Billions in Saudi investments incoming??, CBE maintains interest rates??, & Arla Foods' planned acquisition of Domty hikes dairy sector's share value?

Saudi companies expected to pump USD 15 billion into Egypt in coming years

Saudi private sector companies are expected to channel USD 15 billion toward Egypt-bound investments over the next three years,? the head of the Saudi-Egyptian Business Council, Bandar al-Ameri told Asharq Business in an interview. The news comes after Saudi Crown Prince Mohammed bin Salman concluded a state visit to Cairo last week, and the signing of a bilateral agreement to encourage and protect investments between the two countries.

What we know:

Al-Ameri did not disclose the names of the companies that will undertake these billion-dollar projects as they are in the final stages of negotiations with partners from the Egyptian private sector, but told Al Arabiya that KSA firms are eying investments across our renewable energy, industry, real estate development, and tourism sectors.?

Announcements for a portion of the deals are expected to be made in coming weeks, according to Al-Ameri.

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KSA is already investing heavily here:

More than 7,000 Saudi companies are already operating in Egypt with investments exceeding USD 35 billion, Asharq notes.

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More to come:

Late last month KSA’s crown prince?agreed?to have KSA’s sovereign wealth fund “PIF” channel USD 5 billion toward Egypt-bound investments in what he said is the initial phase of a much larger investment program. This came a month after Saudi Investment Minister Khalid Al-Falih told Prime Minister Madbouly his country is mulling a conversion of a portion of its deposits in the Central Bank of Egypt —? which total some USD 10 billion —? into investments.?

Similar to the USD 35 billion Ras El Hekma agreement with the UAE, the Egyptian government is also reportedly close to finalizing a deal to sell off the rights to Ras Banas on the Red Sea to Saudi Arabia, we wrote last week. Investments for the project may reach USD 25 billion.

CBE maintains interest rates for fourth consecutive time

The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) held interest rates steady for the fourth time last Thursday, keeping the overnight deposit rate at 27.25%, the lending rate at 28.25%, and the main operation rate at 27.75%. It also maintained the credit and discount rate at 27.75%.

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What they said:

The MPC said it decided to keep the CBE’s key interest rates unchanged until there is a significant and sustainable decline in inflation.

Remember, Egypt’s annual headline inflation — total inflation in an economy —? rose for the second consecutive month in September to 26.4%.

The Committee noted that inflation will start to decrease in Q1 2025 as the impacts of monetary tightening and previous baseline effects materialize.

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In line with analyst expectations:

In its country risk report for the fourth quarter of the year, market research and analysis giant Fitch projected inflation to inch down below 20% by Q1 of next year due to significant base effects, and said the CBE will begin its easing cycle either before or immediately after February.

The agency expects the CBE to cut interest rates by up to 1,200 basis points in 2025 as major central banks begin easing cycles.

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Immediately after the CBE’s decision:

Egypt’s fuel pricing committee raised fuel prices for the third time this year and postponed any further decisions regarding price levels for six months. The price increase affected all types of gasoline, diesel, and industrial mazut, with hikes ranging from 7.7% to 17%. This increase is expected to exacerbate domestic inflation.

Denmark’s Arla Foods submits offer to acquire Domty

Denmark’s Arla Foods announced yesterday that it has submitted a non-binding offer to purchase the majority of shares in the Arab Food Industries Company (Domty), which has two production sites in Egypt.

The details:

Arla Foods said it made a a offer to buy the majority of Domty shares at EGP 31.48 per share, equivalent to about EGP 8.9 billion (c. USD 183 million). Arla’s offer marked a 74% premium on Domty’s share value which stood at EGP 18.03 on Tuesday

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Domty responds to Arla’s offer:

The company’s Vice Chairman and Managing Director Mohamed El Damaty said the offer shows the extent of misvaluation Domty has been subjected to through weak valuations and a low share price over the past 8 years since it IPO’d on the EGX.

Remember, the company had a bad 1H:

The local dairy giant saw its net profit recede 4.4% YoY to EGP 241 million, while its overall? sales during the six months ending in June fell 43.3% YoY to 4.34 billion.

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An expansion planned with or without Arla:

El Damaty noted that the board will study Arla’s offer, but in all cases his company has a local expansion strategy mapped out that will see it increase its production lines and acquire new land to expand its operations.?

Market reaction:

Domty's share value surged by 19.96% to EGP 21.63 a day after Denmark’s Arla Foods offer.

At the same time, news of Arla’s planned acquisition sent up the share value of all of Egypt's main dairy manufacturers — including Juhayna and Arab Dairy (Panda) — by 20% by the end of trading on the same day.

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