Egypt's Raya eyes stronger Q4 after consumer dip

A dip in consumer spending hit profit at Egypt's Raya Communications and Technology in the third quarter, but the company's chairman said he saw potential for strong fourth-quarter growth.

Raya, which sells handsets to consumers, runs call centres and provides outsourced IT services, made a net profit of 13 million Egyptian pounds ($2.4 million) in the third quarter, an 18 per cent rise on the same period last year.

It has sought to diversify operations but still receives more than three-quarters of its revenue from its consumer trade line.

Revenue reached 467.5m pounds versus 584.9m, the company said in its earnings statement on Wednesday. Its year-to-date figures showed a sharp decline on 2008.

The trade line – which distributes, sells and maintains mobile phones and IT products for brands including Nokia – reported a 15 per cent dip in sales compared with the third quarter of last year.

It attributed the decline to "a change in consumer spending habits and reduced liquidity", compared with 2008. Analysts said the three lines of Raya's operations were all affected by lower discretionary consumer spending. "This year is a challenging year for the company ... but we believe revenues will pick up by mid-2010," said Ingy El Diwany, an analyst at CI Capital, which has a "sell" recommendation on the stock.

Raya's chairman and chief executive officer, Medhat Khalil, pointed to profit growth over the previous quarter and a move to grow international call centre volumes as positive for the firm.

"We saw a positive upward trend in the market reflected in our net profit growth of 48.1 per cent over Q2 2009, which is a good indication that the fourth quarter of the year will be strong," Khalil said.

He added that Raya had cut short-term debt to 141.3m pounds from 367.3m. The Egyptian stock exchange on Monday said Raya had made 25.2m pounds in the first nine months of 2009, without providing further details.

The firm said in its detailed earnings statement it made a net profit of 25.5m pounds in the nine months. CI Capital's Diwany said her long-term "fair value" on Raya was 8.5 pounds and her target price was 5.5 pounds. The stock ended 0.9 per cent lower at 5.48 pounds.