“EVERYTHING ON WHEELS”
GB Auto
The Ghabbour Group of Companies
GB Auto, S.A.E
Initial Public Offering
“The Leading Automotive Assembler
and Distributor in the MENA Region”
Investor Presentation
I
t P
t ti | B lt
Fi
i l MENA D
N
Y k Cit
M
2009
1
GB Auto
Investor Presentation
Investor Presentation | Beltone Financial MENA Day, New York City – May 2009
Agenda for Today
Company &
Dr. Raouf Ghabbour
Chief Executive
Company &
Business
Overview
Colin Sykes
Chief Financial Officer
Financial
Overview
2
GB Auto
GB Auto
I. Company Overview
Corporate Overview
Overview
72% of FY08 Group Sales
14% of FY08 Group Sales
11% of FY08 Group Sales
3% of FY08 Group Sales
∎ Import, retail distribution,
fleet sales and assembly of
Passenger Cars
∎ Distribution of locally
assembled trucks and buses
Commercial Vehicles
∎ Local assembly of imported
Semi Knocked Down (SKD)
Motorcycles & 3-Wheelers
∎ Includes tires, construction
equipment transportation
Others
∎ Exclusive agent and sole
distributor for Hyundai
∎ Imports and distributes CBU
fleet sales and assembly of
cars
assembled trucks and buses
∎ Exclusive agent for Bajaj
three-wheelers and
motorcycles
Semi Knocked Down (SKD)
units and distribution
equipment, transportation
services and export activities
∎ Exclusive agent for Mitsubishi,
Volvo and Hyundai buses
Buses
Tires
∎ GB Auto distributes passenger
and light tires under a license
Description
units and assembles CKD
units
∎ We have begun work on our
largest passenger car after-
sales center to date on the
Cairo-Ismaliyya Highway;
∎ SKD assembly and
distribution of Bajaj three-
wheelers
∎ Distribution via three retail
showrooms as well as
t
k fl ld l
∎ Assembles and distributes
buses for public, commercial
and tourism sectors
∎ JV with Marcopolo for 8,000
capacity bus-body assembly
facility in Suez targeting local
and export markets
with Lassa; seeking new
representations for bus, truck
and off-road tires
∎ I l d
t ti
d
Construction equipment
Cairo Ismaliyya Highway;
expected to be online by
mid-2010
∎ Large distribution and after-
sales network with four 3S
facilities (sales, service and
spare parts) and 373 service
network of local dealers
∎ Three after-sale services and
spare parts centers
∎ 10 sales centers for
motorcycles and 40 for
three wheelers
and export markets
∎ 30.3% market share in 2008
(excl. microbuses)
∎ Exclusive agent for Mitsubishi,
Volvo and Hyundai trucks
Trucks
∎ Includes construction and
material handling (forklifts)
equipment supplied under
licenses from Volvo and Linde
Transportation Services
spare parts) and 373 service
bays (expected to increase
by 164% to 983)
∎ Market share of 25.9% in
Egypt in 2008
∎ >30,000-unit sales opp. in
three-wheelers
∎ GB Auto is the market for
three-wheelers in Egypt
∎ Includes heavy, medium and
light weight trucks
∎ 16.0% market share in 2008
(excluding pickups)
∎ 23,000-unit opportunity in
Trailers
∎ Haram Transport Company is
a fully owned subsidiary that
operates over 200 buses in 5
governorates and provides
cargo services with a fleet of
90 trucks
Brands
,
pp
2009 alone, to replace taxis
more than 20 years old
,
pp
y
Egypt as draw-bar trailers are
banned and distribution JV in
Algeria
90 trucks
4
GB Auto
GB Auto is the Leading Player in the Egyptian Automotive Market
Key Financial Data
(LE million)
FY2006
FY2007
FY2008
1Q2008
1Q2009
Sales
3,103.3
4,630.1
5,192.4
1,103.8
642.0
Sales
3,103.3
4,630.1
5,192.4
1,103.8
642.0
% growth
50.1
49.2
12.1
30.3
-41.8
EBITDA
417.4
500.7
678.5
142.0
59.5
% margin
13.5
10.8
13.1
12.9
9.3
EBIT
503.6
582.1
646.5
128.1
52.4
% margin
16.2
12.6
12.5
11.6
8.2
Net Income
281.5
433.5
415.9
84.6
7.2
% margin
9.1
9.4
8.0
7.7
1.1
Key Products
Sales Breakdown (FY2008)
% margin
9.1
9.4
8.0
7.7
1.1
3%
Passenger Cars
Commercial Vehicles
1.
2.
14%
11%
3%
3-wheelers & Motorcycles
Other: Tires
Construction Equipment
Transportation Services
3.
4.
72%
5
GB Auto
Transportation Services
Unique, Diversified Position Covering the Automotive Value Chain
Sales &
Assembly
Sales &
Distribution
+
After-sales
Service
Transportation
Services
Exports
> Assembly of passenger cars and commercial vehicles (CKD) at 2 plants in Cairo, 1 plant in Sadat City + JV bus-body
assembly in Suez (GB Polo)
> Sales and distribution: Distribution and retail sales of CKD and CBU (imported) passenger cars, commercial vehicles,
motorcycles and three-wheelers, and construction equipment
> Growing national after-sales service network with 6 passenger car and 6 commercial vehicle outlets (planned expansion to
> Growing national after sales service network with 6 passenger car and 6 commercial vehicle outlets (planned expansion to
25 PC and 10 CV)
> Partnerships with 41 independent passenger car retailers
> Growing network of partnerships including buses with Marcopolo (GB Polo) and trailers in Algeria with Sentrax (GB-Allab
6
GB Auto
> Growing network of partnerships, including buses with Marcopolo (GB Polo) and trailers in Algeria with Sentrax (GB Allab
Remourque)
Remarkable Growth Through 2008, Recent Industry Challenges
179 178
198,800
200 000
250,000
Passenger Cars
CAGR:
29.1%
62,312
60 000
80,000
Commercial Vehicles
CAGR:
29 7%
55 471
94,322
133,591
179,178
100,000
150,000
200,000
Historical Market
16 946
26,848
38,191
48,310
40,000
60,000
29.7%
55,471
0
50,000
2004
2005
2006
2007
2008
Size and Growth,
2004 to 2008
Vehicle Units
16,946
0
20,000
2004
2005
2006
2007
2008
48 441
60,000
Passenger Cars
12 259
15,000
Trucks
4,774
5,000
Buses
48,441
28,083
30,000
40,000
50,000
12,259
7,887
9,000
12,000
3,319
3,000
4,000
0
10,000
20,000
0
3,000
6,000
Recent Market Size
and Change, 1Q08
vs. 1Q09
0
1,000
2,000
7
GB Auto
Vehicle Units
0
1Q08
1Q09
0
1Q08
1Q09
0
1Q08
1Q09
…With Long-term Durability on the Back of Numerous Macro Drivers
Key Growth Drivers
Reduction of
Import Duties on
1
> Import duties on passenger vehicles with engine capacity < 1.6
liters came down in 2004 from 105% to 40%. Duties are expected
i
d
i
h EUE
A
i i A
Comments
Consumption
Import Duties on
Cars
Reduction of
I
T
1
2
to continue decreasing as per the EU-Egypt Association Agreement.
> Consumer spending on everything from mobile phones to vehicles
has boomed since the halving in 2006 of income taxes and is
h i
ili
d
it
l d
i
th
Consumption
growth may
continue to slow
in 2009, but is
expected to
Income Taxes
Legislative Changes
3
showing resilience despite a slowdown in growth.
> Legislation passed in summer 2008 will support demand over the
coming two years by capping the age limit for passenger cars used
t i
tl i d
b t il
d ll i th li
i
f
p
resume as the
GDP growth
accelerates
g
g
Increase in
GDP/Capita Levels
4
as taxis, outlawing draw-bar trailers and allowing the licensing of
three-wheelers (tuk-tuks) as motorcycles.
> GDP per capita is approaching the USD 2,000 range, accelerating
demand for cars, with multipliers of up to 2.5x the rate of GDP
th b i
t i d f
l
I
it t
GDP/Capita Levels
Availability of
Consumer Finance
5
growth being sustained for several years. Income per capita at
purchasing power parity now exceeds that of India and China.
> Auto loans have only recently been introduced to the Egyptian
market. Evidence now suggests national banks are expanding their
consumer credit activities filling a vacuum left by the retreat of
Driving strong
demand in
Egypt’s
automotive
k
Consumer Finance
Lingering Pent-Up
Demand
6
consumer credit activities, filling a vacuum left by the retreat of
international brands in wake of global economic crisis.
> Demand repressed during the downturn of 2001-04 lingers, and
new demand is being created by the rapid formation of a middle
class Current slowdown in sales is as a result of consumers’
market
8
GB Auto
Demand
class. Current slowdown in sales is as a result of consumers
expectations of price cuts, not evaporation of demand.
GB Auto is the Undisputed Leader of the Egyptian Passenger Car Market
40,000
60,000
13%
Market Segmentation | as of end FY2008
Th
i ’
lli PC b
d
30%
20%
26%
0
20,000
Hyundai Chevrolet
Toyota
Speranza
Nissan
Daewoo
8%
6%
6%
6%
T
6 B
d
The nation’s top selling PC brand,
Hyundai has a market share of
26%, reflecting GB Auto’s superior
value proposition for consumers.
10%
0%
2007
2008
Top 6 Brands
Vehicle units
3.1%
2.7%
<1.3L
1.3-1.5L
1.5-1.6L
>1.6L
Up to 1.6 L engine capacity bracket
enjoys preferential tariff on imports
22.2%
16.3%
16%
19%
Engine Capacity
Vehicle units
of CBU vehicles.
58.4%
62.3%
CBU vs. CKD
Car market almost equally split
between CKD and CBU vehicles.
46%
54%
45%
55%
CBU
CKD
9
GB Auto
CBU vs. CKD
Vehicle units
Factors Supporting GB Auto Competitive Advantages Over the Long-Term
Strong market position. The largest player in the Egyptian automotive market in terms of sales revenue,
market share, and production capacity.
Unparalleled distribution and after-sales network Largest distribution and after-sales network in the
Unparalleled distribution and after-sales network. Largest distribution and after sales network in the
passenger vehicle and motorcycles and three-wheelers lines of business relative to competition. Ongoing
investment to expand both passenger car and commercial vehicle after-sales networks.
Strong partnerships with leading global OEMs with access to ‘best-in-class’ products. Strategic
relationships as exclusive distributor and assembler of Hyundai passenger cars and commercial vehicles
relationships as exclusive distributor and assembler of Hyundai passenger cars and commercial vehicles,
Mitsubishi commercial vehicles, Volvo commercial vehicles and construction equipment, Linde materials
handling equipment, Bajaj motorcycles and three-wheelers, and Lassa (Turkish) tires, among others.
Diversified business portfolio. GB Auto boasts a highly diversified business portfolio (from cars to
commercial vehicles and earth movers) with outstanding exposure to aftermarket
commercial vehicles and earth movers) with outstanding exposure to aftermarket.
Best-in-Class assembly and manufacturing operations. Capitalize on Egypt’s low-cost labor and
production environment, leveraging existing operations and rolling out capacity expansions for passenger car
assembly and trailers.
Impressive revenue growth and profitability. Top-line compounded annual revenue growth over the past
five years is 39.3%, as the Group exceeded sales of LE 5 billion in 2008, coupled with earnings of over LE 415
million that same year. Profitable in 1Q09 even in a down market for vehicle sales.
Untapped export potential Very strong export potential particularly as regards locally-assembled and
Untapped export potential. Very strong export potential, particularly as regards locally assembled and
-manufactured commercial vehicles (buses and trailers) into the largely untapped and under-served markets of
the Middle East and Africa.
Positive market outlook. Egyptian automotive market’s impressive growth rates are expected to continue
over the medium term driven by improving macro-economic environment driving consumption patterns
10
GB Auto
over the medium term, driven by improving macro-economic environment driving consumption patterns,
coupled with existing low auto penetration rates.
GB Auto’s Strategy is Built on 3 Core Axes
>Invest in an unmatched nationwide
distribution and after-sales network
>Position products as having lowest
ownership cost
Further entrench GB
Auto’s strong market
position across the
widest range of products
Invest in Core
Business
ownership cost
>Create a “one-stop-shop” for consumers
by vertically integrating sales, consumer
finance and after-sales support functions
>Leverage GB Auto’s image for adding
g
p
>Leverage GB Auto s image for adding
value across all business units
Make GB Auto
indispensable to any
OEM who wants to
successfully operate in
Non-Organic
Growth
>Invest directly in select MENA markets
while also leveraging Egyptian assembly
capacity to serve export markets
y p
Egypt’s automotive
sector
>Strengthen business relationships with
Profitably capture
domestic growth
Strengthen Old
>Strengthen business relationships with
current partners while searching for the
best partners for new lines of business
domestic growth
prospects and be
positioned to
successfully
penetrate regional
Strengthen Old
Ties, Build New
Relationships
11
GB Auto
markets
Significant Expansion in GB Auto’s Distribution and After-Sales Coverage
TODAY
BY END 2011
Investing in unrivaled
distribution and after-sales
i f
t
t
infrastructure
6 PC service centers
25 PC service centers
Own and control the lion’s share of retail sales
1
6 PC service centers
6 CV service centers
25 PC service centers
10 CV service centers
Own and control the lion s share of retail sales
Further solidify leadership position in the market
Reinforce ‘low cost of ownership’ strategy throughout product range
1
2
3 Reinforce ‘low cost of ownership’ strategy throughout product range
Strengthen position vis-à-vis OEMs (Hyundai, Volvo, Mitsubishi, etc)
3
4
12
GB Auto
Leverage image and brand name across all lines of business
5
GB Auto
II. Business Overview
GB Auto: Passenger Car Line of Business Overview
Key Financial Data
Overview
(LE million)
FY2006
FY2007
FY2008
1Q08
1Q09
Revenue
2,211.0
3,314.4
3,675.5
758.2
366.7
> Widest product range in the market,
positioned as ‘best value for money.’
% growth
-
48.9
10.9
28.4
-51.6
Sales Volume (units)
36,266
48,623
51,518
10,526
4,774
% growth
-
34.1
6.0
17.7
-54.6
> Has the largest distribution and after-
sales network with four 3S facilities
(sales, service and spare parts),
emphasizing ‘lowest cost of ownership’
in the market.
Gross Profit
357.5
447.2
613.1
129.2
40.8
% margin
16.2
13.5
16.7
17.0
11.1
Total Market (units)
133,591
179,178
198,800
49,441
28,083
> As expected, Egypt’s market for
passenger cars shrank in the first
quarter of 2009 with total sales of only
28,083 units. Although the table to the
Key Products
GB Auto Market Share (%)
27.1
27.1
25.9
21.3
17.0
left suggests our drop was more marked
than the market’s drop, it excludes
inventory reductions at dealers of some
3,000 cars. So, in fact, Hyundai car sales
performed better than the market,
d li i l
th
30%
declining less than 30%.
> Declining sale prices throughout 1Q09
together with increased costs due to
currency devaluation put pressure on
margins GB Auto also absorbed LE 10
margins. GB Auto also absorbed LE 10
million in unrecovered overheads in the
Passenger Car division in 1Q09 due to
curbed production.
1.0 L
SUV > 2.0 L
Getz
Verna
Matrix
Santa Fe
14
GB Auto
GB Auto: Commercial Vehicle Line of Business Overview I
Key Financial Data
Overview
(LE million)
FY2006
FY2007
FY2008
1Q08
1Q09
> Absorbed LE 5 million of unrecovered
overhead in 1Q09 as the factory limited
Revenue
417.1
590.0
740.9
193.7
120.9
% growth
-
41.5
25.6
96.8
-37.6
Sales Volume (units)
1,914
2,638
3,227
915
615
BUSES
> The bus market was expected to drop
more significantly in 1Q09 and remains
depressed for now as tour companies
production.
% growth
-
37.8
22.3
93.8
-32.8
Gross Profit
105.4
122.3
129.6
38.7
17.9
% margin
25.3
20.7
17.5
20.0
14.8
depressed for now as tour companies
remain reluctant to purchase goods.
TRUCKS
> Truck volumes fell more than expected as
customers are holding back on budget
Key Products (Buses)
customers are holding back on budget
spending for now despite government
projects. Also, we changed the way in
which we booked sales, which contributed
to the drop.
TRAILERS
> 23,000-unit opportunity in Egypt as a
result of legislation banning the use of
draw-bar trailers.
> Distribution JV with GB-Allab Remourque
Mitsubishi
Mitsubishi
Hyundai
Volvo
in Algeria.
> Trailer sales have not yet felt the benefit
of the ban on draw-bar trailers; however,
despite protests by truckers in the first
quarter, the Egyptian government has
Mini-bus
Large Coach
Mitsubishi
Rosa
Mitsubishi
Canter
Hyundai
Aero
Volvo
Splendido
15
GB Auto
stayed the course, refusing to extend the
two-year grace period for replacement.
g
GB Auto: Commercial Vehicle Line of Business Overview II
1600
Bus Sales and Percent Market Share
Truck Sales and Percent Market Share
1,600
33.2%
30 3%
16.0%
6
1,397
800
1200
1
09
1,451
2
05
800
1,200
31.0%
30.3%
14.0%
14.2%
18 5%
694
96
6
416
295
0
400
2006
2007
2008
1Q08
1Q09
1,1
1,2
384
190
0
400
2006
2007
2008
1Q08
1Q09
38.2%
32.3%
18.5%
19.0%
2006
2007
2008
1Q08
1Q09
Key Products (Trucks)
Vehicle Units (excluding microbuses)
Vehicle Units (excluding pickups)
2006
2007
2008
1Q08
1Q09
800
Trailer Sales and Percent Market Share
2
5
400
600
5 5%
12.0%
Light Truck
Heavy Truck
Mitsubishi
Canter
Mitsubishi
Fuso
Volvo FH
Medium Truck
111
227
6
2
115
130
0
200
2006
2007
2008
1Q08
1Q09
3.4%
5.5%
8.8%
10.0%
16
GB Auto
g
y
2006
2007
2008
1Q08
1Q09
Vehicle Units
GB Auto: Motorcycle and Three-Wheeler Line of Business Overview
Key Financial Data
Overview
(LE million)
FY2006
FY2007
FY2008
1Q08
1Q09
R
365 8
528 2
571 3
98 7
122 5
> Bajaj is the largest global
manufacturer of three-
Revenue
365.8
528.2
571.3
98.7
122.5
% growth
-
44.4
8.2
-23.1
24.1
Sales Volume
(units)
29,401
40,830
43,251
7,451
9,311
wheelers.
> Three-wheelers are typically
used for personal and
commercial purposes in rural
% growth
-
38.9
5.9
-26.7
24.9
Gross Profit
53.0
86.1
115.1
17.7
25.4
% margin
14.5
16.3
20.2
17.9
20.7
p p
and low-income areas as an
alternative to urban and peri-
urban transport.
> First quarter growth year-on-
Key Products (Motorcycles & 3-Wheelers)
% margin
14.5
16.3
20.2
17.9
20.7
q
g
y
year reflects benefits from
licensing changes for three-
wheelers as well as a
significant reduction in customs
d ti l
l
d
t
duties largely passed on to
consumers with a slight
retention for the company –
hence the improved margin.
C ti
t
it
> Continue to witness a
substantial increase in demand
for after-sales service and
parts. Now have 8 spares
outlets and 3 service centers
Motorcycles
Tuk-tuks
17
GB Auto
outlets and 3 service centers
with more planned in 2009.
y
Tuk tuks
GB Auto: Overview of Other Lines of Business
Key Financial Data
Overview
(LE million) FY2006 FY2007 FY2008
1Q08
1Q09
Tires
> GB Auto is the distributor for Lassa (Turkish) tires, which
Construction
Equipment
4.2
18.8
49.7
19.4
4.8
Tires
47.5
112.0
75.1
21.8
7.5
Transportation
it retails and uses on CKD models assembled in its
factories. Actively looking to expand its portfolio of
passenger car and commercial vehicle tires.
> The decline in Tires revenues in 1Q09 is primarily due to
two factors. First, 1Q08 figures included sales of the
Transportation
Services
31.0
40.1
56.0
9.4
15.5
Miscellaneous
26.7
26.5
23.9
2.7
4.3
Total Revenues Other
109.4
197.4
204.7
53.2
32.0
popular Double Coin brand before the imposition of anti-
dumping duties made these prohibitively expensive.
Secondly, in 1Q09, the Tires LOB stimulated demand by
liquidating high-COGS inventory after obtaining better
pricing from the manufacturer.
C
i
E
i
LOBs
109.4
197.4
204.7
53.2
32.0
Construction
Equipment
1.2
2.1
7.7
2.6
0.9
Tires
6.4
2.1
7.7
2.6
0.3
Construction Equipment
> Volvo construction equipment and Linde material handling
equipment are at the heart of this LOB.
> The fall-off in sales in 1Q09 represents the trail-off in
demand from real estate projects and the stimulation of
Transportation
Services
7.1
-6.1
-5.6
-3.8
-0.4
Miscellaneous
4.7
4.8
-0.3
0.1
0.4
T t lG
P fit
demand from infrastructure builders as a result of the
government’s stimulus program. Orders for some 20 units
seen as “certain” during the quarter were subsequently
cancelled after tenders were called off, likely due to drift
within the construction industry.
T
i
S
i
Total Gross Profit
Other LOBs
19.4
14.7
12.9
2.7
1.2
Transportation Services
> Public passenger transportation services by participating
primarily in the privatization of inter-city bus transport
routes.
> Cargo freight transportation for heavy industry as part of
18
GB Auto
an emerging professional logistics services practice.
> Cargo now profitable using fixed-price contracts.
GB Auto
III. Financial Performance
Consolidated Group Performance and Revenue Split
8%
5%
1Q2008
Revenue Split
Sales Revenue
188 4
Gross Profit
Consolidated Group Performance in LE million
18%
8%
1,103.8
642.0
600
800
1000
1200
188.4
85 2
120
160
200
69%
0
200
400
600
85.2
0
40
80
5%
1Q2009
0
1Q
1Q
128.1
120
140
EBIT
84.6
90
Net Income
57%
19%
19%
52.4
60
80
100
120
45
60
75
Passenger Cars
Commercial Vehicles
Motorcycles & 3-Wheelers
0
20
40
7.2
0
15
30
20
GB Auto
Motorcycles & 3-Wheelers
Other
1Q
2008
2009
1Q
2008
2009
Results Summary
(LE million)
FY2006
FY2007
FY2008
1Q08
1Q09
%
Change
Q-on-Q
Passenger Cars Revenues
2,211.1
3,314.4
3,675.5
758.2
366.7
-51.6
Commercial Vehicles Revenues
417.1
590.0
740.9
193.7
120.9
-37.6
Motorcycles & Three-Wheelers
365.8
528.2
571.3
98.7
122.5
24.1
Other Revenues
109.4
197.5
204.7
53.2
32.0
-39.9
Total Sales Revenue
3,103.3
4,630.1
5,192.4
1,103.8
642.0
-41.8
Gross Profit
537.1
670.2
872.3
188.4
85.2
-39.2
Gross Profit Margin
17.3
14.5
16.8
17.1
13.3
-3.8
Selling & Administration
137.7
(218.8)
(277.0)
(64.4)
(51.1)
-20.7
Others – Income / (Expenses)
5.7
18.3
32.2
4.8
9.5
97.9
Others Income / (Expenses)
Operating Profit
405.1
469.7
627.5
128.8
43.7
-66.0
Net Provisions
98.5
112.4
19.0
(0.7)
8.7
-
EBIT
503.6
582.1
646.5
128.1
52.4
-59.1
Foreign Exchange Gains
Foreign Exchange Gains
(Losses)
-
2.8
-18.3
2.8
(7.6)
-
Net Finance Cost
(135.8)
(98.4)
(116.2)
(25.8)
(36.0)
39.5
Earnings Before Tax
367.8
486.5
512.0
105.1
8.8
-91.6
Taxes
(63 1)
(50 7)
(94 1)
(20 1)
(1 9)
90 5
Taxes
(63.1)
(50.7)
(94.1)
(20.1)
(1.9)
-90.5
Net Profit Before Minority
304.7
435.8
417.9
85.0
6.9
-91.5
Minority Interest
23.2
(2.3)
(2.0)
(0.4)
0.3
-
Net Income
281.5
433.5
415.9
84.6
7.2
-91.5
N tP fitM
i
91
94
80
77
11
66
21
GB Auto
Net Profit Margin
9.1
9.4
8.0
7.7
1.1
-6.6
GB Auto: Performance
▪ The company posted a profit in an industry under severe pressure worldwide. Market wide,
Egypt’s first quarter year on year passenger car unit sales were down 43 2% and commercial
Group Performance 1Q09
Egypt’s first quarter year-on-year passenger car unit sales were down 43.2% and commercial
vehicle unit sales were down 34.2%.
▪ By contrast Hyundai car sales in the Egyptian market declined 26.2% year-on-year in 1Q09 and
GB Auto commercial vehicle sales fell in line with the market
GB Auto commercial vehicle sales fell in line with the market.
▪ As a consequence, overall group revenues are down 41.8% year-on-year as product mix and
pricing added to volume reductions.
▪ Gross profit saw a higher reduction in 1Q09 because currency added to costs and unrecovered
factory costs of LE 15 million, which resulted from limited production in 1Q09.
▪ Measures to reduce overhead costs came into effect during 1Q09 and the impact of those can be
i
20 8% d ti i SGA
t
1Q08
seen in a 20.8% reduction in SGA costs vs 1Q08.
▪ Interest costs are up largely on the back of higher inventory levels as we provided support to
dealers and that cost was at increased interest rates.
▪ The first quarter of 2009 was also affected by an exchange loss on the facilities used to support
the inventories because of a weakening of the Egyptian pound. The reverse happened in 1Q08,
where a profit was shown.
22
GB Auto
GB Auto: Recent Developments
>Joint-venture bus assembly plant in Suez in partnership with global giant Marcopolo to open
3Q09
>Trailer distribution joint venture with Sentrax in Algeria to ship first units in May 2009
>Rolling out expansion of national service and sales centers; have started building largest
>Rolling out expansion of national service and sales centers; have started building largest
after-sales service center to date on the Cairo-Ismaliyya Highway to be completed by year’s
end
>Commercial vehicle leasing business now active (and insulated from customer defaults)
>Assessing alternatives to build a sustainable and growing tires business
Business
Development
Highlights
g
g
g
>Surveying the market for interesting M&A opportunities and new representations
>New paint shop will allow annual production capacity for locally assembled CKD units to climb
to as many as 100,000 units when it comes online in the second half of 2009
>Completion in November 2008 of our new 3 000-unit trailer line that has the ability to grow to
>Completion in November 2008 of our new 3,000 unit trailer line that has the ability to grow to
6,000 units annually by adding a second shift
>Passenger car line of business has made symbolic first delivery to national taxi replacement
>Passenger car line of business has made symbolic first delivery to national taxi replacement
program, estimated at 34,000 units between March 2009 and March 2010.
>GB Auto remains Hyundai Motor Corporation‘s best distributor in Africa and top-5 worldwide
>Egypt is now the biggest market for Bajaj outside India for its three-wheeler market,
surpassing the large markets of Indonesia and Sri Lanka
Corporate
Development
Highlights
p
g
g
>Institutionalization program, directed by change management consultants CDS, is reaching
the end of the solutions development phase and implementation has begun across the
organization
g
g
23
GB Auto
Cash Preservation and Cost Management Plan
>With dealers overstocked, manufacturing and assembly operations remained very
low in the first quarter as planned. Management began work on plans for cash-
preservation and cost management of overheads in 3Q08 with a target of a total
preservation and cost management of overheads in 3Q08 with a target of a total
saving of LE 100 million. Implementation began in 4Q08 and is continuing.
1. A freeze on pay raises is in effect as of January 1, 2009 and the reduction of workforce by
nearly 900 persons has secured annual savings of LE 20 million.
2. A proportionate reduction in incentives relative to the size of the business will yield up to
LE 20 million in savings.
3. Reduced advertising spending will translate into as much as LE 30 million in annual
savings.
4. Balance of savings of around LE 30 million is being achieved through reduced consultancy,
donation, travel expenses, rents and operating costs.
5
I l
t ti
f
t
ti
h i d
t
t t
li
ffi i i
5. Implementation of a common automotive purchasing department to realize new efficiencies
and economies of scale.
6. Implementation of a logistics and warehousing efficiency plan that goes hand-in-hand with
efforts to reduce working capital primarily through inventory control and spare parts.
24
GB Auto
The Worst May Be Over…
Consumer resistance
fading
Passenger car
Consumer expectations of significant price cuts were a leading factor in the slowdown in sales starting in
September 2008. Market-wide price cuts in 1Q09 appear to have stimulated spending.
GBA t
f i df
hi
l
t
t k dd l
i 4Q08
d1Q09
d ff di
ti
Passenger car
inventories are falling
We are counting sales
differently
GB Auto refrained from pushing sales onto overstocked dealers in 4Q08 and 1Q09 and offered incentives
to help them reduce inventories, which are now starting to approach normal levels.
Part of the apparent drop in sales in 1Q09, particularly in commercial vehicles, owes to a change in
accounting standards for what qualifies as a sale
Aggressive cost-cutting
program
differently
accounting standards for what qualifies as a sale.
As of 1Q09 we have invested in a cost reduction program that will see us save approximately LE 100
million by year’s end.
Liquidated high-COGS
inventory
The company cleared inventory and stimulated market demand by selling high-COGS goods at lower
prices after obtaining preferential pricing from suppliers.
Lingering Pent-Up
Demand
Despite the current slowdown in sales, unmet long-term demand remains significant; Egypt remains a
very under-motorized nation.
Beneficial Legislation
Cautionary Note: The
Legislation passed in summer 2008 will support demand for passenger cars (taxi replacement program)
and trailers (banning of draw-bar trailers). New state infrastructure spending will also spur demand.
With the Egyptian pound and the Korean yen under pressure from the US dollar, GB Auto faces rising
25
GB Auto
Cautionary Note: The
Egyptian pound is down
prices with limited ability to pass those on to the market. We expect support from our global suppliers,
who have enjoyed the benefits of lower raw materials and shipping prices since summer 2008.
GB Auto: Opportunities
>Despite challenging market conditions, GB Auto has unique opportunities to pursue
in 2009
>Investment will be cautious but from a position of strength with a robust balance
>Investment will be cautious, but from a position of strength with a robust balance
Domestic Opportunities
Export Opportunities
▪ GB Polo, a joint-venture bus assembly plant in Suez
with global player Marcopolo, set to begin
operations during 3Q09 with an initial capacity of
2 000 units targeting resilient MENA and African
▪ 30,000+ unit opportunity market-wide in 2009 to
supply passenger cars to a government program
that mandates and subsidizes the replacement of
taxis more than 20 years old
2,000 units targeting resilient MENA and African
markets and, later, European markets when
demand recovers
▪ GB-Allab Remourque, a new joint-venture trailer
di t ib t hi i Al i ith S t
ill
it li
taxis more than 20 years old
▪ 23,000-unit opportunity market-wide to replace
trailers as a result of the phase-in over the coming
years of a ban on draw-bar trailers
distributorship in Algeria with Sentrax, will capitalize
on the recent completion of the trailer capacity
expansion in Cairo
▪ New capacity in trailer assembly (completed 4Q08)
and CKD paint shop (targeting completion in 4Q09)
along with easing CBU supply constraints allow
flexibility to pursue these opportunities
▪ Potential opportunity to land new representations for
foreign brands in Egypt, including a new tires
franchise
26
GB Auto
GB Auto: Outlook
▪GB Auto expects the 2009 passenger car market to be roughly on par with 2007, but the national
t i
l
t
t
b t ti l l
t it f
P
C li
f
Outlook
taxi replacement program presents a substantial sales opportunity for our Passenger Car line of
business.
▪We note signs of growing consumer finance activity in the market as local banks take over from
foreign financial institutions who either withdrew from the market or who are holding back during
foreign financial institutions who either withdrew from the market or who are holding back during
the ongoing global financial crisis.
▪New government spending on civil works programs and infrastructure creating opportunities for
Commercial Vehicles and Construction Equipment lines of business.
▪Soft bus sales as the global economic crisis continues to have a significant impact on tourism
operators.
GBA t
t t t t
i th b
fit f d
d l b l
t i l
i
▪GB Auto expects to start seeing the benefits of reduced global raw materials prices.
▪Restriction of credit by some local banks to automotive industry has forced some distributors to
cut prices to ensure cash flow.
▪GB-Allab Remourque, our Algerian trailers JV, and GB Polo, our export-oriented bus-body
assembler, will begin operations this year.
▪We will continue to grow the three-wheeler line of business and support growing demand for
27
GB Auto
g
pp
g
g
after-sales service.
Balance Sheet (2008 – 1Q09)
LE million
31 Dec 2008
31 Mar 2009
Cash
124.2
82.6
Net Accounts Receivable
500.3
369.7
I
t
1 345 2
1 411 1
Inventory
1,345.2
1,411.1
Other Current Assets
230.8
233.5
Total Current Assets
2,200.5
2,096.9
Net Fixed Assets
1,194.6
1,218.0
G d ill d I t
ibl A
t
188 7
187 8
Goodwill and Intangible Assets
188.7
187.8
Other Long-term Assets
44.8
41.4
Total Long-Term Assets
1,428.1
1,447.2
Total Assets
3,628.6
3,544.1
Short term Notes and Debt
862 8
901 4
Short-term Notes and Debt
862.8
901.4
Accounts Payable
709.7
590.7
Other Current Liabilities
140.7
82.2
Total Long-Term Liabilities
174.2
188.5
Total Liabilities
1 887 4
1 722 3
Total Liabilities
1,887.4
1,722.3
Minority Interest
15.0
44.7
Common Stock
129.0
129.0
Shares Held with the Group
(3.3)
(3.3)
Legal Reserve
120 5
140 2
Legal Reserve
120.5
140.2
Other Reserves
1,024.3
1,027.4
Retained Earnings
455.7
443.3
Total Shareholder’s Equity
1,726.2
1,736.6
Total Liabilities and Shareholder’s Equity
3 628 6
3 544 1
28
GB Auto
Total Liabilities and Shareholder s Equity
3,628.6
3,544.1
Comments on Balance Sheet
>GB Auto’s overall net debt position inclined LE 98.1 million in the quarter, largely on
the back of continuing high inventory levels. That will only start to decline during the
second quarter as the program to regularize dealer inventories (which was largely
q
p g
g
(
g y
implemented in 1Q09) is completed.
>At the end of the first quarter of 2008, inventories stood at LE 7I7.8 million , a level
GB Auto will target during the rest of this year The buildup of inventory since then
GB Auto will target during the rest of this year. The buildup of inventory since then
was largely due to changing market conditions as well as to operating actions taken
during the summer of 2008 to protect GB Auto against then-rising steel and oil prices
as well as persistent supplier shortages that had cost the loss of a significant number
of sales opportunities during peak selling season.
>The net debt-to-equity ratio at the end of 1Q09 was 0.55 compared with 0.41 at 31
December 2008. Furthermore, as the Group financed the build-up in inventory.
December 2008. Furthermore, as the Group financed the build up in inventory.
>Total assets at the end of 1Q09 declined 2.3% on the back of reduced accounts
receivable, with the proceeds applied against reducing levels of payables. Net fixed
assets grew 2 0% as a result of continued investment in the new passenger car paint
assets grew 2.0% as a result of continued investment in the new passenger car paint
shop and in the GB Polo project.
29
GB Auto
In 2008, GB Auto Enhanced Financing Capabilities
750
900
599
600
Short-Term Debt
LE million
Long-Term Debt
LE million
300
450
600
750
Current Portion
212
111
150
300
450
-81.5%
0
150
2006
2007
2008
Current Portion -
Term Debt
Short Term Debt
-
2006 2007 2008
> Long-term debt decreased significantly as a result
of debt restructuring.
> Current Portion Long Term Debt decrease as result
of repayment schedule of historical bank debts
> Short-term borrowings associated with working
capital grew in line with overall growth
Dramatic changes in debt structure have significantly enhanced term debt
capacity
There are no longer mortgages on the company’s assets following
30
GB Auto
There are no longer mortgages on the company s assets following
settlement of the term debt.
GB Auto
IV. Appendix
Corporate Structure
Sales &
Assembly
Sales &
Distribution
+
After-sales
Service
Transportation
Services
Exports
Itamco
Passenger
GB
Leasing
GB Polo
Haram
Transport
P
Ghabbour
Egypt
Commercial
G.I.T.
Free Zone
Exports
Passenger
Transportation
Financing
JV Bus
Assembly
Passenger
&
Cargo
Services
Commercial
Transportation
Exports
32
GB Auto
Organization Structure
Board of Directors
Chief Internal Auditor
CEO
(Dr. Raouf Ghabbour)
P j t D
t
t
(Gamil William)
Projects Department
(Naguib Ibrahim)
Legal Counsel
(Mahmoud Abdel Wahab)
Joint Ventures
Operations – PC &
2/3-Wheelers
(Nader Ghabbour )
Hyundai &
Operations– CV &
CE (COO)
Manufacturing &
Supply Chain
(CMSCO)
Business
Development
(Dina Ghabbour)
Finance
(Colin Sykes)
HR
(Amy Shoukry)
GB Polo
(W. Tawfillis)
Tires
(K. Fahmy)
Hyundai &
Volvo
(I. Naguib)
Mitsubishi
Fuso
(A. Matbouly)
GB Allab –
Remourque
(T. Salah)
Haram
(
y)
33
GB Auto
Haram
Transport
(K. Fahmy)
Institutionalization of corporate governance begins with a majority
independent-led board of directors
M M h
dAbd lW h b (N
E
i Ch i
)
ll
d
li i l fi
i E
d
h f
Mi i
f I d
>
Mr. Mohamed Abdel Wahab, (Non-Executive Chairman) a well-renowned political figure in Egypt, served as the former Minister of Industry.
Mr. Abdel Wahab is a former Chairman of El Nasr Automotive Manufacturing Company (NASCO), the state-owned auto manufacturer which was
the sole market player in the Egyptian automotive industry leading up to the privatization of the sector in 1992. Mr. Abdel Wahab brings to the
Board of Directors deep-rooted industry experience.
>
Dr. Raouf Ghabbour, the Chief Executive Officer, is the founder of The Ghabbour Group of Companies, which he began incepting in 1985. Dr.
Ghabbour jump-started his career working in his family’s auto-related trading business, where he initially established himself in the tire division.
Having quickly gained a commendable reputation in the market for his business savvy Dr Ghabbour went on to acquiring agency agreements
1
2
Having quickly gained a commendable reputation in the market for his business savvy, Dr. Ghabbour went on to acquiring agency agreements
from global OEMs, which he steadfastly turned into successful businesses. Dr. Ghabbour has grown the Company to be a market leader,
employing around 6,000 employees, operating 3 factories and running over four 3S facilities (Show room, Service and Spare parts) and 9 retail
outlets.
>
Eng. Mohamed Salah El Hadary (independent director) is currently serving as the Secretary-General of the Egyptian Automotive
Manufacturers’ Association (EAMA) and brings to the board a wealth of automotive expertise on the back of his experience serving as the
managing director of Suzuki Egypt Company and as the managing director and board member of El Nasr Automotive Manufacturing Company
3
g g
gyp
p y
g g
g
p y
(NASCO).
>
Mr. Byung-Ho Sung (independent director) is a former executive of the Hyundai Motor Company passenger vehicle operations in South Korea
and India. Mr. Sung also gained insight as to the dynamics of the local market during his post as the executive vice-president of the Kia Motor
Company’s Middle East headquarters.
>
Mr. Roger Rau (independent director) is a former president of the Volvo bus and truck operations in Germany. Mr. Rau also has experience
managing commercial vehicle and construction equipment operations in neighboring markets particularly Saudi Arabia Mr Rau has dedicated
4
5
managing commercial vehicle and construction equipment operations in neighboring markets, particularly Saudi Arabia. Mr. Rau has dedicated
the past thirty years of his career in restructuring distressed divisions of automotive companies, and has become reputable for his success in
managing healthy turnarounds.
>
Mr. Juan Carlos Callieri (independent director) recently retired as the Senior Industry Specialist of the automotive sector at the International
Finance Corporation based in Washington DC. Throughout his tenor, Mr. Callieri was responsible for all investments made by the IFC in
automotive and related companies with the additional task of helping shape the business development strategy of some of the most successful
automotive manufacturers and distributors in emerging markets.
6
g g
>
Mr. Aladdin Hassouna Saba (independent director) is the co-founder and Chairman of Beltone Financial, a leading regional financial services
institution operating in the fields of Investment Banking, Asset Management, Private Equity, Brokerage and Equity Research. Mr. Saba is also a
founding member of The Egyptian Investment Management Association, in addition to The Egyptian Capital Markets Association. Mr. Saba sits
on the boards of The Cairo and Alexandria Stock Exchange, National Bank of Egypt, various corporations and Investment funds.
>
Dr. Walid Sulaiman Abanumay (independent director) has been the Managing Director of Al-Mareefa Al Saudia Company since 1997, where
overlooks investments in both developed and emerging markets. Mr. Abanumay, has held several executive roles: between February 1993 and
7
8
overlooks investments in both developed and emerging markets. Mr. Abanumay, has held several executive roles: between February 1993 and
January 1994, he was the General Manager of the Investment Department of the Abanumay Commercial Center. Between November 1990 and
February 1993, he worked in the Treasury and Corporate Bank department of SAMBA. Mr. Abanumay is Board member of several prominent
companies: Madinet Nasr for Housing and Development (since 1998), and Raya Holding (since 2005), and Beltone Financial.
>
Mr. Mohamed Naguib Ibrahim (independent director) was appointed as a General Manager of the largest leasing company in Egypt,
International Company of Leasing “Incolease”, and became the Managing Director in 2003. Mr. Ibrahim was also appointed to serve on the
boards of several local and international companies, among which, are Glaxo Welcome Egypt, Middle East for Glass, Global Management
Company (Milbank’s venture capital fund management company) Stilco Company (Public sector) Allweiler Farid Company & ESB Securities
9
34
GB Auto
Company (Milbank s venture capital fund management company), Stilco Company (Public sector), Allweiler Farid Company & ESB Securities.
Finally, Mr. Ibrahim was appointed to the board of The General Authority for Investment (GAFI) in 2007.
GB Auto
Thank you you
www.ghabbourauto.com
INVESTOR RELATIONS CONTACT INFORMATION:
Mr. Bassem El – Shawy , Investor Relations Officer
Email:
ir@ghabbour.com
Direct:
+20 (2) 3910 0517
Tel:
+20 (0)2 3539 1201 / 3539 3037
Fax:
+20 (0)2 3539 1198
Address:
Abu Rawash Industrial Zone,
Cairo-Alexandria Desert Road, Km. 28,
P.O. Box 120, Giza, Egypt
