EGYPT The rebirth of EGYPT ARCHIVED REPORT May 31st, 1999	Egypt The rebirth of EGYPT Read our exclusive interview METALLURGICAL INDUSTRIES COMPANIES (Egyptian Joint Stock Holding Company) "Targeting the Whole World" Manager: Mr. Adel A. Danaf, Chairman Contact: 5 Tolombat St, Garden City Cairo - Egypt Tel.: (202) 3554833 – 3554844 Fax: (202) 3557221 Export Sector: Tel.: (202) 3541637 Fax: (202) 3556976 Telex: 22348 MICOR UN E-mail : micor2@click.com.eg Strategy 1/ MAIN INDICATORS (92/93 - 98/99) Value ; L.E. Million ITEM 92/93 97/98 DEV. RATE% 1 Revenues of Currents Activity 4190 5804 138 2 Production’s Value 3634 5192 143 3 Sales’ Value 3803 5202 137 4 Exports’ Value 846 884 104 5 Employees Average (No.) 75940 66848 88 6 Total Wages 501 787 157 7 Labour’s Wage Average 6604 11768 178 8 Net Value Added 824 1093 133 9 Invested Capital 11481 18115 158 2/ Affiliated Companies Egyptian Iron & Steel Co. Aluminum Company of Egypt. El Nasr Steel Pipes & Fittings Co. El Nasr Castings Co. Delta Steel Mill co. The National Metal Industries Co. Egyptian Ferro Alloys Co. El Nasr Co. for Coke & Chemicals. Egyptian Ferro Alloys Co. General Metals Co. (GEMET). The General Egyptian Company For Railway Wagons & Coaches (SEMAF). The Egyptian Company for Metallic Construction (METALCO). Engineering Enterprises for Steel Work Co. (STEELCO). Erection & Industrial Services Co. (ERISCOM). Amreyah Cement Company. Nile General Co. for River Transport. Nile General Co. for Water Transport. 3/ Focus 1-THE GENERAL EGYPTIAN COMPANY FOR RAILWAY WAGONS & COACHES (SEMAF) Head Office: Ein Helwan – Cairo- Egypt. Tel. : (202) 782177 – 782358. Fax: (202) 788413 Products: Manufacturing of all kinds and weights of freight wagons. Manufacturing of all kinds & classes of passenger coaches: first class air conditioned coaches, second class air conditioned coaches, second class Buffet air conditioned coaches. Manufacturing power coaches, tram cars, electric metroes. Manufacturing underground metroes. 2-GENERAL METALS Co. (CEMET) Head Office: 5 A 26 July Street – Cairo- Egypt. Tel : (202) 5903829 – 5919937. Fax: (202) 3906479 Products: Aluminium Products: Coils, Sheets, Discs and Slugs Al. Evaporators: Different types and sizes of Refrigerator Freezers. Lead Products: Pipes- sheets- alloys- lead seals- Grey and red lead oxides. Zinc products: Sheets- coils – slugs. Aluminium Alloys : Pressure and gravity Die-cast and sand alloy. Precious Metals Products: Silver wares- table wares chaneller- Aploques. 3- EGYPTIAN FERRO ALLOYS Co. Head Office: Edfu- Aswan- Egypt. Tel. : (2097) 7008012 – 701070 Fax: (2097) 701068 Cairo Office: 32 Kasr El-Nil St. Cairo. Tel. (202) 3921834 – 3903267 Fax: (202) 3921877 Activities: Producing and exporting of Ferrosilicon and other alloys. International and local trading in ferroalloys. Main Products: Ferrosilicon Alloys Different types and sizes of Refrigerator Freezers. - Production Capacity: 50000 Tons/year (75%- 65%- 45%- fines 70%) - Exporting Capacity: 45000 Tons/year Secondary Products: Micro Silica - Production Capacity: 25000 Ton/year - Exporting Capacity: 20000 Ton/year Other commercial Names: Silica dust/Silica Flour/ Silica Fume- Carbon Dioxide (Liquid, dry ice)- Ammonia (Liquid, Solution)- Oxygen & Nitrogen (Liquid, Gas)- Ammonium Becarbonate (edible grade)- Pitch Electrods- Crude Phenol- Naphthalene (Technical and pure)- Anthracene paste (40%)- Creosote oil- Concrere addotove S.P.- Sulphonic acid- Sodium toluene sulphonate (S.T.S)- Tar cleaner 17%- Mistran (A&S)- Ammonium phosphate Sol. 30% (mono-Di)- Laboratory chemicals. 4- DELTA STEEL MILL Co. Head Office: Mostorad- Kallubieh- Egypt. Tel. : (202) 2217627 – 2200504 Fax: (202) 2205648 Cairo Office: 18 Emad El-Din St. Cairo. Tel. (202) 5754955 Products: Hot rolled mild steel bars for reinforcing concrete. High tensile steel bars for reinforcing concrete. High strength, reinforced concrete bars with vanadium or titanium addition. Hot rolled mild steel bars for engineering purposes. Hot rolled steel sections. Cold drawn, low carbon bright calibrated mild steel bars. Cold drawn, low carbon steel wires. Cold drawn, mild steel bars. 5- ALUMINUM COMPANY OF EGYPT : Head Office: Nag. Hammadi – Kena- Egypt. Tel. : (202) 5787983 – 773937. Fax: (2096) 337107 – 335100 Cairo Office: 48 Abdel Khalek Sarwart St. Cairo. Tel. (202) 3918265 – 3935457 Fax: (202) 3930716 – 3906793 Products: Aluminium Metal: Al. Foundryingots Aluminium Slabs Aluminium Billets Aluminium wire Rod AluminiumSheet Coils Aluminium T. Bar Aluminium Standard ingots Rolling Aluminium: Hot & Cold lloying Coils , Plates and Sheets INTERVIEW with Mr. Danaf, Chairman Of Holding Company For Metallurgical Industries Thursday 28th January 1999 1/Q: Could you give our readers a brief historical background of your holding company? When we started with the holding company, we had special organizations. Under each organization the distribution of companies is based on the quality of production. From the name of our holding company, "metallurgical industries", you can deduce that our 10 public enterprises are working in the field of metallurgical industries, both ferrous and non-ferrous industries. When it was decided to move to our holding company to begin privatization, we moved from the organization based on qualitative aspects to the holding companies. We moved with the same group of companies that were specialized in metallurgical industries. At a later stage, it has been decided by the government to reorganize the holding companies to diversify the activities and to merge some of these companies together. When we started there were 27 holding companies. They were merged reducing the number of holding companies to 17. Some of the companies that were moved to different holding companies have been reoriented to their respective affiliates. We moved from 10 companies specialized in metallurgical industries to 17 affiliated companies with different activities, not only metallurgical but also cement industries that were added to the holding company. Further more, some engineering has also been moved to our H.C. and some of our companies were moved to another holding company. The entire structure has changed. The final structure consists of 17 affiliates. We kept the name "metallurgical industries" because the majority of our affiliates are involved in that field. We have 2 large cement companies, one is in Alexandria, Amerya Cement Co., and the other is in Upper Egypt, Assiat Cement Co. We have 2 other companies specialized in river transport. There are other engineering companies, one is specialized in the production of railway coaches and wagons and other materials for the railway authorities. There is another company that is specialized in steel structure buildings and petroleum tanks. We also have companies specializing in the production of steel pipes for infrastructure projects and petroleum. There is another company specialized in the production of ductile iron pipes that is used in infrastructure projects as well. Most of our companies are involved in the export business. One of our main exports is from one of our affiliates, Egyptian Aluminum Company in Naga Hamady in Upper Egypt. It is very well known world wide for exporting aluminum. It exports over 100,000 tons of aluminum. We also have an iron steel complex in Helwan that produces about 1.2 million tons of steel. This is the first integrated steel plant that was built in Egypt to exploit the local ores from Aswan and the Western Desert. This is the structure of our holding company. 2/Q: What are the company’s new challenges? We have already three of our largest companies. One of them is Amerya Cement Company, one of the largest cement companies in Egypt, producing 2.3 million tons of cement per annum. It is now operating under the companies’ Law No. 159. At present, we are working on the other cement companies. We are going to float the shares of Asyut Cement Company in two weeks. The cement business in Egypt is very attractive because it is very efficient and profitable. When we moved from the public enterprise to the holding company, it was decided that we could not privatize the companies in the state they were in because most of those companies have been subject to a lot of difficulties. They have also suffered from financial distortions due to the policies that were governing the public enterprises. Those policies were designed to force the companies to play a more social role rather than a financial and economic one. For example, the companies were not allowed to change prices unless the ministry and the Cabinet approved them. This in turn led to many other problems that we had to deal with when we started to privatize the companies. Such problems included low profitability, large debt burden, financial distortions and cash flow deficiency due to controlled prices by the government. These were the problems we had to deal with for no company would have been attractive to investors. Restructuring of the companies included financial restructuring, debt settlements, modernizing production lines and dealing with overemployment. We also successfully executed an early retirement program. To this day we have over 7,000 workers who have had early retirement and we are on our way to implement the early retirement program for another 7,000 workers. It was a very smooth process and the labor was compensated. This was a sensitive issue that was handled by the government. The origin of the problem was the government policy to send fresh graduates to those companies regardless of the availability of vacancies or the impact this would have on productivity. Now, the companies face overemployment. We have to deal with this now. We decided to restructure the companies to be more attractive to investors, since otherwise the value of the companies would be very low. This is one of the reasons why we have been accused by observers and the IMF that the program was moving very slowly. It is not easy to lay off such a large number of workers and to do it smoothly. There is a number of private sector steel projects that absorbed the skilled labor that took the early retirement from our companies. In addition to the Cement Company, we also privatized our ductile pipe manufacturing. It is a big and modern facility. They have two big locations, one in Cairo and the other in Alexandria. We succeeded in privatizing them. We have been working on the restructuring for a number of years. Now we have 5 companies that will be offered for privatization. They include the steel pipe plant in Helwan for which we have already done the restructuring and the debt settlement. There is considerable demand for such facilities because the company is involved in delivering the pipes needed by the petroleum sector and there are a number of projects being undertaken now in the petroleum and natural gas industry. That is why we have seen a lot of interest from investors. Another company that has been restructured is the Egyptian Ferro Alloya Co. that is specialized in the production of ferrosilicon (a material needed for the steel industry). They export about 80% of their production to the international market. It will be good to offer it for privatization. A company that is almost ready for privatization is CEMAF, which specializes in railway materials and the underground. Many multinational companies have shown interest in making joint ventures with CEMAF because it is the only company in Egypt that provides all that material to the National Railway Authority. We are still working on two other companies including the General Metals Company. It specializes in non-ferrous metals like aluminum sheets, coils, zinc, different products of lead and aluminum alloy casting. They furnish our automotive industry with the parts they need. We have a target of not more than two years in which we have to finalize the privatization of these companies. 3/Q: Could you tell us your personal opinion of the economic reform program in Egypt? Everyone can sense that we are on the right track just by looking at figures like inflation. Still, we are facing some difficulties like the declining petroleum prices. That is why we have to work harder to increase our exports. Most of our companies that are involved in exports are very qualified and certified for ISO 9000. Some of them have ISO 14000. Our Central Bank reserves and the exchange rates are stable. 4/Q: What do think the government should do to increase those exports? The government has done a lot like implementing a lot of new legislation. There are a lot of meetings lately to consider all of the complaints that come from the private sector, which started to play a big role in the economy. In the business community we can feel the quick response from the government when any complaint that arises. Our exports from petroleum and tourism have suffered and therefore we have to increase our non-traditional exports. 5/Q: What is your strategy to face such problems? The main strategy is to increase our exports. Our main goal is to be competitive in the international market. We have to care about quality, reduce our costs and evaluate the performance of our affiliates. We do not interfere in the management of our affiliates but we have periodical meetings with the chairman of our affiliates. Every three months we receive the financial balance. It is submitted to the board of directors of the holding company to evaluate their performance. Every three years we also make contracts with the management of the affiliates. But, within the three years, if the performance of the affiliates is not up to our standard, we can change the management. We do not interfere in the day to day operations but we have to make sure that the government objectives are followed. 6/Q: In USA they say "contacts often mean contracts". What are you doing to increase your contacts? A list has been prepared at the public enterprise office that includes the names of specialized investment banks. We have this list in our hands, classified according to our activities. There are investment banks, for example, that are specialized in cement, others in metallurgical works and so forth. We use this list when we offer the companies for privatization so that such investment banks help us in the promotion of the transactions. Sometimes we also ask them to act as underwriters of such offerings. For Amerya Cement, for example, we were cooperating with Merrill Lynch. 7/Q: Could you give us your personal background? I graduated from the faculty of Science at the University of Alexandria where I studied chemical engineering. Since then, I worked in the metallurgical field. I was appointed to the General Metal Company, which is one of our affiliates now. Then I was promoted to different parts of the metallurgical industry until I became the Chairman of the Holding Company for Metallurgical Industries. 8/Q: Since you have been appointed Chairman of your holding company, what has been your most satisfying personal achievement? The major achievement was restructuring the companies. It has not been an easy job. We have to go through many steps of valuation, confirmation and approval. After we reach the fair value of a company, it has to be approved by the board of directors of the holding company and then it has to go to the General Assembly of the holding company to be approved. Then, it has to go to a special committee in the Ministry to approve it. The valuation has to be also approved by the General Accountant Authority, which is represented in the special committee. Then it has to be revised and approved by the Minister of Public Enterprises. Then it goes to the supreme committee in the Cabinet, headed by the Prime Minister. So, it is a long way. Restructuring itself is also very sensitive in the sense that you have to lay off so many workers. It also requires liquidity (availability of cash) to compensate workers, settle the debts and so on. We do not keep the privatization proceeds. We only keep one-third of the proceeds and the government receives two-thirds. That is why we tell the government to let us keep the proceeds because we can not move forward if we do not have a point. That is a weak point. But, I am very satisfied with the performance so far. 9/Q: What is your last message to our readers? I can say that Egypt is the most favorable to come and invest. We have the political stability in Egypt and the region. International entities like the IMF and the World Bank confirm that as well. We give a lot of incentives to investors, which we never thought would happen. We also have very competent engineers, technicians and workers.   Read on   © World INvestment NEws, 1998. This is the electronic edition of the special country report on Egypt published in FORBES Magazine, May 31st issue. Developed by AgenciaE.Tv