Juhayna intends to add ‘high-margin’ product segments in medium-term

Alyaa Stohy
3 Min Read

Juhayna Food Industries (JUFO) intends in the medium-term to add up to two new “high-margin” product segments.

The company’s management reported that its new Greek yogurt and lactose-free milk products have exceeded expectations. These segments will see an commensurate ramping-up in production and an increased allocation of the related raw materials.

Juhayna’s management team has also decided to downsize its non-productive workforce and to discontinue unprofitable production lines and sales routes, as part of efforts to ration costs. The company will also contain their SG&A spending by one percentage points (ppts) in 2020 to about 16% of revenues. This is backed by a lower headcount and economies of scale.

The company’s strategy also includes dedicating more attention to its Tiba distribution arm, by offering distribution services to others. It is also expected to announce a new account it has secured within the coming weeks.

Juhayna maintains its capex budget of EGP 250m-EGP 300m, which is needed to support new product roll-outs and maintenance expenses. Utilisation rates currently hover at around 75%-80% for different segments, which creates no pressing need for capacity expansion or hefty capex.

The company added that it has not implemented any price hikes in 2020 and is unlikely to do so in the near future. This would only happen should there be a sharp devaluation in the Egyptian Pound, in which case the company will increase prices gradually.

Since the 2016 currency devaluation, the company has decreased its exposure to the US dollar in its cost of goods sold (COGS) through localisation, from 60% in 2016 to a current 40%. 

Exports remain within 6%, since export margins remain much lower than local sales, with the company managing to continue a prioritisation of profitability.

The company reported notable growth in March on the back of panic-induced overstocking by customers, especially evident in the dairy and multi-serve products segments.

The beginning of the 2nd quarter (Q2) of 2020 coincided with Ramadan, which entails peak volumes for the high-margin yoghurt segment. Juices and single-serve products have been hit by the closure of schools and lower footfalls at smaller grocery shops and kiosks.

Juhayna has witnessed a relative slowdown in demand post-Ramadan, owing to seasonal factors, including and excessive stockpiling from before. The company expects sales in June to react favourably to the summer season and extended quarantine period.

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