Tuesday, Nov 23, 2004
CASE STUDY ORIENTAL WEAVERS: Sisters spreading their carpets around world
The worn-out loom on which Mohamed Farid Khamis wove his first rugs is enshrined in a glass pyramid at Oriental Weavers' main factory outside Cairo.
One of seven the former carpet trader acquired from a bankrupt Japanese company in 1979, it serves as a reminder of how far the company has come. From modest beginnings, Oriental Weavers (OW) has grown into one of Egypt's top export-orientated manufacturers. It has also gained an 85 per cent share of sales at home.
After a period of aggressive expansion it is recognised as a world leader in machine-made rugs, selling to more than 90 countries with factories in Egypt and the US - and soon in China - and a hand-weaving outfit in India.
Analysts who track its performance on the Cairo stock exchange point out that the company has been among just a handful in Egypt with the ability to maximise the country's competitive advantages on the world stage.
Egypt's position at the crossroads of three continents is one such advantage. "Low labour costs, control over distribution channels and increasing vertical integration," are other resources that have allowed OW to sustain higher margins than international competitors according to EFG Hermes, the Cairo-based investment bank.
The latest results show sales in the first nine months of this year worth EPounds 1.03bn, up 17.6 per cent on 2003. Profits were up 10 per cent to EPounds 145.3m, squeezed partly by the spike in the price of polypropylene - the main ingredient of artificial fibres - that has accompanied record oil prices.
The bulk of OW's export production takes place in a free zone where it enjoys permanent tax and duty free status. But where it has needed to, OW has invested abroad. Its Sphinx division in the US helps sustain a 30 per cent share of the US market in machine-made woven rugs through a variety of outlets from Wal-Mart to more upmarket home furnishing stores.
As OW has grown, so it has consolidated its advantages in the global market with machine tools that are at the cutting edge of technology, its own petrochemicals plant and a sales team that speaks at least a dozen languages.
But what is most immediately striking about the company is the way it is run. Busy overseeing a diversifying family business empire as well as a career in politics, Mr Khamis has taken the unusual step for Egypt of handing over the day-to-day running of the rug-making business - including talking to the Financial Times - to his two daughters.
They have helped shake up management and eased the company's transition from being part of a family-run conglomerate to a multinational operation, attracting foreign investors and with 30 per cent of its shares floated on the Cairo stock exchange.
For two 20-something Egyptian girls in a male-dominated society, Yasmine and Farida Khamis have developed striking profiles. They sit on the board of the company. Yasmine runs the main factory with a hands-on approach to design and marketing that takes her around the world in search of the latest trends and clients.
After an internship at an investment bank, Farida, the younger sister, runs the investor relations department. She is busy developing plans for a petrochemical plant which will manufacture the polypropylene that goes into artificial fibres direct from Egypt's abundant supplies of gas.
Where once OW's designers drew inspiration from the ancient traditions that gave the company its name, they are now, says Yasmine, as likely to take them from the catwalks in Milan or, as in one recent US line that has sold 155,000 metres to date, from Andy Warhol designs.
The initial success of Oriental Weavers was at least partly attributable to the experience Mr Khamis gained during 13 years as a carpet salesman in the Middle East, says one potential investor.
"A lot of successful industrialists started out as traders, gaining in the process an understanding of their market that engineers for example, rarely can."
Yasmine Khamis appears to have taken that lesson on board and, thanks to frequent travels, has helped the company develop another asset as it expands across the world.
"Where the Belgians, for example, tend to sell what they have, we study demand and then tailor-make for specific markets. In the US, for example, they tend not to go for simple rugs. They like there to be lots going on and they go for - or as they call it 'beef'. They like to feel they are getting value for money."
"In the UK, on the other hand, they care less about quality and more about design."
The result in the factory showroom is a bewildering array of rugs from the conservative to the lurid, and the prickly to the soft underfoot.
OW is branching out with other new products and ventures. These include wall-to-wall carpeting and a joint venture with an Italian company to make towels out of Egyptian cotton.
Meanwhile the International Finance Corporation, the World Bank's private sector lending arm, has expressed an interest in investing in the petrochemicals plant, which will sell to local and global markets as well as to OW's rug factories.
Farida Khamis says her biggest worry is that the company might expand too fast. That's a challenge few Egyptian companies have had of late and even fewer Egyptians her age have had to confront. To meet growing demand, OW has pressed dozens of new looms into service in half-finished factory extensions.
By WILLIAM WALLIS
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