Profits tumble 89% for Egyptian car company Ghabbour

Ghabbour Auto posts an 89 per cent in profits for the first quarter. The Egypt car assembler was hurt as sales hit an all time low.

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Ghabbour Auto, an Egyptian car assembler and distributor, has posted an 89 per cent fall in profits for the first quarter and is now counting on economic recovery in Egypt to reverse the decline.

"For the company's passenger cars, we might see a pick-up in sales as you really need a car to get around in Egypt. It is not a luxury," said Hatem Alaa, an analyst at HC Securities in Cairo.

"But for commercial [vehicles], such as buses and trucks, they are likely to remain affected by a decline in tourism and weakness in the general economy."

Ghabbour posted net income of 7.7 million Egyptian pounds for the quarter, compared with 68.7m pounds in the same period last year as market sales dipped to an all-time low, missing HC's estimates by 21 per cent.

Egyptian equities were flat yesterday as investors remained on the sidelines before a nationwide demonstration expected to take place today. Protesters in Cairo's Tahrir Square say they will be denouncing the violence between Muslims and Christians following violent sectarian clashes that left 12 people dead on Wednesday.

Ghabbour was unchanged at 28 pounds a share yesterday, primarily because the news of slower sales was priced into the stock. The company had previously provided guidance indicating slower sales after the revolution that ousted the president Hosni Mubarak, Mr Alaa said.

He has an underweight rating on Ghabbour with a target price of 34.40 pounds a share.

Operating profit came in at 70m pounds, down 47 per cent on the first quarter last year. Following the unrest, management maintained a tight focus on cost control without resorting to lay-offs, but instituted a recruitment freeze and reduced the marketing budget.

"Results are expectedly weak, and we believe any signs of sustainable improvement in consumer appetite, reflected in a monthly rebound in [passenger car] sales, would bode well for GB Auto," Mr Alaa said.