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We have some important company updates to cap off the short work week from Qalaa, EgyptAlum, and more.
But before we start, a big story dominating the global financial press:
The US Federal Reserve has slashed interest rates — what it charges banks to borrow —by 50 basis points, marking its first cut in four years amid increased confidence that the country’s bout with high inflation is done. The Fed lowered the benchmark rate to the 4.75-5.00% range in a bid to safeguard the labor market now that inflation has fallen, its Chair Jerome Powell said.
The catalyst:
Increased interest rates increase the expense of taking out a loan. Higher borrowing costs drive businesses to balance rising fixed costs like labor while remaining competitive in a market where customers have less money to spend. When unemployment becomes too high, the Federal Reserve lowers interest rates in hopes that job creation will increase.
How will this impact the global economy?
The Fed’s move can have an impact on foreign exchange markets due to their impact on the value of the U.S. dollar, which serves as the global reserve currency. “Emerging markets are impacted because a lot of their borrowing is in dollars. And so they’ve got to repay the interest and the principal in dollars. And if interest rates are changing in the U.S., all the cost of borrowing is changing,” Reena Aggarwal, director of Georgetown University’s Psaros Center for financial markets and policy said in an interview with CNBC.
Qalaa more than doubles its profits in Q1
Qalaa Holdings more than doubled its net income during the first three months of the year, recording a 105.3% YoY hike in profits to EGP 9.14 billion, its latest earnings disclosure to the EGX showed. The company attributes its bottom-line growth to a settlement agreement it struck with Financial Holdings Investments (FHI) in Q1 that saw it settle the bulk of its liabilities owed to the latter.
Revenues:
The firm’s revenues also saw a 44.7% YoY leap during the first quarter to reach EGP 37.56 billion following broad-based growth across most subsidiaries. Qalaa’s subsidiary “Egypt Refining Company (ERC)” saw its USD denominated revenue increase 47% YoY during the period to EGP 34.4 billion mainly on the back of the depreciation of the EGP against the USD, it said.
Operating profit:
Qalaa’s operating profits are down 220.8% YoY to EGP 2.3 billion partly on the back of the negative impact of the war in Sudan on the operations of its subsidiary “Al Takamol Cement”.
FX differences:
The company’s profits from exchange differences on translation of foreign operations also rose 153.3% YoY during Q1 to EGP 30.49 billion.
Remember:
Earlier this month Qalaa Holdings completed a settlement agreement that saw it write off EGP 4.5 billion in debt to four local banks in return for a 17.68% stake in Taqa Arabia, and a plot of land on the Nile river. In case you missed it, we covered Qalaa’s debt restructuring program in detail earlier in May. Go deeper on the company’s plan here.
Going forward:
Qalaa says it will continue driving growth through small incremental investments in its subsidiaries, expanding cash flows, and thereby reducing its debt to cash flow ratios. Qalaa is currently studying several new medium-sized, export-oriented, and predominantly green investments to be executed through its subsidiaries.
Egyptalum plans four new project with investments of up to USD 6 billion
Egypt Aluminum (Egyptalum) is looking to implement 4 projects with investments of up to USD 6 billion in partnership with local and foreign investors over the coming years, its CEO Mahmoud Agout told CNBC Arabia in an Interview. Agour did not specify the timeline for the planned investments but noted that as soon as funding is available, each project will be completed in between two to three years.
Focused export strategy:
The company plans to allocate 60% of its total annual production of 300,000 tons for international markets under plans to increase its export revenues to USD 540 million during the current fiscal year.
Agour said his company’s exports reached about USD 415 million in 1H 2024, marking a 10% YoY increase. Last year, Egyptalum exported 53% of its total production and amassed USD 450 million from overseas shipments.
And big plans ahead:
Earlier this month, Egyptalum noted in an EGX disclosure that it is in “serious discussions” with Germany’s Achenbach for an investment opportunity on its USD 100 million aluminum foil production project.
It also aims to establish a solar power plant in partnership with Norway’s Scatec that will have a 1 gigawatt/hour generation capacity as part of a strategy to transitions to clean and renewable energy sources partly to meet export requirements of foreign markets.
Remember:
Earlier this week, Public Enterprises Minister Mohamed El Shimi noted the government has started taking steps to sell additional shares in the company on the EGX. The firm has been doing well, reporting a 33.5% YoY in net income to EGP 5.22 billion in the period from July to March 2024.
What else is clapping?
Wadi Kom Ombo Land Reclamation recorded a 69% YoY rise in net income in the first half of the year to EGP 43.11 million, and also saw its revenues increase 18.6% YoY to EGP 139.82 million.
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