Cairo - Decypha: The liberalization of the Egyptian pound's exchange rate against foreign currencies has played a key role in determining the profitability and performance of companies in 2016.
Data compiled by Decypha has showed that the cement, food products, and telecommunication sectors are the most affected; while the real estate, petrochemicals, and fertilizer companies are at the top of Beneficiaries.
The Central Bank of Egypt has floated the Egyptian pound against all foreign currencies on November 3 of 2016. The dollar jumped crossing EGP 18 by March 2017 with signs of further increase, compared to EGP 8.88 pound before flotation.
The impact on companies operating in Egypt was not only due to the losses incurred as a result of the volatility of the currency, but due to the sharp hike in costs of raw and packaging materials. A key additional factor was the change in the perceived value of products.
The Egyptian Financial Supervisory Authority (EFSA) responded last month by amending the Egyptian Accounting Standards No. 13, last changed in 2015, "Effect of Changes in Foreign Exchange Rates". The standard has been introduced to deal with the effect of the exchange rate liberalization against foreign currencies.
Real Estate Sector
As the fastest growing industry in Egypt, and reportedly expected to be the fastest growing globally, most industry companies have recorded significant profits, as citizens are turning the devaluating savings into real estate investments to preserve their value.
Al Shams Housing and Urbanization SAE recorded a profit of EGP 386, 250 versus only EGP 24,320 in 2015, while Mena Touristic and Real Estate Investment has achieved a profit of EGP 15.4 million, compared to EGP 887.58 thousand during 2015. SODIC's profit resulting from the revaluation of the company's foreign currency balances amounted to EGP 68.5 million during 2016. Delta for Construction and Rebuilding SAE recorded a profit of EGP 2.8 million pounds during 2016. Pyramisa Hotels and Resorts recorded a profit of EGP 9.5 million against losses the previous year of about EGP 1.8 million. Talaat Mostafa Group Holding boosted its profits from currency differences to reach EGP 39.2 million against EGP 23.5 million. Real Estate Egyptian Consortium's recorded profit for 2016 was EGP 3,527,000. Utopia recorded profits of EGP 204,450, against a profit of only EGP 10,500 the year 2015. However, Cairo Development and Investment achieved a profit of EGP 90,750 compared to profits of EGP 136.6 during 2015. Amer Group Holding Co SAE profited EGP 47.1 million during 2016, compared to a profit of 21 million pounds in 2015. Alsaeed Contracting and Real Estate Investment Company's profit for 2016 were EGP 5.5 million compared to EGP 24,378 during 2015. On the other hand, Alshams Pyramids incurred losses of EGP 3.18 million, however, the company still was showing growth in comparison to its recorded losses of EGP 617.57 in 2015.
Fertilizers and Petrochemicals Sectors
Not unlike the real estate sector, fertilizer and petrochemical companies have performed well as a result of the push they received from currency devaluation. MOPCO announced in a statement that achieved a profit of currency differences of EGP 1.84 billion as a result of the liberalization of the exchange rate, noting that the net losses after tax and the exclusion of currency differences amounted to EGP 1.13 billion .Kerir Petrochemical Company profits for 2016 were EGP 645.52 million against profits of EGP 57.47 million pounds in 2015. The Egyptian Chemical Industries Company (Kima) achieved profits of EGP 219.2 million. Alexandria Mineral Oils Company (AMOC) mid-term results showed that the company benefited positively from the differences in the currency valuation either due to dollar deposits or sales of food, with a net value exceeding EGP 230 million (these numbers are before the final auditing). Samad Misr recorded profits of EGP 174,450 during 2016, compared to EGP 6,590 gains through 2015. Similarly, IFIC profits as a result of the sale of dollar deposit balances by about EGP 35.12 million, in addition to profits resulting from the revaluation of foreign currency balances amounting to EGP 7.37 million as a result of exchange rate liberalization.
Telecommunication Sector
Orange Egypt for Telecommunications suffered huge currency losses of EGP 615.1 million against losses of EGP 16.27 million in 2015. On the other hand, Global Telecom Holding SAE recorded profits from the effects of the currency floatation of EGP 1.2 billion ($67 million), against losses of EGP 727.5 million ($40.4 million) the previous year. Similarly, Telecom Egypt posted a profit of EGP 888 million due to the revaluation of assets and liabilities following the flotation of the pound.
Cement Sector
Most companies in this sector have suffered losses, due to rise in cost of production and affected sales. Beginning with, Sinai Cement suffered losses of EGP 31.6 million, compared to losses of EGP 3.3 million in 2015. Suez Cement lost about EGP 271.6 million against profits of EGP 14.3 million pounds in 2015. Arabian Cement lost about EGP 246 million in 2016 due to currency differences, against losses of EGP 44 million during the year 2015. Tourah Portland Cement lost an estimated EGP 5.2 million in comparison to profits of EGP 305,500 in 2015.
Ceramic and Construction Materials Sector
Lecico Egypt's profited from the currency fluctuations EGP 111.15 million, which contributed to the reduction of the realized losses in the value of the difference in currency exchange rate. The Arabic Ceramic Co. lost EGP 1 million in 2016. Misr National Steel National Steel Company recorded profits of EGP 2.79 million, against losses of about EGP 6.54 million during the year 2015. Arab Valves Co. SAE lost an estimated EGP 251,870 during the past year. On the other hand, Arab Aluminum profited about EPG 697,900 during 2016, against losses of EGP 1.28 million pounds during the year 2015.
Paper and Packaging Material Sector
Due to the hike in costs of production, this sector has mostly seen significant losses in 2016. Beginning with Suez Bags which reported a loss of EGP 27.6 million during 2016, against losses of EGP 1.96 million during 2015. Remaining stead was Universal Co. for Paper and Packaging Materials which lost about EGP 1.79 million, compared to similar loss of EGP 1.07 million in 2017. El Farasha for Manufacture and Printing Packing Materials recorded a loss of about EGP 13.3 million in 2016.
FMCG and Food Sectors
Mostly due to turbulences of the purchasing power, the FMCG industry has seen a sharp decline post currency floatation. Juhayna’s consolidated business results were affected by EGP 58.5 million in losses. The results of the company's independent business were also affected by EGP 2.7 million in losses as a result of the cash items revaluation of balances at the date of exchange rate liberalization. Edita Food Industries suffered losses of EGP 204 million in 2016, including EGP 146.5 million due to the floating effect of revaluation of liabilities denominated in foreign currency. National Co for Maize bore differences of currency valuation and revaluation of about EGP 259.6 million pounds for the fiscal year 2016. Egyptian Starch and Glucose recorded profits ofEGP 5.34 million during 2016 compared to EGP 669,580 during the year 2015. Ismailia National Food Industries achieved profits of about EGP 2.36 million pounds of currency differences.
Miscellaneous
Oriental Weavers lost about EGP 106.7 million due to currency differences, against losses of EGP 42.1 million.
International Company for Leasing reported a profit of EGP 7.3 million, compared to profits of EGP 1.29 million in the year 2015.
Arab Moltaqa Investments profited about EGP 5.55 million pounds of currency differences, compared to a profit of EGP 3.32 million in 2015.
Recap Financial Investments lost about EGP 5.7 million against a loss of EGP 10.49 million.
Arab Engineering Industries recorded a loss of EGP 1.3 million.
Integrated Engineering Group achieved profits of about EGP 2,427 thousand of currency differences in 2016.
The Egyptian Transport Services Company recorded a profit of EGP 44.5 million, compared to EGP 852,210 during the year 2015.
Ameco Medical suffered losses of EGP 1.05 million during 2016, against losses of EGP 315,100 for the year 2015.
Assiut Islamic Company increased its profits due to currency differences to record LE 488.51 thousand during 2016 against a profit of LE 31.67 thousand during the year 2015.
International Dry Ice achieved profits of about EGP 150,346.
Vertika Programming SAE lost EGP 19,810 during the year 2016, compared to EGP 1,061 a year earlier.
It is projects that currency fluctuations may stabilize in the near future, allowing companies to adjust their strategies and begin a recovery; however, as the local currency is expected to further devaluate, the cost of production may still incur further increase, adding to the strain of already unstable companies.
