By Mohamed Gad

CAIRO, Dec. 22 (Aswat Masriya) - Although what goes up can quickly come down at the stock market, Aswat Masriya interpreted the performance of the companies that made the biggest profits and losses in 2015, providing explanations and analysis.

The stock market's main index has mostly declined throughout the year but companies listed on Egypt's stock exchange have made major gains and major losses, reflecting the economic conditions of the country.

Tourism and construction grow

The tourism sector grew by 34.6 percent in the first nine months of 2015, according to statistics provided by Egypt's ministry of planning, a marked improvement compared to the 49.7 percent decline the year before.

The growth was reflected in the performance of companies in the sector, such as the Egyptian Resorts Company, whose luck has been turned around this year: It made EGP 173 million in the first nine months of 2015, compared to losses amounting to around EGP 45 million in the same period in 2014.

The statistics provided by the planning ministry stop one month before a Russian passenger flight took off from an Egyptian airport, only to crash in the Sinai desert 23 minutes later. 

Egyptian tourism was slowly inching towards recovery when the Russian plane crashed. Egypt fears the crash's impact on tourism.

The Egyptian Resorts Company says the recovery of the tourism sector and the economy in general have made it easier for the company to collect its dues from developers, adding that the "core improvement" came mainly because of the "exceptional" boost in land sales.

But land sales have not only supported the tourism sector, they were also among the main reasons that real estate firm Palm Hills Developments' sales improved by 213 percent in the period from January to September, compared to the same time in 2014.

The real estate company made the largest growth in profits among all companies listed in the Egyptian stock exchange.  

A report by investment bank Beltone Financial said Palm Hills' annual increase in revenues, which exceeded the banks expectations by EGP 1.8 billion, was mainly supported by an increase in private land sales and the sale of units, west of Cairo and in the North Coast.

Aswat Masriya's analysis of the performance of companies excluded companies whose financial year ends in June, companies that reversed their losses and started making profits and ones for which there was no data from the previous year to compare.

Palm Hills' financial statements show that 67 percent of the real estate firm's net revenue came from land development, representing a year-on-year growth of 82 percent.

Growth in the construction sector doubled, between January and September 2015, rising from a 5.1 percent growth in these nine months in 2014 to a 10.1 percent growth, according to the figures issued by the ministry of planning.  

Mahmoud Ibrahim, senior equity analyst from Mubasher Trade said the state's "strong return" to putting up land for sales has helped stimulate the real estate sector. It began to bounce in 2014 as the prices of land and units went up and relatively maintained vigour throughout 2015.    

Palm Hills Developments was followed by Elsewedy Electric as the company with the second largest growth in profits. The energy giant's profits grew by 200 percent from January to December 2015.

The private Egyptian firm worked together with German multinational Siemens on a the Attaqa power plant, one of the largest projects Elsewedy is involved in. They announced in July 2015 that they completed the construction works of the station, which is part of the state's 2015 emergency plan to provide electricity amid a growing demand in Egypt.

Currency challenges disrupt profits

Other sectors' growth has been hampered by the fluctuations in Egypt's currency this year.

In the financial sector, EFG Hermes' net profits grew by only 2 percent in the first nine months of 2015 compared to that period in 2014. Hermes' revenues from stock brokerage made a year-on-year drop of 20 percent, while revenue from asset management fell sharply by 46 percent. The investment services company did, however, manage to raise its revenues from investment banking services by 242 percent.

Based on the company's comments on its own performance in the past nine months, the disruptions of the Egyptian pound were restricting it from pumping investments into asset management.

Egypt has depreciated the pound multiple times in 2015 but amid expectations of further devaluations, the Central Bank of Egypt (CBE) revalued the currency in an abrupt decision in November.   

Even after the CBE raised the pound, the currency, which had started off 2015 at an official price of 7.14 to the dollar on the official market, is now trading for 7.73 to the dollar, bringing its overall loss in the past 12 months to 59 piasters.

Hermes says 56 percent of its assets are valued in the Egyptian pound, which means that the depreciation of the pound is placing pressures on the size of the assets it manages, since the value of the assets drops every time the pound falls against the dollar.

Companies outside the financial sector have also been affected by currency challenges. Oriental Weavers, one of the largest machine-made carpet makers,  said its exports to the European market have been affected because the euro fell against the dollar, reducing its competitiveness in Europe.  

The company's revenues from the European market fell by more than a fifth in the third quarter of 2015 and overall exports in the first nine months of 2015 fell to EGP 2.4 billion, dropping from EGP 2.6 billion in the previous year, according to its figures. Meanwhile, profits fell year-on-year by 15.2 percent.   

The dollar shortage inside Egypt has also affected Ghabour Auto's ability to import cars, said Beltone Financial's report, which stated that the automobile assembler grew by a mere 1.2 percent between January and September of 2015.     

The internet leads the communication sector towards profit-making

Although Telecom Egypt was among the top six companies with growth in net profit in the first nine months of 2015, one of the companies with the biggest losses was also from the communication sector, Orascom Telecom Media and Technology Holding.

But the profits and losses of the two companies came as a result of exceptional circumstances. 

Beltone Financial says Telecom Egypt was propped up after the company reversed a deferred tax liability worth EGP 613 million, following amendments to the dividend tax, which retrospectively reduced the maximum corporate income tax from 30 percent to 22.5 percent.

Orascom Telecom Media and Technology Holding, whose executive chairman is telecom magnate Naguib Sawiris, announced in November that it is excluding its North Korean operation Koryolink from its financial statements.

In 2011, Sawiris pumped huge investments into North Korea's virgin telecom industry. 

International sanctions imposed on the country and the fiscal policies applied there were an obstacle to transferring funds between Cheo Technology, the North Korean joint venture cellular operator that uses the Koryolink brand-name, and OTMT, its parent company. 

The situation got more complicated when Koryolink began facing competition after the government set up another cellular operator. In August, Orascom said losses inflicted on it amounted to EGP 3.1 billion.

But Orascom's performance does not reflect that of the communication sector in Egypt because the company's activities inside Egypt are limited. The private Egyptian firm is eyeing to expand activities to emerging markets in Lebanon and Pakistan.

In its report on Telecom Egypt, Beltone Financial says the internet sector is stable and that it still has "promising opportunities" for growth, which makes up for the shrinking audio and voice services sector. Company revenues from home internet services grew by 39.8 percent in the third quarter of 2015, compared to the same quarter in 2014.

Some saturation in the food market

In the food market, Juhayna, Egypt's largest producer of juice and dairy products, made the largest growth in profits between January and September, rising by 60 percent. Juhayna's winning bet was its juice and milk products.

Cake and pastries producer Edita Food Industries, however, had a profit growth of 30 percent. The company says there is fierce competition in the cake market, adding that it is about to become saturated. Edita is seeking to put innovative products on the market to overcome this.  

(1 dollar = 7.73 Egyptian pounds)