CAIRO: As you enter the Oriental Weavers (OW) International factory in 10th of Ramadan City, you are greeted with a black glass pyramid. Inside lays the first carpet weaving machine OW founder Mohamed Farid Khamis used.
Back in 1979, when OW first saw the light, weaving machines could only take a handful of colors in the making of each carpet. With special adjustments, the machine s color capacity increased. Since then, OW machines and products have given the company the necessary edge to dominate the local market and acquire a considerable share of the global industry of rug and carpet making.
Oriental Weavers became the flagship of what has turned into a conglomerate; it s the holding company for its subsidiaries. Throughout the years, the activities have gradually covered different sectors of textiles and other industries; founder and Chairman Mohamed Farid Khamis s political and social activism adds to the company diversified portfolio. Production and distribution facilities have expanded to transcend Egyptian borders.
In the United States, Oriental Weavers Sphinx and Oriental Weavers of America offer distribution and production. The production facility in China aims at capitalizing on the growth of the middle class and increased need for floor coverings. Oriental Weavers also caters special lines of products to major international big box retailers including IKEA, Sears, Wal Mart and Marks and Spencer.
Now, especially with the newly implemented economic reform laws, the company has become an attraction for both local and foreign investors.
Beside the retail and institutional investors, says Farida Khamis, vice chairman for corporate finance, We ve seen a lot of additional international funds invest in the company.
From tax cuts to investment boosting regulations, Khamis points to plenty of positive changes. The government is encouraging investment, they are giving land at very low cost . Our energy costs are relatively lower and much lower than the United States and Europe or the United Kingdom. Even labor costs are not that high compared to China, adding that In terms of the other laws amended for taxes, it has given a lot of comfort to international investors.
Also, due to the export-orientated nature of OW and its subsidiaries (Oriental Weavers International is a free zone company), We don t pay any custom duty on imports, whether it s raw material [or] machinery. We don t pay any corporate taxes, explains Khamis.
On the consumer level, tax cuts have yielded an increase in disposable income and consequently a rise in carpet sales. Khamis says the lower quality sales have been picking up significantly.
I think what the problem was in the past, apart from the fact that there weren t any reforms taking place, was that we weren t marketing ourselves as an investor friendly country, unlike China, notes Khamis. Now she refers to Egypt as a very favorable climate to invest in, even in comparison to other global markets.
The political situation in general has actually increased in the country as a whole, explains Khamis. A lot of the investors look at the macro picture first. They look at the country, the political economic risk and then they focus on each company. So, more stability in the country [and] in the region provides investors with more comfort.
For its part, the company, which has been known as an Egyptian success story in the export business and prides itself to be operating at full manufacturing capacity, has made several deals that have widened its dominance, production and distribution wise, over the floor cover and textile industries.
Following the acquisition of controlling stakes in Misr America Carpets (MAC), a leader in wall-to-wall carpets, area rugs and custom tailored printed rugs, OW increased its annual production capacity by 34 million square meters, a figure expected to reach 47 million by the end of 2006, and added MAC’s network of 94 showrooms to its portfolio.
According to the latest company report, Oriental Weavers International has increased its manufacturing capacity to 41 million square meters.
More recently, OW has partnered with Italy s Miro Radici, a European market leader in textiles. The collaboration would see OW manufacturing and exporting terry cloth (towels and bed sheets) to Europe.
Furthermore, OW is taking great strides on the road of vertical integration. The factories don t just produce rugs but manufacture almost all of the needed ingredients. The various types of natural and artificial fibers, from wool to cotton to polyester, are produced inside the OW factories.
A polypropylene factory is also set up under OW s petrochemical sector catering to the demands of the local and international market, along with the needs of OW s production facilities. Polypropylene, an essential raw material in some fiber manufacturing, was mainly imported.
[It] is export oriented, notes Khamis. We are targeting the European market because there s a shortage in polypropylene, which is the end product we are producing.
In the rug industry, more techniques have been added to diversify production, including Gobelin and gun tuft. Correspondingly, there has been an increase in sales outlets offering high end products. There are now seven branches of La Boutique which are OW stores specialized in higher end products.
One of our main strategies is to actually ensure that we have a product for each and every individual who comes to our showroom regardless of what kind of income they make or what kind of income bracket they have, Khamis explains.