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Gas supplies are once again dwindling amid a summer heatwave that is pushing national reserves to the brink, driving Abu Qir Fertilizers to shutter its doors for the second time this month, and cabinet to reinforce closures for commercial stores at 10 PM. The Prime Minister — who said the gas shortage comes on the back of a halt in operation in a “neighboring country” for 12 hours— also noted blackouts will cease until the end of summer by the third week of July, and said that Egypt will shell out USD one billion on fuel imports to meet the demand of power plants.
Today’s issue also packs updates on an expansion strategy exceeding the EGP one billion threshold from Obour Land, fresh forecasts on how the year will look for the banking sector from Fitch, and much more.
But first… Friday Ice Cream has unveiled its plan to IPO on the EGX by the end of 2026. The public debut follows the firm’s completion of the three phases of construction of its new factory.
Abu Qir shutters its factories once again due to low gas supplies
For the second time in a month, Abu Qir Fertilizers was forced to halt production and close the door to its three plants due to a reduction in gas supplies provided to it by the government. This came as cabinet once again yesterday decided to stipulate that commercial stores on roads and malls turn the lights off at 10 PM to save gas amid LNG shortages during heatwaves.
Refresher:
Earlier this month, Egypt’s Ministry of Petroleum and Mineral Resources reduced natural gas supplies to fertilizer manufacturing companies by 20-30%. Several producers including Egyptian Chemical Industries, Misr Fertilizers Production Company Mopco, AlexFert, and EgyFert shuttered their doors due to shortages in the first week of June.
How to solve the problem?
Government-owned Egyptian Natural Gas Holding Company is looking to issue an international tender in a bid to secure no less than 17 LNG shipments over the next three months to meet demand. The import strategy — expected to average around USD 120 million a month for every three shipments — follows implementation of daily power cuts in a bid to save as much USD 300 million per month.
Obour Land wants to build a new processed cheese factory + plans new EGP 800 mn cattle farm
Egyptian dairy player Obour Land for Food Industries (OLFI) is planning to establish a new processed cheese factory at an EGP 350 million price tag this year, and wants to build a new cattle farm at an EGP 800 million investment as part of a new investment expansion strategy aimed at upping its production capacity and boosting exports.
The farm:
OLFI noted in an EGX disclosure it is devising a plan to complete a project to establish a livestock farm spanning 44 acres in a bid to accommodate 2,000 dairy cattle.
Geared for export:
The company said the plan is part of its target to expand its export revenues this year to USD 40 million.
Remember, the company had a good Q1:
The firm raked in EGP 157 million in net income in the three months ending in March, a 36.34% YoY rise, and saw its revenues jump 18.36% YoY to EGP 1.74 billion in Q1 2024.
Market research and analysis giant Fitch Solutions is projecting a more relaxed year in 2024 for the local banking sector due to an increase in foreign currency inflows and stable exchange rates following the latest devaluation in March, Al Borsa wrote. The company also predicts inflation rates will finish the year slightly above 25%.
An improved foreign asset deficit standing:
Remittances— which rose 43.8% YoY in April to USD 2.2 billion — and portfolio investments are steadily increasing and improving Egypt’s foreign asset position, with Fitch attributing the trend to easier repatriation of funds and higher returns on Egyptian debt instruments. This has led to an 87% reduction in the net foreign asset deficit since hitting a record high of USD 29.0 billion in January.
How will banks direct the increase in FX capacity?
Banks are likely to use the increase in inflows to boost FX lending to businesses, settle overdue payments to oil players, support non-essential imports, and alleviate import backlogs.
Other forecasts:
Fitch believes the Central Bank of Egypt has finished raising interest rates for now, and anticipates rates will remain stable until the end of 2024. On another note, devaluation of the EGP will only slightly affect Egyptian banks’ balance sheets and capital position, as the sector can withstand a 35% increase in the value of the USD against the EGP, according to the firm.
In other economy news:
The World Bank has decreased financing for the State Property Policy Implementation Project to USD 500 million from the previously announced package which was expected to hover at around USD 1 billion, and expects to approve the funding on September 30.
President Abdel Fattah El Sisi approved a law permitting private entities to establish, oversee, and run healthcare facilities and public hospitals for a duration of 3-15 years. When the concessions expire, these healthcare facilities will revert back to state ownership. Administrative regulations for the bill are set to be released in a month.
Who will this not be applicable to?
The bill will not encompass medical facilities providing services essential to national security, basic healthcare, birth control units, as well as blood and plasma collection centers.
What else is clapping?
Dispelling reports of a confirmation, Telecom Egypt says its bid to fully acquire e-signature and information security firm Egypt Trust is still under consideration.
After completion of Qalaa Holdings’ debt restructuring process, the company’s main shareholder, Citadel Capital Partners, shares in the firm will not exceed 33%. Citadel currently holds a 23.49% stake in the company, Qalaa’s co-founder Hisham-El Khazindar told local press.
Raya Holding’s board of directors approved an EGP 1.673 million reduction of its issued and paid up capital to EGP 1.07 billion.
SODIC will inaugurate its EDNC commercial project — which will span 14.7k square meters — in New Cairo by September 2024.
As of yesterday, the Commercial International Bank (CIB) halved its foreign exchange (FX) markup fees to five percentage points, and raised monthly local FX transactions ranging from EGP 75-100,000 based on their account type. The max limit for overseas purchases made abroad each month will now hover between EGP 100-300,000.
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