Banque Misr – Pharos alliance suggests 3 scenarios for EFIC expansion

Mohamed Ahmed
3 Min Read

The Financial & Industrial Egyptian Company (EFIC) revealed, during a meeting with financial analysts at investment banks, that the alliance of Banque Misr – Pharos Holding for Financial Investment has proposed three suggestions to implement the company’s expansion plan worth EGP 300-400m.

A research note by Mubasher International explained that the first suggested scenario, as explained by the EFIC, is selling 40% of the company’s shares in Suez Company for Fertilizer Production (SCFP) to a strategic investor or offering them for public subscription on the Egyptian Exchange.

The second option is selling 100% of the SCFP. However, Mubasher noted that the EFIC is most likely to exclude this option as the SCFP operates a unit for sulphuric acid, which will feed the new Suez Compound.

The third option is to increase the capital of the SCFP.

According to the note, the EFIC selling 40% of the SCFP is practically unenforceable; however, the company confirmed that all funding options are on the table for consideration.

Moreover, Mubasher said that the new expansion plan aims to implement two production lines, each of 250,000 tonnes in capacity, to produce granulated single super phosphate, totalling 500,000 tonnes of production per year.

Mubasher noted that these production lines were purchased in 2009 but have not been exploited yet.

The research note explained that the company will install one line in the SCFP, and the second in Assiut to export production to African markets.

During the meeting, the EFIC noted it aims to install a new unit to produce 50,000 tonnes of potassium sulphate.

The EFIC estimated the cost of the project at EGP 130m and aims to market production in the local market. The price per tonne stands at EGP 9,000 while cost amounts to EGP 7,000—making a profit margin of 22%.

Mubasher noted that the EFIC has a plan to increase exports in 2017, raising its share of exports to 50%, up from 15% in 2016, supported by the Egyptian pound’s flotation.

The research note pointed out that the EFIC signed exporting contracts at the end of 2016 to export 25,000 tonnes of granulated single super phosphate to Albania, Brazil, and Russia, among other markets. The contracts will be enforced in 2017.

Mubasher also stated that the EFIC is benefitting from the flotation as the company operates in a free market without being bound by any mandatory shares to the domestic market.

It added that the EFIC can decide whether to export or feed the domestic market based on the profit margins, especially as the company imports sulphur, which represents 10% of operating costs.

Mubasher also pointed out that the flotation helped the company improve profit margins, after the company raised selling prices by 10% in January this year.

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