ElSewedy Electric

Wires & Cables Industry Analysis

Presented to
Dr. Amira Saleh
Prepared by
Bahgat Mahmoud
Maged Attia
Omar Ghareeb
Mohamed ElBanna
Mai Ashmawy

Introduction
Cables Manufacturing industry is one of the most
important industries in Egypt due to the increase in
governments' spending on infrastructure to attract
more investments.
Companies in this industry manufacture wires,
cables, and cords.

Introduction
Egypt is now considered to be one of the largest
countries in manufacturing and exporting of
those products.
However, the recent Arab spring and the related
political crisis in the region have impacted some
of the ambitious power projects, existing ones as
well as those in pipeline.
Further, a surge in cable capacity in the region
has overtaken demand in the recent past.

Market structure
Cable industry has the following structure
characteristics:
Few # of major players.
Products are identical or differentiated.
High barriers to entry & exit.

Industry Type
Cables industry is a Production Industry.
ElSewedy cables is specialized in the three
stages:
Manufacturing.
Wholesalers.
Retailers.

Local Market Shares

Major local players:

ElSewedy Cables.
Giza Cables.
Electro Cables.
International Cables.
Others.

ElSewedy Cables

Giza Cables

Electro Cables

International Cables

Others

6%
7%
11%

55%
21%

Market Shares
Major International Players:

ElSewedy Electric.
Elloumi Group.
Energya.
Nexans.
General Cable.
Others.

Company Brief
The ElSewedy family began what is today
ElSewedy Electric in 1938 as an electrical
equipment trading company.
In 1960, after developing deep market
understanding and local presence, the company
became Egypts first specialized cables distributor.

In 1984, Arab Cables as the company was then

called built the countrys first private sector
cables factory.

Company Brief
The event marked the beginning of ElSewedy
Electrics corporate identity.
ElSewedy is not only focusing in local market but
also in GCC, MENA region, and Europe.
It maintains 30 production facilities in 15
countries.
It exports to 110 countries worldwide.

Ownership Structure
27 % Free Float

9%
27%

24 % Sadek Ahmed El Sewedy

17%
23% Ahmed Ahmed El Sewedy
17% Mohamed Ahmed El Sewedy

23%

24%

9% Other Non-Executive Sewedy

Family

Macro environmental factors

(PESTEL)
Political Factors:
The electric cables industry in Egypt experienced a
slowdown in sales throughout 2013 4th quarter with
respect to the same quarter in 2012 due to the
political instability and uncertainty in Egypt.
ElSewedy cables experienced a decline in sales due
to labor protests and the political situation leading to
a decrease in gross profit in Q4 2013 decreased by
17% to reach EGP 388 million versus EGP 470 million
in Q4 2012.

Macro environmental factors

(PESTEL)
Economic factors:
The economic situation of world can also affect
the industry as rising inflation rate make the
cost of manufacture high and thus reduce the
profit margin of the industry.
The core inflation rate in Egypt was recorded by
the central bank of Egypt at 9.11 percent in April
of 2014. Decreased from 9.90 percent in the
previous month.

Macro environmental factors

(PESTEL)
An increase in the prices of fuel and electricity is expected due
to the new government direction to change the current energy
subsidies system, which will affect all companies operating
costs including ElSewedy.
Exports (Raw materials) from foreign markets leading the
company to be exposed to High foreign exchange risks.
USD exchange rate increased to 7.11 EGP but the prices of
cables industry imports wasnt really affected by this increase
due to the decline in prices of copper worldwide.

Macro environmental factors

(PESTEL)
Social factors:
Population size: The Egyptian population at home
increased to reach 86 million.
The continued dramatic increase in the
population pushes the government to increase
its spending on the development of
infrastructure in Egypt.

Macro environmental factors

(PESTEL)
Such development will increase the demand on
the electric cables industry in Egypt as it is a basic
need in a lot of infrastructure projects.

Age Demographic Segmentation: Since 60% of

Egypt's current population lies between 15 54
years old, this segmentation guarantees a strong
current and future development projects.

Macro environmental factors

(PESTEL)
Technological factors:
Electric cables industry uses the most
advanced cost effective and clean technology in
production.
ElSewedy developed an understanding of which
core technologies to master and make aggressive
investment in these opportunities.

Macro environmental factors

(PESTEL)
Environmental factors:
Law 4/1994 obliges any factory to conduct an
environmental impact assessment even before
its established; many international standards
have been imposed to guarantee the factories
commitment to health and safety principles.
But the reality that till now the Environment
Ministry fails to enforce this laws.

Macro environmental factors

(PESTEL)
Legal factors:
Tax law: The corporate tax rate in Egypt is relatively
lower than the world average. Which make it less
expensive for producers to produce in Egypt in terms
of tax rates.
Egypts new constitution, ratified on 18 January
2014, Article 238 obliges the state to reach
international spending rates by a specific time the
amendments increase the spending rates to 3% for
health, 4% for education and 1% for scientific
research.

Micro environmental factors

(Michael Porter 5 factors model)

Intensity of
competition

Bargaining
power of
suppliers

Bargaining
power of
customers

Threat of
substitute
industries

Barriers to entry

Micro environmental factors

(Michael Porter 5 factors model)
Bargaining power of suppliers: (LOW RISK).
Too many suppliers.
Inputs have no close substitute.
Few major players in the existing industry.
In order to minimize the bargaining power of
suppliers ElSewedy is self supplier through
(backward integration) to improve its profit
margin and its market share through lower costs,
they internally produce a wide range of raw
materials.

Micro environmental factors

(Michael Porter 5 factors model)
While ElSewedy currently exhausts all of its inhouse production of copper rods, the utilization
of raw steel and PVC has been hovering in the
80% range, which enables the company to sell its
excess capacity to third parties.
Over the medium term, ElSewedy aims to be
able to increase its production capacity for cables
as to use up to 100% of the raw materials it
manufactures.

Micro environmental factors

(Michael Porter 5 factors model)
Bargaining power of customers: (HIGH RISK).
Too many customers: Energy & Infrastructure,
Industry, Buildings & Residential.
Few major players.
In order to minimize the bargaining power of
customers ElSewedy is self distributor through
(forward integration), they Sole Distributor for
their products through ElSewedy electrical
equipments & cables Co. & Authorized
Distributor Gabriel Stores Down Town.

Micro environmental factors

(Michael Porter 5 factors model)
Despite of the vertical integration & due to the
recent political crisis in the region, the short term
appears less bright than the medium to long
term.
The current oversupply along with the weaker
demand in countries affected by the unrest
leaves regional cable producers vulnerable to the
relatively higher bargaining power of customers,
therefore ElSewedy and other regional players
lack pricing power.

Micro environmental factors

(Michael Porter 5 factors model)
Barriers to entry: (LOW RISK).
Absolute cost structure:
Learning experience curve & know how are very high due
to long existence in the market.
Brand loyalty:
Its high due to the products quality, the Brand name
known worldwide.
Economies of scale:
Due to existence since 1938 they eliminated the risk of
the high fixed cost by the excessive production.

Micro environmental factors

(Michael Porter 5 factors model)
Threat of substitute industries: (LOW RISK).
No substitute industries
industry risk as a whole.

which lower the

Intensity of competition: (MODORATE RISK).

Few major players.

Close substitutes to each other.
High fixed cost.
Low rate of demand.

Micro environmental factors

(Michael Porter 5 factors model)
ElSewedy faces competition both locally
and globally, locally the company has a
market share of approximately 55% while
globally it is considered the eighth
worldwide in market share.

7 Risk Characteristics
Cost structure: High operating leverage (HIGH
RISK).
Cyclicality: Cyclical industry (MODERATE RISK).
Profitability: High profits in expansion &
slightly affected in contractions, due to the
exporting business (MODERATE RISK).

7 Risk Characteristics
Dependence:
Supply side: Cooper prices very volatile (HIGH
RISK).
Demand side: Diversified base (LOW RISK).

Substitute:
Product: Too many players (Local & international)
(HIGH RISK).
Industry: No substitute industries (LOW RISK).

7 Risk Characteristics
Regulations:
Control the business environment political &
economic are instable (HIGH RISK).
Cables Industry: company is enforcing high level
of regulation to maintain worldwide standards
acceptance (LOW RISK).

Product life cycle: Matured stage (LOW RISK).

Conclusion
Despite the high risk factors but overall the company
is market leader locally & highly ranked
internationally.
The new green building concept adopted by
ElSewedy will give it a competitive edge over its
competitors & its the new trend worldwide to adopt
healthier environment.

Thank you