Egytrans Investors Presentation 2016 Updated - 28 Jan...
Transcript of Egytrans Investors Presentation 2016 Updated - 28 Jan...
Egytrans Investors’ Presentation2016 Annual Results
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Statements contained in this document that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Egytrans. Such statements involve known and unknown risks, uncertainties and other factors; undue reliance should not be placed thereon. Certain information contained herein constitutes “targets” or “forward‐looking statements,” which can be identified by the use of forward‐looking terminology such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Actual events or results or the actual performance of Egytrans may differ materially from those reflected or contemplated in such targets or forward‐looking statements. The performance of Egytrans is subject to risks and uncertainties. Various factors could cause actual results to differ materially from those expressed or implied by the forward‐looking statements in this document including worldwide economic trends, the economic and political climate of Egypt, the Middle East and changes in business strategy and various other factors.
Disclaimer
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Agenda1. Company Overview2. Why Egytrans?3. Global Transport & Logistics Industry 4. Transport & Logistics Overview Egypt5. Financial Statements6. Strategic Direction7. Industry Outlook 8. Egytrans Outlook
Outline
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COMPANY OVERVIEW
We make integrated transport easy, safe &cost-effective
Click to edit Master title styleHistory and Milestones
Click to edit Master title styleSubsidiaries and Affiliates
Click to edit Master title styleKey Services
Click to edit Master title styleOur Blue Chip Customers
Click to edit Master title styleShareholder’s Structure
Source: Egytrans
Shareholders’ Structure as of 31‐Dec‐2017
Leheta Family, 11.67%
National Investment Bank, 25.25%
Free Float, 30.42%
Financial Institutions,
8.81%
Mohamed Ashraf Omar Group, 18.00%
Mostafa Eissa, 5.85%
Other, 32.66%
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Egytrans has committed itself to a code of corporate governance that ensures responsible,value‐based, transparent management of the company, reinforcing the long‐term confidenceof shareholders, customers, employees and other stakeholders in the leadership of thecompany.
Egytrans has received a number of awards in Corporate Governance in recognition of ourefforts in this area.
Reviews of the company’s corporate governance practices were conducted by IFC more thanonce, most recently in 2016, to ensure continued application of best practices
Corporate Governance
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Incident Free ‐We are committed to fulfil our Incident‐Free ambition to protect people, the environment, our assets and reputation.
Environmental Stewardship ‐We are committed to preventing and minimizing environmental impacts, maintaining a robust environmental management system and effective emergency management plans in compliance with laws, regulations, and good industry practice.
Business Conduct ‐We work against all forms of corrupt practices including bribery and facilitation payments. We focus our efforts on implementing a robust compliance program which includes amongst other measures mandatory procedures, employee training, due diligence of third parties, and recording of gifts and hospitality.
Employees –We are committed to providing positive, productive and supportive working environments for all employees. We treat all employees with respect and dignity and we will not tolerate discrimination or harassment of any kind.
Human Rights ‐We respect human rights and are committed to integrating human rights into our business processes in accordance with the United Nations Guiding Principles on Business and Human Rights, with a focus on human rights due diligence and establishing operational grievance mechanisms.
Stakeholder engagement – We proactively engage with stakeholders to understand their interests. Communities – We commit to making a positive contribution to local communities’ social and
economic development through our core business activities, by seeking out opportunities to leverage our capabilities and working in partnership with reputable business partners, charities and organizations.
Corporate Sustainability & Social Responsibility
Egytrans is committed to conducting business in a responsible, ethical and sustainable manner. Our business is underpinned by our Core Values and Policies, our commitment to the United Nations Global Compact and seven core principles we integrate into our business:
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Why Egytrans?
Click to edit Master title styleEgytrans has the right leadership, the right strategy and the financial strength to drive superior shareholder returns
Market Strength Established
Brand with diverse long term customers
Strong market position
Strategy and Resources Solid Strategy Strong Balance
Sheet
People
Strong leadership with proven track record
Customer driven employees
Continuous improvement culture
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A growing market opportunity Accelerating EBITDA and cash generation, while investing in growth Numerous company‐specific margin improvement opportunities Well‐diversified by service offerings and customer base Leader in high growth project logistics sector World class team who are focused on driving results
Egytrans: High Growth and High Returns
We are on track in our strategic direction and in a good position to achieve 2017
targets
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We use our highly integrated network of people, technology and physical assets to help customers manage their goods more efficiently throughout their supply chains
2016 Revenue of 173.1 mn
Freight Forwarding 47.4% of Revenue
Transport42.6% of Revenue
Storage 10% of Revenue
We are a leading Transport & Logistics Company
Source: Egytrans Separate financials
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Key Metrics: # of Customers: 500 # of Employees: 325 Locations: 8 branches Warehouses: 28,000 m2
in 3 locations
Gross Revenue Profile
Well Diversified Business Mix
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Project Logistics • # 1 provider in Egypt with 60% market share • Versatile service offering with multiple sector experience
Leading Positions in Fast Growing Industry Sectors
EGYPROJECT Bonded Storage
• Total area 10k m2, specialized in handling and storing general cargo, including oversized and heavy lift equipment or packages
• Yard applies international standards, maintaining highest safety, health, quality & environmental regulations.
ISO Tanks • #1 provider in Egypt with 70% market share • New Service with high growth opportunity
Click to edit Master title styleGrowth in Project Logistics
Egytrans’ market share in Project Logistics rose to 60% from 35% in the previous year.
Main power projects awarded to Egytrans in 2016: Beni Suef and the New Administrative Capital Gas Turbine Power stations established by
Siemens, with a total production capacity of 4.8 gigawatts each, representing the largest power stations in Egypt, as well as the largest ever in the history of Siemens.
South Helwan Power Station, established by Mitsubishi‐Hitachi, with a total production capacity of 1.95 gigawatts
Gabal El Zeit II Wind Station, established by the Spanish company Gamesa. This phase comprises the installation of 130 wind towers.
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Global Transport & Logistics Market 2015/2016
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Demand for Transportation and Logistics continues to decrease
World trade growth declined to 2.6 percent in 2016 down from 3% in 2015
Decrease in fuel prices does not offset decline in earnings
Airlines and Transport infrastructure have benefitted most from declining fuel prices and have weathered difficult environment positively
Shipping companies were the worst performers within the sector, as they faced their eighth consecutive year of crisis.
Market fundamentalsLong term downside pressures weigh on lackluster economy
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Ninth consecutive year of crisis for Shipping Industry due to oversupply of capacity coupled with declining demand
Containership fleet grew by 8 percent in 2015 which added to the persisting overcapacities in the market.
Subsequently, container freight rates declined by 30 –40 percent even as scrapping of capacities continued.
Total net fleet capacity grew by “only” 4.6 percent in 2016, the lowest ever recorded growth of the global containership fleet
Larger mergers and restructuring efforts of shipping companies trend will continue across the globe .
The dissolution of Hanjin, one of the major shipping lines in the world, may balance the supply demand market and improve outlook for 2017 .
Shipping and Sea freight
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Global air freight volumes expanded by 2.2 percent in 2015, which was lower than in 2014 according to IATA..
The falling oil prices and persistent overcapacities (due to the expansion of belly capacity over the last years) caused a further deterioration of air freight rates. The average monthly decline of air freight rates in 2015 was ‐9 percent.
The fall in fuel prices means a mid‐term modal re‐shift of cargo from sea to air freight. Air freight is still largely dependent on the state of the global economy and world trade.
Air Freight
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Transport & Logistics Overview Egypt
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Foreseen economic and political stability A large competitively priced labor force Large consumer market An ambitious plan for developing
infrastructure across all governorates Competitive tax rates Preferential access and proximity to key
global markets A diversified economy Investment and legal reforms to
encourage investments
Egypt’s Economy; GDP vs. Inflation
GDP Growth vs. Inflation (2011/12‐2015/16)
Source: CBE
0%
2%
4%
6%
8%
10%
12%
14%
16%
0%
1%
2%
3%
4%
5%
Real GDP @ Factor Cost Headline CPI Inflation
Egypt’s Ideal Geographic Position gives its Logistics Market the Potential to Thrive
Accounting for 3.1% of GDP in FY2014/15 (fiscal year running from July‐June), Egypt’s logistics and transportation sector encompasses more than 108,000 kilometers of paved roads, 9570 kilometers of railways, globally ranked airports in all major urban centers, including an air cargo airport of five terminals in Cairo, six seaports on the Mediterranean and nine on the Red Sea, six dry ports and an extensive network of Nile river transport facilities.
Click to edit Master title styleTransport & Logistics /GDPShare of GDP remains constant growing from 4.3 % in 2015 to 4.4% in 2016.
2014/2015 2015/2016
Source: CBE Source: CBE
11.2%
12.5%
15.8%
2.4%5.1%
9.5%
3.2%1.7%
4.4%
13.4%
3.9%0.7%1.6% 9.7%
4.8% Agriculture, Forests & FishingExtraction (Oil & Gas)ManufacturingUtilitiesConstruction & BuildingReal EstateCommunication & ITSuez CanalTransportation & StorageWholesale & Retail TradeFinanceInsurance & Social InsuranceTourismGeneral GovernmentHealth & Education
11.1%
13.5%
16.0%
2.3%4.7%
9.3%3.1%1.7%
4.3%
13.0%
3.9%
0.7%2.3% 9.5%
4.7% Agriculture, Forests & FishingExtraction (Oil & Gas)ManufacturingUtilitiesConstruction & BuildingReal EstateCommunication & ITSuez CanalTransportation & StorageWholesale & Retail TradeFinanceInsurance & Social InsuranceTourismGeneral GovernmentHealth & Education
Click to edit Master title styleTransport & Logistics Weight/Implemented Investments increases to 11.4% in 2016 vs 10.3% in 2015
2014/2015 2015/2016
Source: CBE Source: CBE
4.0%
20.9%
12.6%
8.5%
1.2%
11.5%5.7%
8.2%
10.3%
4.1%0.2%
0.6%12.1%
Agri, Irrigation & Reclamation
Extraction (Oil & Gas ‐ Others)
Other Manufacturing
Utilities
Construction & Building
Real Estate
Communication & IT
Suez Canal
Transportation & Storage
Wholesale & Retail Trade
Finance
Tourism
Health & Education & Others
4.3%
15.9%
12.5%
5.7%
3.0%10.1%
6.1%
7.7%
11.4%
4.0%
0.01%1.5%
17.7%
Agri, Irrigation & Reclamation
Extraction (Oil & Gas ‐ Others)
Other Manufacturing
Utilities
Construction & Building
Real Estate
Communication & IT
Suez Canal
Transportation & Storage
Wholesale & Retail Trade
Finance
Tourism
Health & Education & Others
Click to edit Master title styleTransport & Logistics Main Growth Drivers
Imports & Exports Suez Canal Traffic
Source: CBE Source: CBE
‐20%
‐15%
‐10%
‐5%
0%
5%
10%
15%
20%
05000
100001500020000250003000035000400004500050000550006000065000
2011/12 2012/13 2013/14 2014/15 2015/16
Imports Exports Imports GR Exports GRUSD mn
‐10%
‐5%
0%
5%
10%
0
5000
10000
15000
20000
2011/12 2012/13 2013/14 2014/15 2015/16
No. of Vessels Net Tonnage (In mntons)
Vessels GR Tonnage GR
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Ports and Suez Canal
Suez Canal accounts for roughly 7.5% of world sea trade and is one of the world’s five ‘strategic chokepoints’ through which the overwhelming majority of the world’s oil flows. Egypt has 40 sea ports, of which 12 are commercial ports; six mining ports; six fishing ports; five marinas; and 10 oil shipping ports. Among the most important ports are Alexandria, the biggest port in Egypt, and the Port of Dekheila,. Damietta Port has the largest container terminal and the most sophisticated equipment in the Middle East, while Port Said and Port Suez occupystrategic positions at each end of the Suez Canal.Port infrastructure is also weak and suffers from lack of maintenance of equipment, evidence points to inability to meet the requirements of shipping lines due to insufficient space and water depth to accommodate containers. .
Air FreightEgypt has 73 airports with paved runways, five of which are international airports. Egypt’s airport development plans are driven by longterm tourism opportunities.The largest and most active airport is in Cairo, being the second‐busiest airport in Africa with direct flights to most countries.There are frequent flights within the country and improvements to the air infrastructure will increase handling capacity and efficiency, which will benefit the transport and logistics sector.
RailThe rail freight sector’s network is limited and undeveloped its operational capacity is stretched to the limit. Up to 85% of rolling stock is long past its replacementdate. Railway connects Cairo and Alexandria with the main towns in the north of the country, all the large towns in the Nile Basin down to Aswan, and Safagaon the Red Sea coast. But does not cover new, important origin/destination flow zones. Absence of direct links to dry ports and factories and storage terminals is another hindrance.
.
Land TransportEgypt’s roads carry the largest share of freight (53%), which increases the country’s dependence on the maintenance of the road infrastructure. 92% of roads are paved. But narrow and of poor quality, network capacity is inadequate, and the vehicles used are mostly outdated. In 2011 the road transport industry comprised approximately 743,000 trucks,most of which are not capable of carrying containers, thereby hampering port‐hinterland container transport. These trucks have also been found unsuitable for carrying specific commodities, mainly agricultural products.Additionally increase in the number of long trailer vehicles, which are not built to standard international specifications and jeopardize road safety.
Poor Infrastructure Slows Tempo of Market Growth. In 2010, Logistics revenues touched $17.04 bn. Government has been unleashing initiatives to make the country a global logistics hub by facilitating business processes.
Click to edit Master title styleIn spite of this Logistics is a performing sector
The World Bank’s LogisticsPerformance Index shows Egypt has significantly improved its logistics performance over the past few years, with the country moving from 92nd in 2010 to 49th place out of 160 countries globally in 2016 . In the MENA region Egypt is ranked 6th behind gulf countries. Increased efficiency in international shipments and infrastructure improvements rate strongly in the country’s logistics performance.Notable is that Egypt scored highest in the timeliness sub‐indicators, which measures the timeliness of shipments reaching their destination. On the other hand, the lowest score was assigned to the customs sub‐indicators, which measures the efficiency of the clearance process.
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Consolidated Financial & Operational Performance2016
Click to edit Master title styleMarket Dynamics
Transport and Logistics industry in decline globally suffers from oversupply and decreasing demand
Import restriction locally
Inflation, VAT and float impact trade negatively
EGP float Government
spending on mega projects
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Revenues were up 63.3% Y‐o‐Y to reach EGP 215.5 million Costs increased 45.5% to EGP 142.2 million SG&A escalated by 26.9% to EGP 32.3 million EBITDA recorded EGP 41.1 million compared to EGP 8.6 million a year ago Backed by the EGP currency floatation, an exceptional FX gain was recorded
amounting to EGP 44.5 million, this was coupled with an 81% hike in Investment Income to EGP 10.4 million
Meanwhile, provisions were booked at EGP 24.8 million Net Profits after Taxes skyrocketed to EGP 58.7 million vs. EGP 9.9 million in FY
2015 Revenues from other lines of business were mixed in 2016 affected by the
macro‐economic slowdown
Full Year 2016 Highlights
Egytrans ranked as one of the top 100 performing companies in 2016 by Amwal El Ghad
Click to edit Master title styleConsolidated B/S (2015‐2016)
Click to edit Master title styleConsolidated I/S (2015‐2016)
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Performance (2010‐2016)
Source: Egytrans consolidated financials
Egytrans Consolidated; Financial Performance
‐20%
0%
20%
40%
60%
80%
‐101030507090
110130150170190210230
2010 2011 2012 2013 2014 2015 2016
Revenues Cost of Revenues SG&A
EBITDA Net Profits Revenues GR
In EGPmn
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Performance (2010‐2016)
Source: Egytrans consolidated financials
Egytrans Consolidated; Margins Performance
‐5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
Gross Profit Margin EBITDA Margin Net Profit Margin
Click to edit Master title styleEgytrans Separate I/S (2015‐2016)
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Revenues Details (2015‐2016)
Source: Egytrans separate financials
Egytrans Separate:Contribution by Business Line
Click to edit Master title styleETAL Separate
Click to edit Master title styleEDS Separate (figures are in USD)
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Share Performance (2016 – Mar 2017)
Source: Mubasher
Indices values are rebased and on a daily basis
Egytrans share price has shown a great performance during 2017 and reached a high of EGP 15.49 (18‐Oct ‐2017). Moreover, it outperformed all EGX indices with a 181.1% vs.‐ EGX30 (YTD of
21.7%)‐ EGX70 (YTD of
78.6%)‐ EGX100 (YTD of
79.9%)‐ EGX20 Capped
(YTD of 19.4%)
Egytrans Share vs Market Indices (2017)
Data till 31‐Dec‐2017
4
6
8
10
12
14
16
ETRS EGX30 ‐ rebased EGX70 ‐ rebasedEGX100 ‐ rebased EGX20 ‐ rebased Linear (ETRS)
Outperforming period
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Strategic Direction
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Our Approach Detailed review of operations Conducted internal assessment of management, assets, equipment, labor etc. Analyzed external factors including customers, markets, competitive environment and
investment opportunities
Situation Analysis
Positives Strong operations and leadership No structural differences with competitors Powerful brand Dedicated employees, positive culture Strong customer base and relationships Opportunities for investment Strong balance sheet Growing number of clients seeking value
services Increased Transport and Logistics
infrastructure
Challenges Turbulent global market Declining foreign trade Fragmented, unregulated competition at
lower cost Macro economic instability Legal & regulatory environment Lack of clarity in government planning
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Accelerate Profitable Growth
Close the Gap –Operational Excellence
Introduce Differentiated
Services
Accelerate Profitable Growth Grow high value
services Grow account share
with large customers Penetrate new markets
Strategic Direction
Close the gap Operational Excellence Efficiency in utilization of working capital Lead industry in safety and security Exceed customer expectations Increase operational productivity Achieve competitive margins
Introduce Differentiated Services Launch high value
differentiated services Leverage and integrate
new technology solutions for logistics and operating systems
Egytrans delivers best in class transport and logistics services with a strategy that rests on three pillars to deliver long‐term profitable growth
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Industry Outlook
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Growth by subsectorConsidering individual subsectors, ports are predicted to grow the fastest at 5.8% on average per year over the forecast period, while airport investments are expected to slow down to an annual growth rate of 2.6%.Roads will likely remain the biggest area of investment, especially for growth markets. This is partly due to the rise in prosperity and, hence, car ownership in developing countries.
Global Outlook to 2025 Transport infrastructure investment is projected to increase at an average annual rate of about 5% worldwide over the period of 2014 to 2025.
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Roads still make up the largest subsector for transport spending in the Middle East. The rate of car ownership is expected to increase sharply over the coming decade; consequently, the investment in roads is expected to increase as well – by almost 116% over this period to reach $31bn per year by 2025.
Global Outlook to 2025 Growth by region
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During the upcoming 5 years we expect incoming mega energy & power projects announcedby the government, including El Daba’a nuclear station construction, expansions in wind andsolar energy plants and the increase of electricity capacity by 30,000 megawatts via newplants to be added to the national grid.
Moreover, Oil & Gas and Petrochemical projects will enhance and boost the T&L sector(Projects LoB). Total expected investments for the aforementioned projects are USD 76.1bn*, of which USD 28.6 bn* as signed contracts and the rest is MoUs.
One of the major growth drivers is a possible increase in river transport business in line withthe government plan to reach 10% of the cargo transported locally via river. River transportvia barges and ports operations and management has high profitability margins but there aremany challenges remaining.
Suez Canal Development Zone projects which offers a bundle of investments in ports,logistics and maritime related activities. Moreover, there are other projects in infrastructure,industrial & manufacturing, ICT and business parks.
Egypt Transport & Logistics Outlook
* Figures are extracted from EFG‐Hermes economy & strategy report “Wrapping up a successful EEDC” dated March 25, 2015
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Egytrans Outlook
Click to edit Master title stylePositive Industry Outlook
Increasingly stable operating environment. Economic conditions are still challenging but this creates opportunities for
well‐capitalized and experienced companies like Egytrans. There continues to be strong potential in the transport and logistics
market in Egypt and we believe the value of our brand equity will continue to set us apart from the competition.
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Accelerating cash flow due to EBITDA growth Higher margins backed by higher operational revenues in line with an
improved Cost/Revenues ratio Enhanced Return on Assets and Return on Equity ratios Considerable FX gain resulted from EGP floatation effective November 3rd
2016 Escalating net profits Y‐o‐Y reflecting the overall operational performance
Strong Financial Position
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Given the expected huge investments in the sector which will offer greatopportunities for Egytrans to invest and participate in either directly or viaoperations.
Expanding regionally, there is huge potential in the Libyan market during thestage of reconstruction if stability and security are recovered.
Government plans to expand heavily in exports which will help Egytrans toincrease its volume of regular business like Sea Freight, Customs Clearance andConsolidation LoB.
Egytrans added new Bonded Warehousing LoB in Al Adabeya (Suezgovernorate), which will add a considerable value.
ETAL added new crane equipment enabling it to expand considerably on itsLifting & Installation activities
Outlook For Egytrans
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Egytrans is considering potential projects, which are still undergoing technical andfeasibility studies to be announced once studies are finalized. Among these are: Expanding Warehousing services and/or 3PL (Locations to be decided) Expansion on EDS capacity & locations Exploring opportunities in Inland transport Growing YoY market share in Projects LoB, which is anticipated to grow over
the next few years with the expected higher demand in mega projects inflowto Egypt
Has a clear strategic plan for the next 5 years in order to enhance revenues andprofitability. The plan includes expansions into new LoB within EGYTRANS inaddition to entering new businesses that are related to Transport & Logistics vianew subsidiaries or existing ones.
Good utilization of finance proceeds that are invested in expansions or newprojects after a comprehensive and extensive feasibility study through aspecialized team.
Given the company’s large market share in the Projects LoB, it is expected thatEgytrans will strongly participate in these projects as proved by its extensive andsuccessful track record.
Outlook for Egytrans
Click to edit Master title styleEgytrans Outlook Consolidated; Financial Performance
Source: Pharos ‐ Egytrans Valuation Update Report / 14 Jan 2018
‐30%
‐10%
10%
30%
50%
040
80120160
200240280
320360
2017 2018 2019 2020
Revenues Cost of Revenues SG&AEBITDA Net Profits Revenues GRNet Profits GR
In EGPmn
Click to edit Master title styleEgytrans Outlook Consolidated; Margin’s Performance
0%
5%
10%
15%
20%
25%
30%
35%
40%
2017 2018 2019 2020
Gross Profit Margin EBITDA Margin Net Profit Margin
Source: Pharos ‐ Egytrans Valuation Update Report / 14 Jan 2018
Click to edit Master title styleEgytrans’ Plans for 2017
We continue to focus on enhancing cost‐effectiveness and implementing best practices to grow returns
Developing new services for existing and new customers is a key deliverable at the core of the strategy.
Other investments in transport and logistics are under study.
Click to edit Master title styleEgytrans’ Plans for 2017
This new Line of Business is expected to:o Reduce outsourcing
costso Improve marginso Enhance cash flowo Increase operational
control for critical cargo
o Integrate company’s overall supply chain services
Egytrans is in the process of launching a pilot project in‐land transport to compliment its line of business in that area. New activity comprises 5 container trucks as a start‐up fleet for regular container transport with potential for further expansion.
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Thank you for your attention