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Thursday, 8 August 2019

Earnings watch: GB Auto, Egypt Kuwait Holding, Talaat Moustafa Group

EARNINGS WATCH- GB Auto turns net loss in 2Q2019 as competition with zero-tariff EU imports bites: GB Auto posted a net loss of EGP 8.9 mn in 2Q2019, with revenues falling 6.3% y-o-y, according to a company earnings release (pdf). The bulk of the revenues during the quarter came from the company’s Auto & Auto Related (A&AR) segment, which took EGP 9.64 bn over the quarter — a 4.3% y-o-y rise from 2Q2018. The company recorded net profits of EGP 7.1 mn during 1H2019 on revenues of EGP 11.54 bn.

“Regulatory challenges,” low customs for EU, Moroccan, Turkish cars driving losses:The company attributed its loss during the quarter to “regulatory challenges” including the imposition of lower customs rates on cars from the EU, Morocco, and Turkey than vehicles from other markets. “This trend is creating an environment that favors importation of more expensive and luxurious cars from EU countries over buying locally assembled cars and other more economic, fully imported products of non-EU origin. It is our view that these trends are unsustainable, and corrective measures are required to protect our national manufacturing know-how and capacities, as well as provide a level playing-field that would stabilize the market, improve foreign currency utilization and enhance customs revenues,” GB Auto CEO Raouf Ghabbour said. Ghabbour also pointed to regulations constraining the three-wheeler segment, including caps imposed on the number of licenses for three-wheelers.

Regulatory changes are coming, but are they enough? Sources told us last month that the Madbouly Cabinet had approved legislative amendments to the Customs Act that would provide incentives to domestic manufacturers. The amendments would see manufacturers’ effective customs rates reduced if they meet domestic component quotas. Nonetheless, even under these incentives — which could see their customs bill reduced to 15% from a current 40% in certain cases — local manufacturers would still find it hard to compete with imports from the EU that have a 0% customs rate. These incentives were created in place of a previous package of incentives (dubbed the automotive directive), which was long called for by local assemblers, who had hoped it would tip the scales before customs on EU cars fell to 0%.

Egypt Kuwait Holding 2Q profit up 12% y-o-y: Egypt Kuwait Holding (EKH) posted a net profit of USD 34.8 mn in 2Q2019, up 12% from USD 30.7 mn a year earlier, according to a quarterly earnings release (pdf). Revenues increased by more than USD 25 mn y-o-y to reach USD 140 mn. Growth came primarily from the company’s energy arm, which saw revenues rise to USD 30 mn from USD 24.4 mn in 2Q2018.

Profit rises 13% y-o-y in 1H2019: EKH reported profit of USD 71.9 mn during the first six months of 2019, up 13% from USD 63.3 mn last year. Revenues in 1H2019 rose by almost 20% to hit USD 280.3 mn, from USD 234.8 mn.

Outlook: The company is “optimistic” about its medium and long-term growth prospects due to the ongoing Egyptian gas boom, the completion of its 40 MW Kahraba plant expansion in late 2020, and the entry of its fertilizers and petrochem segment into new export markets.

Real estate developer Talaat Moustafa Group reported net income of EGP 812.3 mn during 1H2019, compared to EGP 731.7 mn a year earlier, the company said in a bourse filing (pdf). Revenues came at EGP 4.9 bn during the period, a 25% increase from last year.

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