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manufacturers report flat
sales
[“manufacturers see rising growth,” september 1998]
egyptian manufacturers reported flat sales and exports and squeezed
margins for the first half of 1999, but they are optimistic that
business will improve in the second half of the year, according
to a survey of 165 companies released in early august by a cairo
think tank.
the egyptian center for economic studies said that about one in
three of the respondents to its latest industrial barometer survey
said that their exports and domestic sales were unchanged from the
second half of 1998, with reports from the remaining respondents
split evenly between rising and falling domestic sales and exports.
about 85 percent of those responding also reported steady or declining
final product prices, despite steady or rising costs of inputs.
“given that sales performance continually fails to meet expectations,
rising input and wage prices in combination with falling final goods
prices implies that firms’ profits continued to be squeezed
during the first half of 1999,” the center said.
nnthe center said respondents to its previous survey, six months
ago, had been overly optimistic in forecasting global markets’
recovery from the world financial crisis that began in 1997 in asia
– and remain optimistic.
nn“although the worst ap-pears to be over, recovery has been
slow and commodity prices have only partially recovered,” the
center said. “business confidence in the manufacturing sector,
however, re-mains resilient and expectations for the second half
of 1999 are quite optimistic.”
more than half of the manufacturers responding to the survey said
that they expected sales, exports and egypt’s overall economic
growth to rise in the second half.
but adrian swinscoe, an economist at the center, said manufacturers’
forecasts have exhibited an optimistic bias in each industrial barometer
since the survey was introduced in the summer of 1998.
bankers warned in our august issue that egypt’s growth has
stalled or is at risk of stalling – particularly given the
banking system’s lack of liquidity, which is raising companies’
cost of borrowing.
the center has estimated that egypt’s economy grew 5.1 percent
in the fiscal year ended june, down from 5.7 percent in the year
before, as growth in investment slowed and growth in imports continued
to outpace growth in exports.
the industrial barometer is a semiannual survey of various private-sector
and state-owned manufacturers that aims to measure the performance
of the real side of the egyptian economy.
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government repurchase of
free shops proposed
[“decrees threaten egypt free shops,” july 1999]
in the first transaction of its kind in egypt’s 8-year-old
privatization program, the state housing, tourism & cinema holding
co. has agreed to repurchase the recently privatized duty-free retailer
egypt free shops co., government and company sources said in july.
the transaction, which egypt free shops’ management negotiated
with holding company chairman moustafa eid, is intended to reimburse
egypt free shops’ investors after a pair of government decrees
in june all but destroyed the company’s business.
as of press time, the parties had yet to secure the government’s
final approval of the repurchase. but the negotiated plan calls
for the holding company to reimburse investors the purchase price
of their shares and pay £e 3.00 per share as compensation
for the unpaid dividend for the fiscal year ended june 30, egypt
free shops officials said.
investors who bought shares after the government decrees were announced
on june 7 won’t be covered, company and government sources
said. the transaction still must be ap-proved by the ministerial
privatization committee.
“i think it’s better than anyone would have expected,”
said amr sheta, director of equity investments at commer-cial international
investment co. and a member of the board at egypt free shops.
the ministerial privatization committee, whose ap-proval isn’t
a foregone conclusion, had yet to set a date for discussing the
issue despite having met twice since the agreement was reached.
nevertheless, mohamed hassouna of the state public enterprise office
said the government is eager to reach an equitable settlement with
egypt free shops’ investors to limit the damage to the nation’s
program of state-asset sales. “it’s very critical,”
hassouna said.
egypt plans to sell off 41 state-owned companies by the end of 1999
– most of them, as with egypt free shops, to strategic investors.
but brokers, fund managers and analysts said the government’s
handling of the duty-free decrees has cost it a lot of good will.
the decrees, announced without warning by the ministry of trade
and the ministry of finance, prevented duty-free shops from retailing
durable goods and drastically limited the time in which travelers
can buy duty-free products. shares in egypt free shops lost roughly
half their value after the decrees were announced.
a team of strategic investors paid £e 42.00 per share to buy
the government’s remaining 24 percent stake in the company
in december 1997.
the rest of the company had been sold to the public, at £e
40.00 per share, and to the company’s workers, at £e
32.00 per share, a year earlier.
egypt free shops earned £e 19 million on sales of £e
162 million in the fiscal year ended june 1998. figures for fiscal
1999 weren’t available.
egypt has divested at least a majority stake in 113 of 314 state-owned
companies slated for privatization. seventeen of those companies
have been sold to strategic investors.
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offers in for assuit, alexandria
cement
[“cement offers raise hopes,” march 1999]
egypt’s effort to sell down state shareholdings in the country’s
cement companies by the end of this year moved ahead in august,
with the announcement that the government was negotiating the sale
of 90 percent of state-owned assiut cement co. to mexico’s
cemex s.a. and its remaining 74 percent stake in alexandria portland
cement to blue circle industries plc of the u.k.
the announcement followed july’s news that the state mining
& refractories co. had closed the sale of 95 percent of state-owned
beni suef cement co. to lafarge s.a. of france and that a cabinet
committee had approved in principle the sale of additional 10 percent
tranches of state shares in helwan portland cement co., amereyah
cement co. and torah portland cem-ent co. via the stock ex-change,
in addition to an offering of a majority of the state’s holdings
in national cement co. to a strategic investor, all by the end of
the year.
“the government has proven that it is committed to following
its privatization program,” said mohamed nabeeh, co-head of
research and a cement-sector analyst at efg-hermes.
the government is seen to be encouraging state-asset sales in part
to ease pressure on the egyptian pound by attracting a larger inflow
of foreign currency. lafarge, for example, paid £e 506 million
for beni suef and assumed responsibility for a japanese loan worth
25 billion yen. cemex said in a press release that the state metallurgical
industries co. had accepted its conditional offer to buy the stake
in assiut cement for $372 million, or £e 44 per share –
topping the government’s minimum price of £e 40, which
valued the company at £e 1.28 billion. assiut ce-ment has
32 million shares.
amr el-garhy, executive director of corporate finance at commercial
international investment co., which is advising the state metallurgical
industries co. transaction, said cemex’s bid was “in good
shape” and that the holding company was keen to reach an agreement.
wadie mish-reky, privatization and in-vestment adviser at the holding
company, said the bid had met the government’s minimum requirements.
at press time, the parties were still in negotiations.
nnthe state chemical in-dustries holding co., owner of the government’s
stake in alexan-dria cement, declined to comment on the bidding.
the holding company and blue circle are in negotiations about the
sale of the stake, for which the government has set a minimum price
of £e 90 per share. alexandria portland cement has 10 million
shares.
the offers still must be approved by the ministerial privatization
committee, which is responsible for state-asset sales. the approval
is not a rubber stamp, but mo-hamed hassouna, acting specialist
at the public enter-prise office, said he believed the offers would
likely prove acceptable.
“basically, there is no reason for the committee to re-fuse,”
hassouna said.
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stella bubbles over
[“thing brewing (late) at stella,” april 1997]
al ahram beverages co., egypt’s dominant brewer, reported
that its earnings grew more than 30 percent in the fiscal year ended
june 30, as sales leapt on strong growth in alcoholic and nonalcoholic
beer.
al ahram reported net profits of £e 87 million, or £e
18.02 in diluted earnings per share, for 1999 – up from £e
68 million, or £e 13.78 per share, in 1998. sales grew more
than 60 percent, to £e 272 million from £e 168 million.
moreover, growth came despite lingering damage to tourism following
the luxor massacre and the emergence of gouna beverages co. as al
ahram’s first competitor.
“we’re growing like an internet company, but we’ve
got a real product,” said investor relations director steven
keefer.
and real earnings. beer sales rose by more than a third on the year
by volume. al ahram sold 390,000 hectoliters of alcoholic beer in
1999, up from 353,000 hectoliters in 1998, and 367,000 hectoliters
of nonalcoholic beer in 1999, up from 205,000 hectoliters in 1998.
sales costs grew slower, to £e 95 million in 1999 from £e
62 million in 1998. keefer attributed the growth in sales to better
marketing and distribution, strong sales of beer in cans, and improved
quality.
al ahram reported a 25 percent jump in earnings in 1998, but much
of that came from a one-off land sale.
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