No happy surprises and no unpleasant shocks, for the most part the bt100 companies were stable throughout the month of April
The government has approved its 2007-08 budget at LE 335 billion -- 22.3% higher than the current budget. Public debt is expected to drop to 79% of gross domestic product (GDP) from 90%; government expenditure is set 14% higher at LE 241 billion; basic revenues are expected to reach LE 185 billion; government investment is forecast to increase 15% to LE 25.5 billion. The state subsidy budget was revealed to be LE 64.5 billion, up from LE 51 billion.
Minister of Finance and Insurance Youssef Boutros-Ghali remarked that energy subsidies may gradually be removed over the next four to five years to ease the budget deficit, which currently stands at 8% of GDP. He added that inflation is likely to keep rising unless it harms lower income groups, at which point the necessary measures will be taken to reign it in. Inflation had hit 12.8% in March according to CAPMAS, yet the Central Bank of Egypt (CBE) holds its overnight corridor rates unchanged at 8.75% for deposits and 10.75% for lending to banks.
Economic growth is clearly more necessary after the preliminary results of the census were revealed to show a 24.4% increase in population since 1996 to 76.5 million, 3.9 million of whom are living abroad. The statistics show that nearly one out of every three Egyptians is younger than 15 years of age, indicating the need for economic growth to absorb the number of new entrants into the employment market in coming years.
Meanwhile, macro-figures are showing a 16.2% year-on-year increase in the number of tourists visiting Egypt in February 2007 to 776,000. Exports climbed 12.5% to LE 6.3 billion ($1.1 billion) in January 2007 compared to January 2006, driven by an increase in exports of aluminum, steel and wood products according to analysts' reports.
Citing an increase in Egypt's non-oil exports, the International Monetary Fund raised its forecast for Egyptian economic growth for 2007 to 6.7% from 5.6% and doubled its inflation forecast to 12.3% from 6.2%.
Suez Canal revenues increased 21.8% year-on-year to $352.6 million in March 2007, up from $289.5 million in March last year. 1,667 ships passed through the Canal, compared to only 1,511 in February and 1,502 in March 2006.
Telecoms
Etisalat's head of operations announced that the company would launch its services in Egypt in May, the most recent launch date after the company missed its February deadline due to problems in setting up its towers and network stations. The company is aiming for three million subscribers by the end of its first year of operation, and 10 million subscribers within three years.
As the third operator is about to launch its service, Mobinil (bt100 number 6) has agreed to discontinue its EDGE services, as per the National Telecommunications Authority's (NTRA) request. The decision ends a year-long dispute with the NTRA over whether EDGE is considered 2G or 3G technology. Mobinil is the only one of the three mobile operators that has yet to buy its 3G license, a decision company officials said they would rule on within three months. Having ended the EDGE dispute, the NTRA has agreed to provide Mobinil with an additional capacity of one million numbers, and has also granted its approval on the 'validity for life' scheme allowing customers to keep accounts with no credit on them indefinitely, which had also been under regulatory scrutiny.
Minister of Communications and Information Technology Tarek Kamel handed the state treasury LE 3 billion ($500 million) in 3G-license-fee receipts (LE 2 billion) and Telecom Egypt (TE, bt100 number 3) revenues (LE 952 million).
Mobinil's 'A' rating from Middle East Rating & Investors Services (MERIS) last September, for its long-term debt obligation issued in 1999 and amounting to LE 340 million, was reaffirmed.
In early April, France Telecom revealed plans to expand its presence in Egypt by opening a research and development center in Cairo which will be part of its international network of 15 Orange Labs.
The government revealed plans to float a further 20% of TE as early as 2009, while it may award a second fixed-line telecom license to compete with the majority-government held (80%) fixed-line incumbent.
On April 16, Orascom Telecom (OT, bt100 number 1) bought back 1.8 million global depository receipts and 185,000 local shares at an average share price of $55.3 per share. The subsequent April 18 extraordinary assembly voted to terminate 10 million treasury shares and invest in buying back 55 million shares or look for other countries in which to invest, Brazil being one of the options at the top of the list. With a declining ARPU in the majority of its operations, OT is seeking profitable investment opportunities.
Raya Holding (Raya, bt100 number 17) released its financial results for FY2006, revealing net income worth LE 69.9 million ($12.3 million), a 66.6% increase compared to the LE 42 million ($7.4 million) recorded last year. The bottom line increased mainly as a result of investment income, which recorded LE 67.5 million ($11.8 million) compared to a negative figure of LE 6.9 million ($1.2 million) last year.
The company had decided to execute a 'put option' that grants it the right to sell its remaining shares in Raya Telecom -- amounting to 45.9% to Vodafone Egypt -- at the same share price as the last transaction, for approximately LE 93.6 million. In late 2006, Raya sold 51% of Raya Telecom for LE 104 million to Vodafone Egypt.
Banking
Bids for the National Development Bank (NDB, bt100 number 38) have been rolling in, with an Abu Dhabi Islamic Bank-Emirates International Investment Company consortium requesting to acquire 100% of NDB's capital at LE 11 per share. The National Commercial Bank of Saudi Arabia and Egypt's Commercial International Bank (CIB, bt100 number 13) declined to submit any financial offers to acquire the bank.
With the announcement of Abu Dhabi Islamic's offer, 52.6% of NDB's shareholders expressed their interest in the offer. Meanwhile, Minister of Investment Mahmoud Mohieldin refused to sell the public sector's 17% stake in NBD. The offer, nevertheless, has been preliminarily approved by the CBE.
CIB is allegedly partnering with UAE-based Tamweel to establish an Islamic mortgage-finance company in Egypt, with an initial capital of LE 500 million. With reports that CIB's share of the new venture would reach one third of the new company, the bank's share price was more or less stable throughout the reporting period closing at LE 56.71.
Beltone Financial has been selected to lead the public offering of 15% of the Bank of Alexandria (BA) on the Cairo and Alexandria Stock Exchange and the allocation of 5% of the bank's shares to its employees. The offering will take place in 4Q2007. In October 2006, the Italian San Paolo Group acquired 80% of BA for $1.6 billion.
Beltone won the bid after heavy competition with EFG-Hermes (bt100 number 26), Prime Securities, BNP Paribas in alliance with Cairo Capital, the Arab African Bank in alliance with the National Bank of Egypt, and HC Securities in alliance with the National Commercial Bank of Saudi Arabia.
Cement
Misr Beni Suef Cement (bt100 number 48) released its full-year financial results through December 2006, reporting a net profit of LE 227.7 million ($39.9 million) versus LE 132.8 million ($23.3 million) in FY05.
Suez Cement (bt100 number 11) also released its full-year consolidated financial results through December 2006. Net profit before minority interest fell by 23.6% to reach LE 798.8 million ($140.1 million) versus LE 1.05 billion ($183.4 million) in FY05. Beltone is awaiting the release of the full results to comment fully. Until then, it is worth mentioning that the comparative 2005 bottom line was boosted by a one-off investment sale gain.
Tourah Portland Cement (bt100 number 31) released its full-year financial results to end December 2006. Net profit fell by 70% to reach LE 231.5 million ($40.6 million) versus LE 763 million ($133.9 million) in FY05. Beltone is also waiting for full results to be able to comment fully. The comparable 2005 bottom line was boosted by a one-off LE 607.6 million ($106.8 million) investment sale gain.
Construction
Orascom Construction Industries (OCI, bt100 number 2) has received the approval of the Turkish capital-market regulators to make a voluntary tender offer for all outstanding A and B shares in its partially-owned Turkish cement company Baticim for a minimum price of 11.50 lira ($8.10) for B class shares and $1,499 for A class shares.
OCI had first made the offer in February at the same price and then filed a complaint in March with the Turkish regulators, accusing the management of Baticim of blocking the deal by purchasing shares through its subsidiary, Batisoke.
OCI's consolidated annual results for 2006 show a 57.1% increase in its bottom line to LE 2.67 billion, compared to LE 1.7 billion in 2005. The Egyptian Cement Company and the Algerian Cement Company accounted for 50% and 31% of the cement group's EBITDA, respectively. EBITDA grew around 49%.
OCI's construction group contributed 75% of OCI's revenues, with $2.6 billion in new contracts awarded in 2006. Al-Alam Al-Youm reported that OCI won a deal worth LE 700 million ($123 million) to undertake civil and construction works for the Tibbin power-plant project in southern Cairo.
Steel: Suriving Nicely, Thank You
After levying a controversial export duty on cement and steel last month, the Ministry of Trade and Industry amended the duty on steel to exempt smaller 'cold-rolled' producers from the LE 160 per ton export duty. The export duty on billets and direct-reduced iron (DRI) will be increased to LE 180 per ton. The export duty on cement remains unchanged.
Ezz Steel Rebars (bt100 number 9) announced consolidated results for 2006 showing a bottom line of LE 995 million ($168 million) and a top line of LE 11.6 billion ($2.0 billion). The group consolidated Al-Ezz Al-Dekheila Steel Alexandria and Al-Ezz Flat Steel in its financial statements for the first time in 2006.
Al-Ezz Al-Dekheila Steel Alexandria is among the few producers of billets using the DRI method. Most of this processed raw material goes into the company's production of steel and only a minor portion of DRI. The excess is sold to outside producers here and abroad. Sales of DRI, on the whole, form a small part of Dekheila's revenues, meaning tariffs will not have a huge effect on Ezz Steel.
By Fatima El-Saadani
© Business Today Egypt 2007
