Market report

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The market took an upward trend during the final trading sessions last week and Sunday and Monday, supported by Egyptian buying orders in what was seen as a correction activity. Overall, fourth quarter results were better than expected thanks to the solid performance of the listed companies for the first three quarters of the year before the global financial crisis hit hard.

The government issued a number of decisions aimed at hedging against the repercussions of the crisis, a factor that has in a way sent positive messages to investors. The Central Bank of Egypt (CBE) reduced corridor rates by one per cent, slashing the rate for the first time since mid-2007.

Another move that aimed at regulating the cement market obliged producers to announce selling prices and print on cement bags to eliminate traders' speculative practices. Decreased steel prices have pushed building activities causing cement demand to increase by 35 per cent in January 2009 compared to the same time last year.

Also surprising was the decision to restructure the Egyptian General Petroleum Company (EGPC) and to establish an authority to regulate energy affairs. The move was read by many as an end to the government's extensive, role in the energy sector being involved in the production, distribution and regulation of the sector, and crowding out private sector involvement in these operations.

On a negative note, Suez Canal revenues dropped by 20 per cent to $332.4 million in January 2009, from $391.8 million in December 2008.

PAINT AND CHEMICALS INDUSTRIES (PACHIN) released its first half results ending in December. The company reported an 8.6 per cent increase in its sales compared to the first half ending in December 2007. However, net profits, witnessed a 23.9 per cent fall to LE49.9. The double digit is mostly attributable to a hike in the company's operating expenses. A commentary by Beltone Financial said that since paint is an oil- based product, it comes as no surprise that operating expenses would be higher, as oil had reached a record LE147 per barrel in July 2008 and fell thereafter.

NATIONAL SOCIÉTÉ GÉNÉRALE BANK (NSGB): The bank realised a 70 per cent increase in its net profits for the year ending December 2008. Meanwhile, its board of directors decided to increase its paid-in capital by LE302.9 million to reach LE3.332 billion, through the distribution of one free share for every 10 shares, financed from reserves. The increase is subject to the approval of the extraordinary general assembly meeting scheduled on 11 March 2009.

HSBC BANK EGYPT: The bank reported a net profit of LE1.2 billion in 2008, 29 per cent higher than the LE905 million reported in 2007. Net interest income increased by 47.5 per cent year-on- year to reach LE1.15 billion in 2008 versus LE783 million in 2007. Commenting on the results, Beltone Financial said that the results are strong, given the healthy growth in the balance sheet, accompanied by strong growth in profitability, while keeping costs under control.

NASR CITY FOR HOUSING AND DEVELOPMENT (NCHD): The company's second quarter results came better than investment banks' expectations, thanks to the strong performance of its 54 per cent subsidiary Nasr City Civil Works and the sale of a plot of land. NCHD's net profits were LE 26.8 million, which is 12 per cent lower than its level in the previous quarter.

EGYPTIAN IRON AND STEEL (HADISULB): The company reported a net loss of LE18.1 million during the second quarter of 2008/2009 ending December 2008 compared to a net profit of LE20.2 million in the first quarter. The decline is attributed to the company having to liquidate inventories produced with high-cost inputs at low prices in the last quarter. Moreover, the crisis prohibited the company's ability to sell all of its production with 24 per cent remaining unsold. This came despite the fact that the selling price was 31 per cent lower at LE4,228 per tonne.

GHABBOUR AUTO (GB AUTO): Egypt's largest car retailer revealed a plan to spend up to LE1 billion to buy auto distributors or auto parts manufacturers in the Middle East and North Africa. The company's CEO Raouf Ghabbour was quoted by Reuters as saying that the financial crisis has put many businesses under very high pressure to be acquired. According to EFG- Hermes, GB Auto's balance sheet is also "under-leveraged", implying existing capacity to assume additional long-term debt to finance a potential purchase.

SOUTH VALLEY CEMENT (SVC): The company's board of directors has decided to split SVC into two companies, one of which will specialise in financial investments and the other in cement and building materials production. The former will seek the acquisition of at least a 76 per cent stake in Golden Pyramids Plaza, which owns the CityStars shopping mall, through a share swap.