CAIRO: Net profits at Egypt’s Oriental Weavers dropped 15 percent in the first quarter, the world’s biggest machine-woven carpet maker said on Tuesday, as raw material costs rose and the Egyptian pound weakened.
The firm said the affects of the weaker currency would eventually be balanced out by the boost it gives to exports, while a new 400,000 ton-per-year fiber production plant now coming on stream would improve margins by the fourth quarter.
"The weakening pound added to already more costly dollar-denominated raw material expenses, as did interest payments on foreign currency debt," Oriental Weavers said in its results statement, adding, however, that a lower pound would ultimately provide important support to the export business.
Egypt’s pound , which weakened by about 2.5 percent in the first quarter, was hurt by the popular uprising that toppled the government in February and frightened away tourists and foreign investors.
First-quarter consolidated net profit slid to LE 82.3 million ($13.9 million) from LE 97.1 million a year earlier, Oriental Weavers said.
The political turmoil, which caused Egypt’s economy to contract by 4.2 percent in the first quarter, had a relatively small effect on revenue, of which about 64 percent came from exports, it said.
Revenue rose 6 percent in the first quarter to LE 966 million, boosted by higher exports, more efficient production and a resilient Egyptian consumer market.
The company said it was able to fulfill all its commitments despite a 10-day work stoppage during the uprising.
High raw material prices, including those of oil, continued to squeeze margins, a problem that was hurting its competitors as well, and might force it to pass them on to consumers, it said.
"Oriental Weavers will consider sharing the burden of these price pressures, should they remain elevated, and will actively pursue a product mix that reduces exposure to the most quickly rising resources," it said.
"Our strategy is generally to be the last to implement price rises and to raise prices as little as possible."
The company said it expected to expand its sales to the United States and Canada, which accounted for 29 percent of total first-quarter sales in the coming months "as product mix, distribution channels and currency movements support exports."
The new fibers plant is part of a LE 1.3 billion industrial complex that would increase its total capacity 60 percent by 2016, the company said.
