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Thursday, 2 March 2017

Earnings watch: Edita, EK Holdings

** EARNINGS WATCH- Edita announced net profit of EGP 47.4 mn in 2016, down 86.4% y-o-y even though revenues increased by 12.5% y-o-y to EGP 2.5 bn. Edita posted a very strong top line performance in the fourth quarter despite widespread expectation of a pullback in consumer spending on the back of spiraling inflation. Edita chief Hani Berzi noted that “Our strong performance is most directly attributable to the accelerated rollout of the pricing strategy that we began implementing in late 2015,” which was “initially indirect in nature, including the selective upsizing or downsizing of products as well as the launch of new products at higher price points” but that later included direct price increases after the float of the Egyptian pound. Edita notes it recorded FX losses of EGP 298.5 mn in 2016, of which EGP 241.0 mn came as a consequence of the EGP float and “the consequent revaluation of its foreign currency-denominated liabilities.” M&A signal? Speaking to strategy in 2017, Berzi is quoted in part as saying the company may look at “direct expansion both in Egypt and in new markets.”

Egypt Kuwait Holding Company reported a 72% y-o-y increase in 2016 net profit to USD 62.5 mn in 2016 despite the translation into USD from EGP of the underlying financials of the companies in which it invests. EKH reported USD 351.2 mn in revenues, a 24% increase y-o-y. Calling 2016 “a year characterized by extreme volatility and unprecedented macroeconomic challenges,” EKH Chairman Moataz Al-Alfi noted that EKH has “positioned itself as a hedge against market challenges and a vehicle for capitalizing on high-growth industries. As the Egyptian economy undergoes a fundamental restructuring, one that will favour energy plays and manufacturers who use domestic resources to export and produce import substitutes, EKH is poised to capture the upside.”

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