3 7,912.8 9,451.6 10,771.4 

Growth 36.4% 81.3% 37.7% 19.4% 14.0% 

COGS 2,661.0 4,941.7 6,828.7 8,163.8 9,285.3 

S,G & Admin. Expenses 89.8 167.8 242.2 289.3 329.7 

EBITDA 417.9 636.7 841.8 998.5 1,156.4 

Growth 15% 52% 32% 19% 16% 

EBITDA M argin 13% 11% 11% 11% 11% 

Depreciation & Amortization 43.5 66.1 83.6 100.8 210.2 

Other Provisions 17.2 5.8 4.8 3.9 3.2 

Operating EBIT 357.2 564.8 753.5 893.8 943.0 

Interest Income 14.1 45.8 33.9 73.4 90.4 

Investment Income 0.7 0.0 0.0 0.0 0.0 

Interest Expense 36.6 94.6 128.2 136.0 133.6 

Non-Operating Revenues 2.6 29.0 42.1 0.0 0.0 

Pre Tax Income 337.9 545.0 701.3 831.2 899.8 

Income Tax 9.4 11.5 21.0 24.9 45.0 

Effective Tax Rate 3% 2% 3% 3% 5% 

NPAT 328.5 533.5 680.2 806.2 854.8 

Growth 23% 62% 28% 19% 6% 

Extraordinary Items 1.9 0.0 0.0 0.0 0.0 

Net Income 330.4 533.5 680.2 806.2 854.8 

M inority Interest 0.5 0.1 25.4 32.4 42.3 

Net Attributable Income - NAI 330.2 508.1 647.8 764.0 787.6 

Growth 23% 54% 28% 18% 3% 

ROS 10% 9% 8% 8% 7% 

Balance Sheet 2005a 2006a 2007e 2008f 2009f 

Cash & M arketable Securities 277.3 994.4 880.1 1,380.0 1,667.8 

Trade Receivables-Net 750.1 883.1 1,212.6 1,448.4 1,650.7 

Inventory 842.1 1,746.4 1,611.2 1,701.3 1,938.8 

Other Current Asset 16.2 350.1 473.8 561.7 637.1 

Total Current Asset 1,885.7 3,974.1 4,177.7 5,091.4 5,894.4 

Net Fixed Assets 367.4 557.9 591.8 1,238.0 1,286.5 

Projects Under Implementation 145.9 145.5 574.6 0.0 0.0 

Other Assets 4.9 202.9 17.8 17.8 17.8 

Total Assets 2,403.9 4,880.3 5,361.9 6,347.2 7,198.6 

Short Term Bank Debt 291.1 1,927.8 1,545.1 1,700.5 1,669.7 

CPLTD 459.2 27.5 19.1 0.0 0.0 

Accounts Payable 40.8 222.7 306.7 366.3 417.5 

Dividend Payable 0.0 0.0 0.0 0.0 0.0 

Other Current Liabilities 222.9 192.4 158.5 189.4 215.8 

Total Current Liabilities 1,014.2 2,370.5 2,029.5 2,256.2 2,302.9 

Long-Term Debt 38.6 19.1 38.3 0.0 0.0 

M inority Interest 8.9 158.5 329.5 371.8 396.7 

Provisions 30.8 28.9 22.6 20.5 18.5 

Total Shareholders' Equity 1,296.3 2,253.6 2,901.4 3,665.4 4,452.9 

Total Liab.& Shareholders' Equit 2,403.9 4,880.3 5,361.9 6,347.2 7,198.6 

Free Cash Flow Statement 2005a 2006a 2007e 2008f 2009f 

NOPLAT 352.8 542.7 729.9 865.0 891.8 

Non-Cash Items 60.7 71.9 88.4 104.7 213.4 

Gross Cash Flow 413.5 614.6 818.3 969.7 1,105.2 

Gross Investments 526.2 1,681.1 514.3 396.0 723.3 

Non -Operating Cash Flow 4.4 28.4 40.8 0.0 0.0 

Free Cash Flow 

Financing Flow 

-108.2 -1,038.1 344.9 573.8 381.9 

Interest Income After-Tax -14.0 -45.7 -33.8 -73.2 -89.9 

Investment Income After-Tax -0.7 0.0 0.0 0.0 0.0 

Increase in Excess Cash & M. Sec. 111.3 516.6 -161.1 564.7 241.6 

After-Tax Interest Expense 35.6 92.6 124.4 132.0 126.9 

Decrease in Debt & Bonds -538.7 -1,185.5 371.9 -98.0 30.9 

Provisions Used 

Source: El Sewedy Cables 

Dividends Paid 

Historical & Prime Esti- 

Non-Appropriation Items 

mates 

Shareholders Equity 

9.9 

0.1 

0.0 

288.2 

7.7 

25.4 

0.0 

-449.2 

11.1 

32.4 

0.0 

0.0 

6.0 

42.3 

0.0 

0.0 

5.2 

67.2 

0.0 

0.0 

Total Financing Flow -108.2 -1,038.1 344.9 573.8 381.9 

19

HEAD OFFICE 



Stock Recommendation Guidelines 

Recommendation Target to Market price (x) 

Strong Buy x > 25% 

Buy 15% < x Average LCY IBOR 

Speculative Quality Earnings Reflect Above Normal Risk Factor 

PRIME SECURITIES S.A.E. 

Regulated by CMA license no. 179 

Members of the Cairo Stock Exchange 

2 Wadi El Nil St., Liberty Tower, 

7th-8th Floor, Mohandessin, Giza, Egypt 

Tel: +202 3005700/770/650/649 

Fax: +202 760 7543; Email: inforesearch@primegroup.org 

PRIME EMIRATES LLC. (UAE) 

Members of the ADSM and DFM 

Shiekh Zayed 1st Street, Khaldiyah, Abu Dhabi, UAE 

PO Box 60355 

Tel: +971 2 6910800 Fax: +971 2 6670907 

Email: research@primegroup.org 

Egypt 

This document has been compiled by Prime Securities S.A.E. and obtained from information we believe to be fair and 

accurate at the time of publication. This report should not be construed as a solicitation to subscribe to or sell any 

investment. We accept no responsibility or liability to the accuracy of this document and our opinions are subject to change 

without notice. Investors should understand that statements regarding future prospects might not be realised and Prime 

Securities S.A.E. shall not bear any legal obligation as a result of direct or indirect losses arising from information herein. 

Foreign currency rates of exchange may also affect the value, price or income of any security or related investment referred 

to in this report. Prime Securities S.A.E, an affiliate of the full service firm Prime Group, may currently, or in the future 

have business relationships with companies covered in this report. Copyright 2007 Prime Securities S.A.E. All rights 

reserved. You are hereby notified that distribution and copying of this document is strictly prohibited without the prior 

approval of Prime Securities S.A.E. 

20

El Sewedy Cables - Zawya

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