Stock on hand of both products, strong pricing power across all product lines, recovery in Commercial Vehicles segment and new businesses will cushion impact of the ban on the import of motorcycles and three-wheelers
GB Auto (AUTO.CA on the Egyptian Exchange), a leading automotive assembler and distributor in the Middle East and North Africa, said today that an effective ban on the import of motorcycles and three-wheelers will have a minimal impact on the company’s bottom line in the current fiscal year.
The Ministry of Trade and Industry announced the 12-month ban on fully built-up units alongside a three-month prohibition on the import of components.
“We are certain that organic growth, new business ventures and cost control initiatives will allow us to deliver the same profitability in FY14 as we had originally planned, even as our top line falls slightly short,” said GB Auto Chairman and CEO Raouf Ghabbour in a statement to the Egyptian Exchange. “We remain convinced that the ban will have a sharply negative impact on the Egyptian economy and the development of peri-urban and rural areas.
“That said, GB Auto has pursued line of business, product and geographical diversification since 2008 to guard against any such development that would impact one of our lines of business,” Ghabbour said. “Our top line and bottom line will continue to grow in accordance with our initial expectations. The motorcycles and three-wheelers division continues to enjoy strong pricing power on a product that is highly sought after. Existing stocks here will support a few months of sales, and we will work to funnel a higher proportion of unit sales to Mashroey, our Microfinance business.
“Moreover, we have so far had very strong results in January and February across all lines of business,” Ghabbour continued, “clearly indicating that other LoBs can help compensate for the loss of motorcycle and three-wheeler sales later this year. Geely and Hyundai together account for well over one-third of the Egyptian passenger car market. Our new microbus and micro-microbus offerings have been well received, and our Commercial Vehicles division has not only continued to grow its export business in 2014, but expects to win important tenders as part of the Government of Egypt’s ongoing stimulus spending on infrastructure.
“Against this backdrop, we look forward to a rising proportion of high-margin aftersales revenues and continued strong growth of our Tires business across the region,” he said. “We will continue to invest in our new businesses in Algeria and Libya while at the same time looking forward to our first revenues from our Lubricants, Retail and Used Cars businesses in Egypt.”
GB Auto recently announced a strategic partnership with Gazprom Neft-Lubricants to distribute lubricants in Egypt and, potentially, other markets. The company will shortly roll out a retail strategy that will see points of presence across Egypt offering lubricant sales and injection, tire sales and tire service and spare parts.
In March 2014, GB Auto will also launch its used cars business, offering in each GB Auto sales center pre-owned vehicles, marking its entry into a market estimated at a multiple of the size of the nation’s market for new passenger cars.
The motorcycles and three-wheelers division contributed about 13.9% of GB Auto’s total sales revenues in the third quarter of 2013, the most recent quarter for which audited financial results have been released. Mashroey, a subsidiary of GB Auto’s Financing Businesses, additionally finances their purchases.