GB Auto turns to losses, revenues grow in Q2, H1

CAIRO – 9 August 2017: GB Auto turned to losses of LE 150.9 million in the second quarter and LE 305.5 million for the six-month period of 2017, driven by higher selling, general and administrative (SG&A) expenses, a Tuesday statement said.

SG&A expenses leveled up by 30.6 percent, accompanied by 135.6 percent hike in finance costs to LE 332.6 million, after the Central Bank of Egypt's (CBE) raised the interest rate by 500 basis-point.

"In parallel, GB Auto Group is scaling back debt and payable levels with a net (automotive and finance combined) reduction quarter-on-quarter to the tune of LE 660 million as we seek to streamline financing with our asset and inventory levels.

In the quarters ahead, we see a trend in debt reduction that will take us to historical levels in-time for an anticipated roll-back of the temporary and unsustainably high interest rates," Ghabbour added.

Gross profit fell 16.6 percent year-on-year to LE 473.3 million in Q2 of 2017, yielding a gross profit margin of 11.3 percent versus 14.4 percent in the same period of the previous year.

Careful deployment of special price promotions and dealer compensation packages, to achieve volume recovery, have weighed down on the gross profitability for the Egypt passenger car segment.

Revenues rose 6.3 percent to LE 4.17 billion in the second quarter of 21017 and increased 4.2 percent to LE 7.14 billion in the first half of the year.

Q2 Revenue growth was driven by GB Auto and GB Capital, recording LE 3.5 billion and LE 584.8 million standalone revenues in the second quarter.

"We are seeing clear signs that the macroeconomic challenges which resulted in an industry-wide slump are receding. And while the passenger car market is operating at levels 50 percent below last year, consumers are adapting to new market prices," GB Auto Group CEO Raouf Ghabbour said.

The group highlighted that its results are affected by the slowdown in Egyptian passenger car segment performance following the Egyptian pound floatation in November 2016, noting that the segment is starting to recover, with revenues climbing 43.1 percent quarter-on-quarter in Q2 of 2017 compared to a 57.7 percent decline in the first quarter.