Float reax: Snack-maker Edita to increase prices, employee wage, GB hikes car prices, Savola and airlines brace for hits.
Edita Food Industries will increase the prices of some products and boost employee salaries in the aftermath of last week’s reforms, Chairman Hani Berzi told Reuters’ Arabic service. Berzi says the EGP float is a positive step towards achieving FX stability, but says higher prices will impact imports and transportation. As a result, Berzi says, Edita is having to reprice its products to maintain profitability. Edita had stopped sourcing USD from the parallel market two weeks prior to the float claiming “unacceptable prices,” Berzi added, noting that 28% of Edita’s expenses are directly affected by FX rate. With inflation rates expected to hit 20% by the end of the year, he says, the company is trying to take into account the drop in purchasing power of its employees, but did not reveal the size of the salary or product price increases.
Meanwhile, GB Auto has raised prices on Hyundai cars by 5.7-11.2% following the float of the EGP, Al Mal reports. The newspaper has a chart of Hyundai prices before and after the float. The move justifies our skepticism of last week’s announcement by the automobile division of the Federation of Egyptian Chambers of Commerce promising to reduce prices of cars by EGP 10-30,000 for vehicles in the EGP 100k-350k price range.
Savola getting hit by EGP float: Savola group issued a statement to Tadawul saying its operations in Egypt will be impacted negatively by float of the EGP. The company says its 4Q2016 consolidated net profit will be impacted by SAR 171 mn approximately as a result. Savola also said it “has previously taken a number of measures, over the year, that have significantly decreased its exposure and the resulting ‘hit’ of Egyptian pound devaluation against foreign currencies, this efforts have been actively managed by the company, which enable it to avoid much bigger loss.”
Similarly, revenues of international airlines tied down in Egypt have shrunk since the float to USD 153 mn, a 45% depreciation from USD 275 mn in August, Al Mal notes. This would likely make the issue repatriation of revenues from Egypt all the more pressing for airlines. KLM had reported earlier this fall that it will indefinitely suspend flights to Cairo starting 8 January, 2017. Meanwhile, British Airways has increased the prices of its tickets by 15%, a move it claims it will reverse if it can repatriate its revenues.
How will your company be impacted by the flotation? Let us know by dropping us a line at firstname.lastname@example.org. We’ll sift through your answers and either run the best quotes or knit together a little piece. Please make sure to include your name, company and title even if you’re asking your comments run on a no-name basis.