MTI revenues affected by late product launches amid COVID-19

Daily News Egypt
3 Min Read

MM Group for Industry and International Trade (MTI( reported EGP 2.23bn in revenues over the first quarter (1Q) of 2020, compared to EGP 2.90bn in 1Q 2019.

The latest figures show a decline of 22.9% year-on-year (y-o-y) but a rise of 6.5% quarter-on-quarter (q-o-q), against the EGP 2.10bn reported in 4Q 2019.

The decline in sales during March comes on the back of a nationwide curfew, movement restrictions, and shorter working hours.

The sales decline can also be attributed to the delayed launch of new Samsung and Huawei mobile phone models due to the ongoing coronavirus (COVID-19) pandemic. The new models will now be introduced in 3Q 2020.

MTI is expecting to add one of the biggest local home appliances brands to its distribution network. It is anticipated that this will lead to margin enhancements, given that home appliances gross profit margins is usually more than 10%.

Samsung’s delayed mobile model introduction is expected to take place in 3Q 2020, paving the way for market shares gains. Nokia’s delayed mobile model introduction is expected to take place in 4Q 2020, allowing sales to recover after weak previous quarters.  

Accordingly, the company’s management believes that operational performances for 2019 and 2020 will be reversed. This saw 2019 start strong on the back of new model launches.

However, operational growth deteriorated due to a lack of new models and spending on expansion. 

The year 2020 started with a weak performance due to local and global challenges, but with the introduction of new models, and the addition of new home appliances products to the company’s distribution network, a flat or slightly weaker performance could be achieved.

MTI is currently revising its COVID-19 Pandemic Pressures Operations assumptions, taking into account the latest developments and slower sales growth during 2020.

MTI is expected to report an equally slow operational performance in 2Q 2020 compared to the first quarter, since global and local dynamics have not changed. This is also on the basis that this quarter saw the peak of the curfew and movement restrictions, along with Ramadan and an extended Eid break.

The introduction of the new Y7 Huawei mobile model that was introduced in April and offered at a 20% price discount achieved good sales. It is expected to increase Huawei’s smart phone market share to around 14%-15% in 3Q 2020, up from a market share of 10.5% in 1Q 2020. This could pave the road towards a slight recovery, although a y-o-y decline in top-line performance is still expected.

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