1 4Q / FY 2015 Earnings Newsletter GB Auto (AUTO.CA) Earnings Release: 4Q / FY 2015 Full Year 2015 Financial Highlights • GB Auto revenue for the full year of 2015 decreased by 0.5% to LE 12,264.7 million compared to LE 12,322.1 million in FY14. • Net income was LE 233.1 million in FY15, rising by 34% from LE 174.0 mil- lion in 2014. Net profit margin improved by 0.5 percentage points, coming to 1.9% at the end of the year. • Passenger Cars revenue witnessed a 15.9% drop year-on-year in FY15 to LE 7,489.9 million from LE 8,909.9 million in FY14. • Motorcycles and Three-Wheelers revenue rose 49.7% in FY15 to LE 1,997.2 million from LE 1,334.0 million in the year prior. • Commercial Vehicles and Construction Equipment revenue climbed up 45.5% during FY15 to LE 1,327.9 million from LE 912.9 million in FY14. • Tires posted revenue of LE 324.4 million, a 21.9% drop from LE 415.2 mil- lion in FY14. • Financing Businesses revenues stood at LE 1,046.2 million in FY15, a 44.8% increase over LE 722.7 million the previous year. • Others revenue reached LE 79.0 million, up 188.6% from LE 27.4 million in FY14 for Pre-Owned Vehicles, legacy fleet transportation contracts, and Lubricants. Fourth Quarter 2015 Financial Highlights • GB Auto revenue in 4Q15 dropped 23% to LE 2,689.3 million from LE 3,491.5 million in 4Q14. • Net income came in at LE 28.1 million in 4Q15, a 12.3% drop from 4Q14 figures; net profit margin climbed 0.1 percentage points to 1.0%. • Passenger Cars revenue dipped 34.9% year-on-year to LE 1,498.8 million from LE 2,303.6 million in 4Q14. • Motorcycles and Three-Wheelers revenue fell 11.1% in 4Q15 to LE 485.9 million from LE 546.7 million in 4Q14. • Commercial Vehicles and Construction Equipment revenue closed the quarter at LE 286.8 million, an 8% increase from LE 265.5 million in 4Q14. • Tires revenue registered a 15.4% decrease in the quarter to LE 90.5 million. • Financing Businesses revenue increased by 14.5% to LE 294.4 million in 4Q15. • Others revenue came in at LE 32.9 million, growing by 184.2% for Pre- Owned Vehicles, legacy fleet transportation contracts, and Lubricants. AUTO.CA on the Egyptian Exchange GB Auto’s Shareholding Structure as of 31 December 2015 GB Auto 4Q & FY15 Results: Highlights Ghabbour Family Free Float 58.7% 41.3%
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AUTO.CA GB Auto 4Q & FY15 Results: on the Egyptian ...resources.ghabbourauto.com/GB-Auto-ER-4Q15-E-FINAL-4.pdf · and revenue from the bus segment. Tires, on the other hand, saw revenuesdecline
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GB Auto’s Shareholding Structure as of 31 December 2015
GB Auto 4Q & FY15 Results: Highlights
Ghabbour Family
Free Float
58.7%
41.3%
2
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
GB Auto Reports 4Q & FY15 ResultsLeading auto industry player reports bottom-line growth for the year 2015, despite challenging macroeconomic backdrop and resultant operational difficulties.
15 March 2016 —(Cairo, Egypt)GBAuto(AUTO.CAontheEgyptianExchange),aleadingautomo-tiveassembleranddistributorintheMiddleEastandNorthAfrica,announcedtodayitsconsolidatedresultsforthefourthquarterandfullyearof2015,reportingrevenuesofLE12,264.7millionforFY15,down0.5%y-o-y.Netprofitrose34%y-o-y,closingtheyearatLE233.1million,withanetprofitmarginof1.9%,anincreaseof0.5percentagepointsoverFY14.“2015isthefirstyeartoseeGBAutopostadropinitstop-linesinceitsIPOin2007.However,
It is my belief that difficult circumstances are when the best op-portunities generally arise and we are fully confident we can face these head-winds and use them to our own benefit.
34Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
Fourth Quarter 2015 at a Glance
Financing Businesses
Startups
Tires
Commercial Vehicles & Construction Equipment
Motorcycles & Three-Wheelers
PassengerCars
1.8%
Gross Pro�t Contribution by Line of Business
4.8% -1.0%2.0%
1.4%
-0.7%2.8%
1.1%
6.0%
68.3
%22.4
%
3.8%
-1.8%
-0.3%
3.0%
5.3%
65.3
%
18.7
%
3.5% 13.1%
54.1
%24.2%
10.0
%
4.1%
44.0
%
23.4%
16.6%
67.5
%
25.4
%
11.1%
4Q12
3.3%3.4%
70.3%
18.4
%
4Q13
3.3%
4.6%
4.6%
5.5% -0.1%
72.2
%
14.6
%
4Q14
7.6%
3.1%
7.4%
4Q15
1.2%
0.3%
3.4%
10.9%
55.7
%18.1%
Revenue Contributionby Line of Business
4Q11
0.1%5.4%
1.9%2.7%
76.3
%
13.6
%
66.0
%15.7
%10
.7%
Key Indicators(all �gures in LE million)
4Q11
1,877.5
4Q12
2,354.2
4Q13
2,818.9
4Q14
3,491.5
2,689.3
4Q15
4Q11 4Q12 4Q13 4Q14 4Q15
4Q11 4Q12 4Q13 4Q14 4Q15
4Q11 4Q12 4Q13 4Q14 4Q15
Revenues
243.0
354.9 347.5
413.5 409.3
Gross Pro�ts
131.9
206.7
175.6
235.4
130.1
EBIT
43.6
77.5
45.1
32.128.1
Net Income
44Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
Full Year 2015 at a Glance
Financing Businesses
Startups
Tires
Commercial Vehicles & Construction Equipment
Motorcycles & Three-Wheelers
PassengerCars
Gross Pro�t Contribution by Line of Business
4.3% -1.0%2.8%
0.7%
-0.9%4.0%
1.9%
6.4%
67.2
%
21.3
%
5.0%
-0.6%
-0.3%
3.2%
65.5
%16.3
%
4.0%
6.2%
10.7%
63.9
%15.5
%11
.0%
2.3%
49.7
%
21.7%
14.7%
64.4
%28.8
%
10.6%
0.6%
FY12
3.5%3.0%
73.2%
14.6
%
FY13
4.3%
5.6%
5.3%
5.3%
71.6
%
13.5
%
FY14
7.4%
3.4%5.9%
FY15
0.6%
0.2%
2.6%8.5%
61.1
%16.3%
Revenue Contributionby Line of Business
FY11
0.1%4.6%
2.2%2.1%
77.4
%
13.5
%
72.3
%
10.8
%10
.8%
Key Indicators(all �gures in LE million)
FY11
7,415.3
FY12
8,290.1
FY13
9,126.7
FY14
12,322.1 12,264.7
FY15
FY11 FY12 FY13 FY14 FY15
FY11 FY12 FY13 FY14 FY15
FY11 FY12 FY13 FY14 FY15
Revenues
883.31,071.6
1,170.3
1,581.7 1,594.4
Gross Pro�ts
519.2616.5 586.5
857.4750.2
EBIT
190.6
219.4
116.0
174.0
233.1
Net Income
54Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
Passenger Car Line Of BusinessGB Auto is a leading passenger car importer, assembler and distributor in the Middle East and North Africa. In Egypt, it is the largest player in the market, as the sole representative of Hyundai, Geely Emgrand, Mazda, and Chery passenger cars, and owns the biggest nationwide distribution and after-sales service networks of any brand. Regionally, GB Auto distributes Hyundai passenger cars in Iraq and Geely Emgrand passenger cars in Algeria. GB Auto serves the Egyptian market with both Completely-Knocked-Down (CKD) and Completely-Built-Up (CBU) products, while operating in Iraq and Algeria with CBU units.
* Others includes Geely Libya, Geely Algeria and Karry Egypt
After-Sales
12.6
%
4.6%
13.1%
12.3%
6.5%
2.3%
4Q13
4Q14
4Q15
Breakdown of Units Sold, all brandsand markets*
CKD**
*Markets currently include Egypt, Iraq, and Algeria; Iraq and Algeria are CBU only** CBU refers to Completely -Built-Up units; CKD refers to Completely-Knocked-Down units
CBU**
9,763
11,484
5,846
6,948
9,590
9,686
64Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
The drop came on the back of difficulties sourc-ing foreign currency due to a shortage in the Egyp-tian market whose effects were accentuated during the second half of the year, particularly in the fourth quarter. The shortage impacted GB Auto’s abil-ity to finance imports and restock its inventory.
largelyduetothecountry’ssluggisheconomicbackdropaswellasoversup-plyproblemscarryingthroughfromthepreviousquarter.Fromacomparativestandpoint,GBAuto’sposition in themarket isbetter thanmost in termsofbankdebt,stocks,andforeigncurrency.
• Despitethesedifficulties,managementisoptimisticabouttherecoveryofthispotentially lucrativemarket and is still pursuing additional opportunities forlong-termgrowth.
Table 1A: Total Passenger Car Sales Activity — All Brands and Markets
Commercial Vehicles & Construction Equipment Line of BusinessThe Commercial Vehicles & Construction Equipment line of business offers a wide range of trucks and locally manufactured buses under exclusive distributorship agreements with Mitsubishi, Volvo and Iveco. GB Auto manufactures and distributes semi-trailers and superstructures (i.e. oil and chemical tankers as well as concrete mixers). In Egypt, this line of business also distributes earth-moving equipment, road machinery and power generators under distribution agreements with Volvo Construction, SDLG and Aksa, as well as YTO tractors, and produces buses for domestic and export markets through GB Polo (a joint venture between Ghabbour and Marcopolo, the world’s larges bus body manufacturer).
Tires Line of BusinessGB Auto has agreements with a number of Original Equipment Manufacturers (OEMs) to distribute a wide variety of tires in five countries. In Egypt, the company distributes Lassa, Yokohama, Westlake and Double Coin tires, while it distributes Westlake, Diamond Back and Jumbo tires in Iraq. In Jordan, the company distributes Diamond Back, Triangle and Jumbo tires; and in Algeria it distributes Lassa, Grandstone and, most recently, Goodyear tires.
Financing Line of BusinessGB Auto’s future strategy aims to create a full-fledged financial arm that serves its core business while competing aggressively with other non-bank financial service providers. GB Capital is the driver of this strategy. Today, GB Capital oversees the operations of the group’s five financial service providers: GB Lease, which offers financial leasing services to a wide range of companies; Mashroey, which offers asset-based lending to microfinance eligible clients throughout Egypt; Drive, which offers factoring services to individuals and companies; Haram Limousine, which offers car rental services on a quasi-operational lease basis to companies in the market; and most recently Tasaheel, which similar to Mashroey, offers direct microfinance lending services to micro entrepreneurs throughout Egypt. GB Capital’s strategy is to benchmark its operations against the best in the field, building on strict and robust credit policies specifically developed for each industry. All companies are staffed with veterans of the financial services industry to provide the required expertise and know-how, and all companies work on a non-exclusive basis with GB Auto to ensure the competitiveness of operations. The companies’ credit approval and disbursement mechanisms are well-advanced and comply with best practices of financial institutions in the country. Furthermore, asset quality and collections — the backbone for the success of any financial institution — are closely monitored, well-maintained and controlled within the group. The aim of GB Capital is to develop a well-diversified and synergetic group of financial services, building on the spirit and strategy of GB Auto while maintaining a high level of focus and specialized expertise within each company. To that end, GB Capital is also on the lookout for new additions to complement its portfolio.
StartupsGB Auto’s Pre-Owned Vehicles division — branded Fabrika — is rolling-out a western-style, pre-owned car operation at all GB-owned points of presence in Egypt. Our newly launched Lubricants business — PAL — distributes G-Energy and Gazpromneft products at GB Auto-branded and third-party points of sales in the Egyptian market under an exclusive strategic alliance with Gazpromneft Lubricants. Our Retail arm will operate retail After-Sales outlets to distribute tires, tire parts, batteries, parts and lubricants. These points of presence will also offer services including tire installation and balancing, battery service and the sale and injection of lubricants in select locations.
• GBAuto’sRetail arm is in theprocessof rolling-outnewAfter-Sales retailoutletsthatwillbecalled‘360,’andwilldistributetires,tireparts,batteries,partsandlubricants.Thesepointsofpresencewillalsoofferservicesinclud-ingtireinstallationandbalancing,batteryservices,andthesaleandinjectionoflubricantsinselectlocations.
As we enter 2016 with a replenished inven-tory, a solid pricing strat-egy, and a rather healthy market demand (despite natural inflation), we are in a better position to reap the benefits from our high-growth markets.
Financial Position and Working Capital ManagementGBAutosawtotalsalerevenuesdecreaseby23.0%and0.5%y-o-yduring4QandFY2015,re-spectively,mainlyasaresultofthechallengingFXenvironmentinEgypt(especiallytowardstheendoftheyear)aswellastheturbulentIraqimarket(throughoutthefullyearof2015).InEgypt,thedecreaseinsalesofthepassengercardivisionwerecompensatedbytheTwo-andThree-Wheelerdivision,theCommercialandConstructionVehiclesdivision,aswellasourFinancingbusiness.Despitethedecreaseinsalesin4Q15,ourgrossprofitmarginswerequitestrongy-o-y,aswereportedGPMsof15%in4Q15versus11.8%in4Q14asaresultofpriceincreasesthegroupintroducedinthequarter.FullyearprofitabilityalsoimprovedasweclosedtheyearatGPMof13%.Overall, ouroperatingprofitdecreased 30.5%y-o-ywhileournetprofit showeda 34.4%
increasecomparedto2014,onthebackofaone-timegainfromthefairvaluereassessmentofaninvestmentpropertyreportedin3Q15,aswellaslowertaxespaidduetoaweak4Q15andanoveralllowertaxrateof22.5%.Thepositiveminorityinterestreportedthroughouttheyearismainlyduetothereportedregionallosses,especiallyinIraqwherelow-oil-priceshavetakentheirtollontheeconomicsituation,inadditiontotheregionalover-supplysituationwithspill-oversmainlyaffectingIraqioperations.Onthecash front, thecompanyhasusedmostof itscashgenerated throughout theyear
GB Auto’s After-Sales division performed well in 2015, boosting the con-tribution of the Passenger Cars, Motorcycles & Three-Wheelers, and Commercial Vehicles & Construction Equipment to the company’s overall profits.
Latest Corporate Developments
1) GB Auto adds Chery vehicles to its brand portfolio in tripartite cooperation agreement InOctober2015,GBAutoenteredintoatripartitecooperationagreementwithCheryInternationalofChinaandAboulFotouhAutomotive(AFAutomotive)ofEgyptthatwillseeGBAutoexclusivelydistributeChery-brandvehiclesthroughitsnationwidenetworkinEgypt.TheagreementcoversbothCKDandCBUmod-elsproducedbyCheryInternational,includingsub-compacts,compacts,sedansandsmallSUVs,allwithenginesinthe1.0Lto2.4Lrange.
2) GB Auto establishes new servicing facility in AlexandriaInMarch2016,GBAutoestablisheditslatest3SfacilityinAmareya,Alexandria,toserviceitsdifferentpassengercarsandcommercialvehiclebrands.
3) GB Auto awarded new tender for 150 busesGBAutowasawardedanewtenderfromtheEgyptianPublicTransportAuthor-itytodeliver150busesin2016.PleaserefertotheCommercialVehiclessectionofthisreportformoredetails.
4) GB Auto appoints Karim Gaddas as the new CEO for the Tires businessInOctober2015,GBAutoappointedMr.KarimGaddasastheChiefExecutiveOfficerforitsTiresbusiness.Mr.Gaddaswillleadthegroup’seffortinestablish-inganewtiresmanufacturingfacilityaswellasmanagethegroup’scurrenttiresdistributionbusiness.Mr.Gaddashasover20yearsofexperienceingeneralmanagement,operations,andsalesandmarketingactivitieshavingpreviouslyservedinnumerouspositionsatPirelli,includingheadquarter-levelrolesinMi-lan,andregionalrolesinParis,Dubai,CairoandAlexandria.
tunities,managementhasalsostressedefficiency.Thecompanyisaccustomedtooperatinginalean,efficientmannerinallaspectsofthebusiness—atraitthatwillserveuswellasthecountry’sfreetradeagreementswiththeEUandTurkeyonimportsdutiesarefullyimplemented.TheseagreementshavealreadyplacedChineseandSouthKoreanvehiclesatadisadvantage,andmanagementbelievesthefullimplementationofthetwopartnershipagreementscouldhaveasubstantialnegative impacton themarket.ThegovernmentofEgyptappears to recognize
174Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
thedifficultposition intowhichautomotivemanufacturers andassemblersfindthemselves,andmanagementcontinues toactivelyadvocate for legislation thatwouldprotectdomesticassemblersandthethousandsofvaluablemanufacturingjobstheysupport.In the Passenger Car segment,management acknowledges downside risk to
agement does not expect significant growth of the tourismmarket until 2016.However,giventheongoinginvestmentininfrastructureandrenewedeconomicactivity–suchastherecentoverhaulinpublictransportthatsawthegovernmentpurchasemorethan400newcitybuses–divisionsinthiskeylineofbusinessareexpectedtocontinuetheircurrentgrowthtrendsforsolongasstatespendingoninfrastructure(includingurbantransportfleets)continues.AspartofGBAuto’songoingdriveforinvestment,thecompanyintendstolaunchapre-ownedcon-structionandheavy-truckdistributionventureinthefirsthalfof2016,propelledbythesuccessofourpre-ownedPassengerCaroperation.In-linewithmanagementexpectations,GBAuto’sAfter-Salesdivisionperformed
wellin2015,boostingthecontributionofthePassengerCars,Motorcycles&Three-Wheelers,andCommercialVehicles&ConstructionEquipmenttothecompany’soverall profits. It is considered likely thatAfter-Saleswill turn in aparticularlystrongperformancein2016aswell,especiallyasthecompanyroll-outnewoutletsinkey,underservedgeographiclocations.Sincethebeginningoftheyear,weshiftedpaymenttermsforourTiresBusi-
the year andmanagement expects this lineof business to continue this trend,especially with company’s fifth financing venture, Tasaheel, posting promisingresultsduringitsfirstmonthsinoperation.Turningourattentiontotheregion,GBAutocontinuestoviewmeasuredriskas
The two new facili-ties will expand GB Auto’s opportunities in these fast-growing lines of business, in addition to enhancing Group profitability and FX outlook in the long run.
184Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
beginstoimprove.Furthermore,asweweatherthisperiod,managementcontin-ues topursueacapital-lightapproach to in-marketexpansion thathasalreadyseenitrolloutitsmotorcycleandthree-wheelerofferingsinIraq,withthelattercapturingtheattentionofIraqiconsumersandachievingpromisingresultsthusfar.InLibya,thechallengingsecuritysituationisseeingGBAutoliquidateitsstocks
Common Stock 135.3 1,094.0 -Shares Held With the Group -3.3 -26.5 -Legal Reserve 267.3 296.6 11.0%Other Reserves 1,066.8 1,153.0 8.1%Retained Earnings (Losses) 670.0 817.4 22.0%Total Shareholder’s Equity 2,136.1 3,334.4 56.1%Total Liabilities and Shareholder’s Equity 9,585.1 11,798.2 23.1%
214Q / FY 2015 Earnings Newsletter
GB Auto (AUTO.CA)Earnings Release: 4Q / FY 2015
About GB Auto S.A.E.GBAutoS.A.E.(AUTO.CAontheEgyptianExchange)isaleadingautomotivepro-duceranddistributorintheMiddleEastandNorthAfrica.Acrossfiveprimarylinesofbusiness—PassengerCars,Motorcycles&Three-Wheelers,CommercialVehicles&ConstructionEquipment,TiresandFinancing—thecompany’smainbusinessactivitiesincludeassembly,manufacturing,salesanddistribution,financingandaf-ter-sales services.GBAuto’sportfolioofbrands includesHyundai,Mazda,GeelyEmgrand,Chery,Bajaj,Marcopolo,Iveco,VolvoTruck&Bus,VolvoConstructionEquipment,MitsubishiFuso,YTO,Karry,SDLG,Aksa,Lassa,Yokohama,Goodyear,Westlake,Triangle,Grandstone,DiamondBack,DiamondCoin,Jumbo,MonroeandGazpromneft.GBAutohasoperationsinEgypt,Iraq,LibyaandAlgeria,andisac-tivelypursuingopportunitiesinnewgeographieswithinitscorefootprint.Thecom-panyisheadquarteredinGiza,GreaterCairoArea,Egypt.www.ghabbourauto.com
Forward-Looking StatementsThisdocumentmaycontaincertain“forward-lookingstatements”relating to theCompany’sbusiness.Thesemaybeidentifiedinpartthroughtheuseofforward-lookingterminologysuchas“will,”“planned,”“expectations”and“forecast”aswellassimilarexplanationsorqualifiersandbydiscussionsofstrategy,plansorinten-tions.Thesestatementsmayincludedescriptionsofinvestmentsplannedorcur-rentlyunderconsiderationordevelopmentbytheCompanyandtheanticipatedimpactoftheseinvestments.AnysuchstatementsreflectthecurrentviewsoftheCompanywithrespecttofutureeventsandaresubjecttocertainrisks,uncertain-tiesandassumptions.Manyfactorscouldcausetheactualresults,performance,decisionsorachievementsoftheCompanytobemateriallydifferentfromanyfu-tureresultsthatmaybeexpressedorimpliedbysuchforward-lookingstatements.
Head OfficeCairo-Alex Desert Road, Km 28 Industrial ZoneAbu Rawash, Giza, Egypt