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We have updates on how the fertilizer industry is faring in the wake of gas supply cuts, news of a rise in remittance inflows in April, a splash of earnings updates, and more.
Low gas supplies lead to factory closures across Egypt
The Clap:
A number of fertilizer and petrochemical producers including Abu Qir Fertilizers and Egyptian Chemical Industries (Kima) ceased operations on Wednesday following a government decision to cut gas supplies to the energy-intensive industry.
Refresher:
Egypt’s Ministry of Petroleum and Mineral Resources reduced natural gas supplies to fertilizer manufacturing companies by 20-30%, officials familiar with the state strategy told Al Arabiya Business. Nitrogen, the primary component of fertilizer enabling high agricultural yields, must be produced using natural gas.
Who else is affected?
Sidi Kerir Petrochemicals and Kima said they are stopping output until the pressure levels settle, while Mopco, AlexFert (a subsidiary of Egypt Kuwait Holding), and EgyFert said Wednesday they are stopping production for twenty-four hours.
The impact:
News of the factory closures led the affected fertilizer firms to lose some market capitalization on market close Thursday. The worst performers on the EGX30 were Abu Qir (seeing a 4.9% fall in share value), Sidpec (4.8%), and Egypt Kuwait Holding (3.7%).
Who has not taken a hit?
Ferchem Misr for Fertilizers and Chemicals, Kafr El Zayat International Pesticides and Chemicals Co, as well as International Company For Fertilizers & Chemicals all said the gas cuts have not affected their day-to-day operations as their supply remains steady.
This comes as cabinet works to slash energy spending:
Axing spending on gas comes as the country wrestles with its domestic energy supply after becoming a net importer of LNG in recent months following a fall in domestic gas production.
How to solve the problem in the long term?
A government insider told Asharq Business that the cabinet plans to issue an international tender within the next few days to import about 15 shipments of liquefied natural gas (LNG) through October.
And work on resolving the problem is already underway:
On Thursday, the Oil and Electricity Ministries gradually expanded LNG supplies to a number of fertilizer firms, and Abu Qir said that day it had begun to resume operations after stabilization of gas pressure.
Inbound remittances rise almost 44% YoY in April
The Clap:
Remittances flowing into the economy from Egyptian immigrants totaled USD 2.2 billion in April, representing a 43.8% YoY rise and a 2.6% month-on-month increase, Youm 7 reported, citing a source from the Central Bank of Egypt familiar with the figures.
The impetus:
Following the float of the EGP in March, inflows from Egyptians residing overseas through official avenues have seen an uptick for the second straight month in April.
Remember:
Remittance inflows significantly decreased last year, seeing a 30.8% YoY dip to USD 22.1 billion, as Egyptian expats held onto their money or transferred it back using unofficial channels on the back of the country’s acute FX liquidity crunch.
In line with state targets:
One of Egypt’s main sources of foreign exchange, remittances are expected to increase by 10% annually to reach USD 53 billion by 2030.
The clap:
Confirming earlier reports of drug price hikes, the Egyptian Drug Authority (EDA) is looking to gradually raise certain med prices by up to 30% over the next 15 months, MBC Masr’s Sherief Amer quotes an EDA source as saying.
Which drugs are targeted?
Price increases will only affect newly manufactured drugs and do not include products already in stores, head of the Federation of Egyptian Chambers of Commerce’s pharma division Ali Auf noted last week. Meds for chronic illnesses are targeted for smaller price upticks of between 10-15% compared to those for diseases that are not long-lasting, Amer said.
How will the price hike process go about?
Amer said every three months a group of drugs will be selected for a 25% price hike. As for the date of implementing the price increase, Chairman of the Manufacturing Committee of the Pharmacists Syndicate Mahfouz Ramzi told MBC the timeline will be different for each company.
Remember:
Egypt’s FX shortage, import restrictions, and inflation woes have hampered pharma companies efforts to bring in needed raw materials to boost domestic production, leading to a number of key drugs — including ones for immune diseases, diabetes, and multiple sclerosis — to vanish from pharmacy shelves. Last year, pharma firms submitted requests to the EDA to increase the prices of 3,500 drug items, with most companies requesting an average increase of 25% as a first phase.
Where we stand:
Now some producers are requesting a 40% price hike, Ramzi told MBC Masr.
Will this alleviate the supply gap?
The price hikes are expected to see shortages of some meds in the Egyptian market “resolved within the next ten days,” Auf said last week.
Going forward:
“After raising prices, the company that delays the production of its medicines will have its license withdrawn immediately, “ Ramzi said. Companies looking to disrupt the market by shorting supplies will be replaced/overtaken by new entrants, he cautioned.
The Clap:
Elsewedy Electric reported a healthy growth to its bottom and top line in the first quarter of the year, raking in just shy of EGP four billion in net income during the three months ending in March.
Revenues:
The company’s top line surged 35.7% YoY during Q1 2024 to reach EGP 45.25 billion on the back of strong revenues in their prime segments, and partly due to currency translation and market dynamics enabling Elsewedy to command better prices for certain products in EGP, it said. In the wires and cables segment, revenue grew by 56% YoY in Q1 2024, making it the primary growth driver for the group.
Gross profit:
Elsewedy’s gross income rose to EGP 9.9 billion, representing a 61.9% YoY hike from Q1 2023 as a result of positive impact from currency movements, coupled with improved supply conditions and increased demand across markets including Saudi Arabia, Algeria, and Egypt.
Operating profit:
The company’s earnings before interest and tax rose 30.6% YoY to EGP 5.1 billion, it noted.
Net profit:
The firm’s bottom line after minority interest increased 37.0%YoY to reach EGP 3.98 billion in Q1 2024, on the back of increased revenue and a foreign exchange gain from the revaluation of foreign currency receivables from international operations.
Remember, a big acquisition of the company is in the works:
Earlier this month, Abu Dhabi-based Electra Investment Holding snapped up shares in Elsewedy Electric at USD 1.05 (EGP 49.58) per stock. The offer will continue through to 9 July as part of a plan to acquire up to 24.50% of the EGX-listed firm. Electra’s bid marked an 11.37% premium to Elsewedy Electric’s share price of EGP 44.51 (USD 0.94) at market close Thursday, May 30th.
What else is clapping?
Alexandria Spinning and Weaving Co recorded a 47% YoY drop in net income in Q1 2024 to EGP 29.5 million, while its revenues are up 73.9% to over EGP 163 million.
Arab Cotton Ginning reported a 142% YoY rise in net profits to EGP 62.6 million in the first three months of the year, and its top line also grew 16% YoY 83.96 million during the period.
Misr Beni-Suef Cement saw an 81.2% surge in net income in Q1 2024, raking in EGP 41.52 million. Its revenues also soared 141.2% YoY to EGP 666.5 million.
Mountain View has launched Plage, its EGP 90 billion development in the center of Sidi Abdel Rahman on the North Coast, Asharq Business reported.
Egypt’s Supply Ministry is eying imports of about 5 million tons of wheat in 2024, a million tons lower than its initial target for the year as it works to shore up reserves of the commodity domestically, Asharq Business quotes Supply Minister Ali El Moselhy as saying.
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