The biggest Arab cable maker is lifting productivity, and the future could be even brighter because of a drop in copper prices. El Sewedy Cables, based in Cairo, reported strong earnings yesterday and analysts see encouraging prospects ahead. The company recorded first quarter revenue of 2.9 billion Egyptian pounds and net income of 251 million pounds, an increase of 199 per cent over the previous quarter and a 30 per cent rise compared with the same period last year.
El Sewedy shares moved up 3.2 per cent to 70.50 Egyptian pounds a share, but the Nomura analysts Chet Riley and Sunrita Bhowmik believe the stock is still undervalued by 37 per cent. The company specialises in making copper cables, although it has been expanding into other energy solutions. But the cable business is responsible for 84 per cent of the company's total revenues and 71 per cent of gross profits.
The company has production plants in North Africa and exports to the MENA region, southern Europe and Brazil. In the past year, the company has increased its annual production capability from 135,000 to 165,000 tonnes. The price of copper has been volatile lately. All told, it is more than 13 per cent lower for the year, contributing to greater demand from customers. El Sewedy forecast an 800m pound increase in net profit for the coming year but analysts already suspect that number could be conservative.
"While our full-year net income expectation of 797m pounds for 2010 are left unchanged at this stage, we stress the fact that they might be revised upward should the strong cable segment performance prove to be sustainable," Laurent-Patrick Gally, an analyst with Shuaa Capital, said in a note. While cable remains the company's core business, it also appears to be making roads into other segments. The company yesterday announced a US$100m (Dh367.2m) contract with Mozambique to upgrade the country's electricity distribution networks.
It has also made sizeable investments in wind energy that have yet to produce significant profits but could begin to do so as early as next year. halsayegh@thenational.ae