# **Exhibit 2.12 – Profitability analysis by industry**

_<u>Medians by year and average median and compounded average growth rate of period 2003-2007</u>_

||**Trav**|**el and leisu**|**re, medians**||**Constru**|**ction and m**|**aterials, medi**|**ans**|
|---|---|---|---|---|---|---|---|---|
||**2003**|**2007**|**Average**|**CAGR**|**2003**|**2007**|**Average**|**CAGR**|
|**Operating profit margin, %**|||||||||
|Egypt - Second tier (Coface)|40.4|47.6|44.0|3.3|8.9|13.5|10.2|8.7|
|Egypt - Top tier (Coface)|10.1|22.4|21.2|17.3|15.1|26.2|23.4|11.6|
|**ROA, %**|||||||||
|Egypt - Second tier (Coface)|4.8|9.0|6.9|13.5|4.1|9.5|6.1|18.5|
|Egypt - Top tier (Coface)|1.4|7.0|5.2|39.0|6.3|14.4|11.6|17.9|
|**ROE, %**|||||||||
|Egypt - Second tier (Coface)|7.1|14.6|10.4|15.6|10.6|24.2|16.2|18.0|
|Egypt - Top tier (Coface)|3.8|12.1|10.7|26.3|8.8|22.6|19.7|20.6|
|**Yearly real sales growth, %**|||||||||
|Egypt - Second tier (Coface)|NA|10.3|8.1|NA|NA|2.9|5.3|NA|
|Egypt-Top tier (Coface)|NA|20.8|17.1|NA|NA|2.5|11.8|NA|
||**Con**|**sumer staple**|**s, medians**||**Indu**|**strial cyclic**|**al, medians**||
||**2003**|**2007**|**Average**|**CAGR**|**2003**|**2007**|**Average**|**CAGR**|
|**Operating profit margin, %**|||||||||
|Egypt - Second tier (Coface)|6.5|7.3|7.0|2.3|8.1|10.7|9.9|5.5|
|Egypt - Top tier (Coface)|5.0|6.8|6.2|6.4|18.3|22.2|19.5|3.9|
|**ROA, %**|||||||||
|Egypt - Second tier (Coface)|5.6|6.2|5.7|1.9|5.1|8.9|7.0|11.6|
|Egypt - Top tier (Coface)|8.7|8.8|9.1|0.1|5.0|12.1|10.4|19.6|
|**ROE, %**|||||||||
|Egypt - Second tier (Coface)|11.6|12.3|13.4|1.2|10.2|18.4|14.2|12.5|
|Egypt - Top tier (Coface)|21.6|16.7|20.1|-5.0|15.1|26.0|22.3|11.5|
|**Yearly real sales growth, %**|||||||||
|Egypt - Second tier (Coface)|NA|-0.7|-0.9|NA|NA|6.9|6.2|NA|
|Egypt-Top tier (Coface)|NA|-3.6|-3.7|NA|NA|17.8|9.9|NA|

_Source: Coface Egypt; World Bank staff analysis_

# **Exhibit 2.13 – Statistical differences between the median Top Tier firm and the median Second Tier firm** _<u>Quantile regressions for period 2003-2007</u>_

||_Difference_<br>**Median d**|_Statistically_<br>_different?_<br>**ifference, (pp)**|_Difference_<br>_Statistically_<br>_different?_<br>**Median difference also taking**<br>**firm size into account, (pp)**|
|---|---|---|---|
|**Real sales growth, %**|2.6|No|0.5<br>No|
|**Op. profit margin, %**|4.9|Yes|1.8<br>Yes|
|**ROA, %**|3.7|Yes|4.4<br>Yes|
|**ROE, %**|5.3|Yes|6.1<br>Yes|
|**Real asset growth, %**|1.0|No|-0.7<br>No|

_Source: Coface Egypt; World Bank staff analysis_ _Note: Differences are expressed in percentage points. Statistically different refers to a p-value less than 0.1._

# _2.2.2 Investment: All tiers show similar signs of disinvestment with much higher retained earnings levels for Top Tier firms_

Exhibit 2.14 shows that both tiers experienced significant disinvestment―similar to the international benchmark results―which was even higher for Second Tier firms (median difference: -1.2 pp). Consistent with higher profitability, the Top Tier also shows higher retained earnings. However, international comparison is difficult since Coface information overstates fixed asset growth and retained earnings significantly, but the big differences both point to significant underinvestment and hoarding of earnings.

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