|13 May, 2019

GB Auto reports drop in first quarter earnings, as auto business weighs

Along with its auto business, GB Auto has a financial arm, GB Capital, that serves the group’s core business and competes with other non-bank financial service providers

Men work in an assembly line of Hyundai cars in Egypt's biggest car assembler GB Auto in Cairo September 10, 2013.

Men work in an assembly line of Hyundai cars in Egypt's biggest car assembler GB Auto in Cairo September 10, 2013.

REUTERS/Mohamed Abd El Ghany

GB Auto, Egypt’s biggest car assembler, posted on Monday a sharp drop in first quarter earnings, triggering a retreat in the company’s shares.

The group reported a Q1 2019 net profit attributable to shareholders of 16 million Egyptian pounds ($936,250), compared to 33.5 million pounds in Q1 2018, well below CI Capital’s estimate of a net profit of 160 million pounds. Revenue increased by 23.52 percent to 5.88 billion pounds from 4.76 billion pounds in the first quarter of 2018.

Ghada Alaa, a senior industrials and transport analyst at CI Capital, told Zawya by email that “the group performance was dragged down by bottom line losses at the auto platform”.

Alaa added that the auto business posted its second consecutive quarter of losses on weak margins and unfavourable industry dynamics.

Alongside its auto business, GB Auto has a financial arm, GB Capital, that serves the group’s core business and competes with other non-bank financial service providers.

Alaa noted that GB Capital’s net profit amounted to 118.6 million pounds in Q1 2019, up 36.6 percent year-on-year (y-o-y), while the auto segment recorded a net loss of 124.7 million pounds compared to a net loss of 54.4 million pounds in Q1 2018, well below CI Capital’s estimate.

Ahmed Hesham, vice president of financials and strategy research at Beltone Financial, said in a note that “GB Capital continued to record a strong performance in 1Q19”.

Hesham added that GB Capital’s strong earnings growth “came on the back of a surge in interest income which increased 5.9 percent q-o-q (quarter on quarter) and 41.4% y-o-y, NIM expansion (13.1 percent in Q1 2019, compared to 11.2 percent in Q1 2018), and the booking of lower provisions during 1Q19.”

The group’s shares were trading 1.395 percent lower on Monday at 4.24 pounds by 14:45 GST and have dropped 18.48 percent so far since the start of the year.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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