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COVID-19 sees varied market impacts of profits, losses on Egyptian companies - Daily News Egypt

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COVID-19 sees varied market impacts of profits, losses on Egyptian companies

Pharmaceutical, chemicals, food, communications sectors achieve profits, whilst industrial, real estate, tourism sectors incur losses

Business results of Egyptian companies for the second quarter (Q2) of 2020 have showed varied results due to the ongoing novel coronavirus (COVID-19) pandemic.

Despite the significant economic downturn reported worldwide, many companies in the telecommunications, retail, food, and pharmaceutical sectors have reported good profits. This comes on the back of their ability to rely on consumer power, and a general shift in lifestyle habits in recent months, due to shutdowns and working from home measures.

On the other hand, companies in the industrial, real estate, and tourism sectors incurred huge losses, due to shaky consumer confidence. These results can be attributed to their reliance either on long-term investments, or due to the global travel and tourism suspension.

Pharos Research notes that telecom and tech companies, as well as those producing consumer staples and pharmaceuticals, are the most resilient to the current global shock.

Banks appear to be doing well overall due to the sustainability of operating income flow, despite temporary slowdown in balance sheet growth and the surge in booked provisions.

The Industrial and real estate sectors have been hit the hardest. However, Pharos expects a relative recovery in Q3 and Q4 of 2020, which should stimulate stock prices and the performance of the Egyptian Exchange (EGX). The company highlighted that this would occur even if there were some pressures as a result of Q2 of 2020 earnings.

Abo Bakr Imam, Head of Research at Sigma Securities, said that most sectors recorded poor results. However, some have seen an increase in demand, such as the food and beverage sector.

This sector benefited from the improvement and stabilisation in retail sales following the panic buying and hoarding that occurred in March 2020. This has generally been attributed to consumers stockpiling due to their unsure of the full impacts of the pandemic, and the decision to close down restaurants and cafes. 

Imam believes that the business results of companies dependent on exports have been negatively affected, as have tourism and real estate companies. Only a few real estate companies have been able to buck the trend and achieve good sales.

He underlined that construction schedules can take longer due to the labour force reduction at some sites, as well as the recent reduction in working hours in recent months. This hints at a slowdown in sales and a delay in delivery schedules.

Hotel sector companies are currently focusing on reducing costs, especially due to the absence of tourists as a result of the global pandemic. Losses have also occurred at contracting, cement and iron companies, which have witnessed a decrease in the volume of demand due to the delay in construction operations. The recovery of these sectors will occur soon as economics and construction go back to normal.

Imam added that, unsurprisingly, pharmaceutical companies are among the biggest beneficiaries of the coronavirus crisis, which is evident in their business results. In addition, insurance companies, such as the Egyptian Kuwaiti Holding Company, have achieved strong results in the light of the crisis.

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