Edita’s revenues decline, profitability suffers: Pharos

CAIRO – 27 July 2017: Edita for Food Industries’ revenues declined quarter-on-quarter, as the volumes of its segments, except for the rusk (baked wheat snacks), decreased 13.6 percent.

The quarter coincided with the Muslim fasting month of Ramadan, which is generally a low-volume season for Edita, local investment bank Pharos Holding said Thursday.
The company faced competition in the croissant segment as competitors reduced their product prices.

In order to capture market share, Edita reduced its croissant prices 5.7 percent quarter-on-quarter, following its competitors’ price cut move, resulting in a 1.4 percent fall in its effective average price.

The croissant segment is the second biggest contributor to the company’s revenues with 18.2 percent in the second quarter (Q2) of 2017.

Price cut and lower volumes contributed to worse gross margins, as Cost Of Goods Sold (COGS) increased.

Edita’s general and administrative expenses figures rose to 26.6 percent in Q2 of 2017 after 22.4 percent and 22.7 percent during Q2 of 2016 and Q1 of2017 respectively.

Pharos attributed the increase to inflation, driving general and administrative expenses up, and high advertising expenses, as the majority of their advertising budget is assigned to the first half of 2017.

The investment bank said that Edita will keep on introducing higher-priced stock keeping units to achieve higher margins and will work on strengthening its distribution network to reach unchartered territories, pursuing regional expansion on the long run.

Edita is currently trading at price-earnings ratio multiples of 47.2x and 28.7x for 2017 and 2018 respectively, and at an EV/EBITDA of 25.6x and 17.0x in 2017 and 2018 respectively, the report said.

Edita Food Industries is local company that operates in the packaged snack food market. It manufactures markets and distributes a range of branded baked snack products, including packaged cakes, croissants, rusks and wafers.