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Thursday, 26 May 2022

Earnings: EFG Hermes, Contact Financial, Elsewedy Electric report strong 1Q 2022 results

EFG Hermes’ net income rose 18% y-o-y to EGP 345 mn in 1Q 2022, the bank said in its earning release (pdf) yesterday. Revenues were up 55% y-o-y to EGP 1.9 bn.

Revenue growth was underpinned by a strong quarter for EFG’s core businesses despite a challenging operating environment. Top line growth was driven by the inclusion of revenues from commercial bank aiBank — in which EFG acquired a controlling stake late last year — and solid performance at EFG’s investment banking and non-bank financial institutions (NBFIs). Revenues from the group’s investment bank rose 12% y-o-y to EGP 901 mn. NBFI revenues grew 34% y-o-y to EGP 601 mn, driven by microfinance platform Tanmeyah, consumer finance subsidiary valU, and the bank’s factoring business. Growth in core businesses more than offset a 24% y-o-y drop in revenue generated by holding and treasury activity.

aiBank + inflation push up operating costs: Group operating expenses were up 49% y-o-y to EGP 1.2 bn, driven by the consolidation of aiBank’s operating costs and higher marketing spend at valU, which recently attracted investment from Amazon. Expenses at the group’s investment banking platform rose 16% to EGP 569 mn, largely because of inflationary pressures.

More GCC + NBFI expansion ahead: “In the quarters to come, we will continue to focus on garnering more opportunities in the GCC and cementing our foothold there in the investment bank space,” EFG Group CEO Karim Awad said in a press release (pdf). “At the same time, our NBFI platform will continue to grow as our BNPL player valU expands its operations and Tanmeyah continues to deliver solid revenues. ”

Elsewedy Electric’s net income was up 9% y-o-y to EGP 760.9 mn in 1Q 2022, according to the company’s latest earnings release (pdf). Revenues rose 51% y-o-y to EGP 18.6 bn. The company attributed the jump in revenues to growth in its turnkey projects as well as its wires and cables segments, where new awards and higher pricing in response to inflationary pressures were reflected in its top line.

The wires and cables segment accounted for half of all revenues, rising 48% y-o-y to EGP 9.3 bn. Turnkey projects brought in EGP 7.6 bn or 41% of all revenues, up 66% y-o-y.

Elsewedy is navigating the global rise in raw materials: Shortages in raw materials and cargo ships “remain an issue,” but one the group is mitigating by redesigning products and placing larger advance orders from suppliers.

What they said: “I consider our strategic efforts towards geographic and operational diversification as a major contributor to our ability to navigate the latest exchange rates’ movement and its related effect on our financials,” said CEO Ahmed Elsewedy. The company is focused on contingency planning as market volatility and uncertainty continues amid the war in Ukraine and rising global inflation, he added.

Contact Financial Holding’s net income jumped 40% y-o-y to EGP 154 mn in 1Q 2022, the company said in a press release (pdf) yesterday. Net income from Contact’s financing business rose 46% y-o-y to EGP 141 mn, which the company attributed to “growing demand across the division’s consumer finance, mortgage and commercial vehicles products.” Contact’s ins. income grew 39% y-o-y, adding EGP 18 mn to its bottom line.

New loan products helped push the company’s growth: Contact saw a near five-fold increase in new consumer finance, driven by growth in home interior, club membership, and education financing. The company’s mobile app also gained more traction, with total downloads growing 35% q-o-q to reach 105k.

Looking ahead, Contact plans to invest ‘innovatively’ + enhance its digital presence: “We will continue to survey the market for innovative opportunities to invest in as we look for new ways of serving our expanding audience, and continue to transform the way consumers and businesses access financial services,” said management.

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