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Lakah Group Activities:
Medical
Industrial
Tourism
Trading
Aviation
Contracting
Art Media
 Strategy
Interview with
MR. RAMY LAKAH
CEO & CHAIRMAN OF LAKAH GROUP
Monday 11th January 1999
1/Q: Mr. Lakah, your company started as a family-run business about a century ago. Since you have diversified in many fields of activities and you recently reconsolidated your company, could you give us a brief background of your company and the present structure?
My grandfather started the business almost 100 years ago in the cotton business. He was one of the major players in the cotton business in Alexandria and Mahala El-Kobra. At the same time, he had one of the largest jewelry and diamond centers at Khan El Khalili. My father was among the first to introduce the business of medical equipment in the 1960s. At this time we had just introduced the electro cardiograph and some other electronic devices. My father was the first to introduce them in Egypt. At that time he was teaching how that equipment would be used to Egyptian doctors who are now the major players in the industry. After the death of my father, together with my brother we took over the three companies in the industry and medical fields. Then, President Mubarak decided to liberalize the economy, open the capital market and open investment without limitations. This encouraged us to increase our business and open new companies, new factories and reinvest profits in the company and increase the size of the company. We have immediately invested in our steel factory, which is one of the largest steel factories in the region where we own our power station. No one in the past believed that a power station could be privately owned. This helped us to establish this factory. We took over 2 major companies from El-Sherif Investments Company, which are a soap factory and a bulb factory. We are now the leader in soap and bulb manufacturing in the Egyptian market. At the same time we have been encouraged to export the medical knowledge to the Middle East. We are now representing Toshiba Medical Systems all over the Middle East including Africa. We are the distributor of Hewlett Packard in Greece. We export hospitals from Egypt for about $100 million annually. In addition, we opened in Africa, Europe and the Middle East jobs for about 340 persons. Our group is now the largest paid-in capital group in Egypt. It is L.E. 1.2 billion and it is the largest company in Egypt. We are the first company that issued the largest bond since the creation of the Egyptian Stock Market in
1908. It is the biggest marriage of companies since the creation of the Egyptian Stock Market. We are opening 30% of our capital now to investment institutions and banks to give to our company worldwide potential and trust. We will be the first private company to be on the New York Stock Exchange. We have applied for ADR on the New York Stock Exchange. All our financial statements are done according to the GAAP standards and by one of the largest firms, Deloite, Touche & Thomatsu. This is the history of our group.
2/Q: What is the core element of your activities?
Our activities are divided into three major activities: industry, which has three divisions. 2)trading of medical equipment and general services 3) construction of hospitals and major projects.
3/Q: You operate in the steel industry. Steel demand is increasing by
7% in Egypt, fueled by a boom in the construction sector. What is your policy to face such increasing demand and to maintain your market share?
Our steel industry is different from what you think. There are three phases for the steel industry. It starts from scrap or its subsidiary. Then you take the scrap and transfer it into billet and then to steel bars. The majority of the companies, except two in Egypt (there are 25 steel bars factories in Egypt), do not manufacture billets. They buy the billets and manufacture steel bars. We are the only company that manufactures billets and sell it to the steel bars factories who are our clients and not the end user. In this case there is a shortage of 2 million ton per year. Our production is sold one year in advance to those companies. We have no competition in this regard.
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4/Q: Are you undergoing a process of diversification or specialization?
We want to reach very high productivity with very low cost. This is what we want to achieve this year. We want to keep our 20% market share. We do not want to increase this but we want to decrease our cost of production.
5/Q: The three key words for success are modernization, modernization, modernization. What efforts are you making in that sense?
We are not manufacturing high-tech equipment but rather we are manufacturing using high-tech equipment. The end product is not a high-tech product but rather a consumer product. Modernization is just a gadget. The cost of productivity is a key factor.
- But generally speaking for the group?
For the group, we are trying to work on very low leverage. We are trying to work on goods that are sold in advance or the selling of such goods is very easy. We are trying to decrease the stock. The hospital and medical equipment are sold before you buy it. We are selling our billets from the steel factory in advance. In construction, we get a contract first and then we start building. This keeps a high level of liquidity and this is what we want.
6/Q: Could you provide us with more figures regarding the group?
We have around 7,000 employees. We have a turnover of almost L.E. 2 billion. Profitability is around 8%-9%. Our market share in the medical field is around
32% in the Middle East and Africa, 20% in steel, 42% in bulb manufacturing.
7/Q: You tied up with Midwest Airlines to schedule regular flights between Egypt and the USA. Are international alliances an important part of your strategy?
Yes. We would like very much to find an American company that can assist us in forming an alliance with us and who can believe in a growing Egyptian company, knowing that it is extremely difficult to have a license of flying to the USA. It is not easy as the procedures here. It would help us in developing two or three lines to the USA, North America and South America.
8/Q: As we say in the USA, ‘contacts often mean contracts’. What are you doing to encourage greater contacts in the USA?
We have a long-term partner from the USA like Hewlett Packard, with which we had a big trade relation for 12 years. We have made a lot of good business together and we are looking to opening new relations with an American bulb company to make a joint venture together to get their experience in manufacturing and our experience with our market share to increase bulb production. For our steel production, the technology is coming from the USA.
9/Q: Do you see your company heating up further on international markets?
No. We are only interested in the New York Stock Exchange. We are not floating to any other market. We want investors and not brokers or gamblers. We want people who can see our progress and the future of our company.
10/Q: You recently offered L.E. 250 million in bonds (the largest bond offering in the Middle East). This was a local and international offering or strictly local?
This was both a local and international offering that has been covered
11 times on private placement and three times on public issuing.
11/Q: When you said that you were looking for investors to create new companies, in which areas of your activities are you willing to attract new investors?
We want to attract new investors to further the expansion of the group as a whole.
12/Q: There are a lot of incentives to attract investors to Egypt. What are further measures that you take to attract more investments?
I think that the step that has been taken here makes Egypt one of the most attractive countries for investment in the emerging markets. We have a strong government and President. The next measure should be to go faster in the privatization program.
13/Q: Keeping in mind that Forbes magazine reaches more than 4 million people, what will your last message to them be?
I want to tell the American businessmen and not the large companies, that they could come here with their product and make joint ventures with Egyptian companies knowing that the Egyptians are and will remain the Key to the Middle East. The entire region is watching Egyptian television, reading Egyptian magazines and interested in our politics. To penetrate the Arab market, Egypt is the key. In addition, Egypt is in itself a big market with over 60 million people and it is very easy to export from here to the any part of the Middle East.
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© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Egypt published in FORBES Magazine,
May 31st issue.
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EGYPT
