Dollar shortage crisis impacts Juhayna’s expansion agreement with Arla Foods

Mohamed Ahmed
3 Min Read

The worsening dollar crisis, which began in 2015 and resulted in the dollar reaching as high as EGP 20, has lead to a reduction of benefits for Juhayna Food Industries from its partnership with European Arla Foods where the latter produces its products in the Egyptian market.

According to an official source in Juhayna, the company planned to establish a factory for Aral Foods’ cheese products last year; however, the increase of the dollar price and the increased reliance on the informal market for dollar reserves prompted Arla Foods to manufacture its products inside one of Juhayna’s factories in 6th October City.

Juhayna signed an agreement to manufacture Arla Foods’ products in Egypt in May 2015 and establish Argo for Food Industries. The activity of the company was supposed to begin in October 2015; however, the project’s launch was delayed several times. The companies aim to achieve revenues worth €100m by 2020.

The source noted that his company has prepared a long-term plan to reduce production costs through depending on the local market to obtain raw materials and offer financial support to local dairy suppliers, in addition to holding educational seminars for cattle breeders through attracting international experts from European countries to take part in these seminars.

He stressed that Juhayna’s policy will continue to stop any dollar-related expansions in the local market. Hence, it reduced the value of allocated investments for 2016 from EGP 640m to EGP 500m.

Juhayna had a plan to invest EGP 640m in the development of its transportation and distribution fleet as well as add new production capacities, while developing the dairies and cattle farms at the same time.

The aggregated results of Juhayna’s business during the first nine months of 2016 have revealed that net profits of EGP 168.4m were achieved, compared to EGP 218.6m during the previous year, with a 22.9% decline.

Sales of the company have increased throughout the first nine months of 2016, reaching EGP 3.6bn, compared to EGP 3.1bn during 2015, with a 19% growth rate. Costs also increased by 22%, reaching EGP 2.5bn during the same period in 2015.

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