Lecico, Egypt's biggest publicly listed tiles firm, has put its expansion plans on hold.
Lecico holds growth for firmer footing
An Egyptian tiles company is putting its expansion on hold after a 61 per cent decline in profits for the final quarter of last year coincided with political turmoil in the country.
Lecico Egypt said its net income in the fourth quarter declined to 11.1 million Egyptian pounds on weaker sales and provisions.
As a result, the company decided to put off the second phase of its expansion and is now "dependent" on the recovery of the local market, it said. "I believe we should expect continued weakness in 2011 with European demand slower and Egyptian sales probably very weak until we see political progress," said Gilbert Gargour, the chairman and chief executive of Lecico.
Much of Egypt's economy was halted after the political protests that ousted Hosni Mubarak erupted on January 25, and has been only slowly returning to normality.
The company's shares have been suspended since January 27 when the Egyptian Exchange decided to halt trading in light of civil unrest.
National Bank of Kuwait put the stock "under review".
"In light of the recent developments we emphasise that our earlier forecasts for Lecico do not hold any more," wrote Rajat Bagchi, an analyst at the bank.
The company in 2009 decided to invest in a US$42 million tile factory, to be built in two phases, each capable of producing 6.4 million square metres of red quarry tiles and 2.1 million sq metres of porcelain tiles. The first phase has been completed.
Company management says Lecico's two existing plants in Egypt suffered production delays of more than a week during the turmoil, but did not sustain any physical damage and are operational, Mr Bagchi said. All employees were safe.
The sanitary ware segment, which was plagued by a labour shortage until recently, will face further trouble due to the tightening in export markets.
Economic recovery in the company's key European export markets, which account for about half of total sanitary ware exports, have been slow and the near-term prospects do not look encouraging, Mr Bagchi said.