The political turmoil in Egypt since the start of the year has taken a heavy toll on company earnings as first half results reveal. Compared to the mayhem, loss of life and physical destruction in Libya and Syria, Egyptians consider that they have suffered considerably less in their revolutionary transformation. While 850 people were killed and many others were injured, the state has survived and economic assets have emerged intact.
Even so tourism, investment and consumer confidence have been hit badly. That is largely the story being told, and in particular by one company’s H1 figures: Orascom Development.
Orascom Development (ODHN:SWX), a builder and operator of luxury resorts, listed in both Egypt and Switzerland, has just reported a net loss of $17.5m compared to a profit of 50.9 million a year earlier. Revenues fell by 62 percent.
The market didn’t take the news so well. OD’s share price on the Swiss Exchange fell 10 per cent during trading on Tuesday.
In a press release, the company explains that it “was heavily impacted by the Egyptian revolution, as many businesses came to a near stand-still for nearly 50 days.”
OD is present in nine countries, including Switzerland, Morocco and Oman, but Egypt remains its biggest single market. The company says its hotel revenue fell by 43 per cent as occupancy rates in the country plummeted to 46 per cent. It reports, however, that demand has been picking up gradually during the second half. Revenue from its real estate and construction activities fell by 78 per cent.
Angus Blair, head of research in Beltone Financial, the regional investment bank says that with some exceptions, overall company results are weaker than last year, though he also notes that consumer confidence has been returning.
“Tourism and real estate are the worst hit,” he said. “Banking has not been affected so much, [though there is always a lag until the impact of non-performing loans has been felt.] Some companies also had problems with strikes and with getting goods to port [as a result of insecurity] but those issues are less relevant now than straight after the revolution.”
For now, OD’s investors are unlikely to take solace in the knowledge that things can’t really get much worse than this.
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