Egyptian food giant to raise prices

Reuters

Edita Food Industries, one of Egypt’s largest food producers, will raise the
prices of some of its products and also increase workers’ pay after the massive devaluation of the Egyptian pound, its chairman said.
The company’s decisions point to challenges faced by firms around the country in the wake of the devaluation, which is expected to trigger a surge of inflation that drives up import costs and, temporarily at least, hurts living standards.
The central bank floated the pound on Thursday, abandoning a peg of 8.8 pounds to the dollar and letting the currency drift down to around 16 on Sunday. Many bankers think more depreciation is possible. The float aims to attract flows of hard currency into the economy, ending an endemic dollar shortage that pushed the pound as low as 18 in the black market last week.
Like many Egyptian businessmen, Edita chairman Hani Berzi welcomed the devaluation as a step towards creating a stable, balanced market in foreign exchange that would make planning and investment easier. Two weeks before the float, he said, Edita had stopped buying dollars at “totally unacceptable and totally unrealistic” rates.
It also suffered because of the hard currency shortage in another way; the shortage made it hard for some importers to bring in sugar from abroad. This caused a shortage of sugar in Egypt and the government responded by temporarily seizing sugar from Edita and some other companies last month.
The devaluation may end such incidents. But it also means Edita will have to grapple with a surge of inflation in coming months as import costs rise and fuel prices are hiked. The company raised prices for some of its snack foods last month; it is now preparing for more increases.
“We have been surrounded by a tsunami wave of cost increases,” Berzi said. “We have to price our products again…not only to maintain the profitability, but to be able to maintain the continuity of the business.” Twenty-eight percent of Edita’s costs are directly related to foreign currency, he said.
At the same time, the company will have to factor in the blow to its employees’ real incomes from higher inflation, Berzi said. Annual inflation was 14.1 percent in September and could near 20 percent by the end of this year, economists think.
“We are a labour-intensive industry and definitely I will need to support (Edita workers)…We will defiantly go an extra mile to accommodate them,” Berzi said without specifying how large wage hikes might be. The company has about 5,600 employees and plans to add 400 to 500 more by next year, he added.
The pound’s devaluation will help Edita’s exports by making them cheaper for foreign buyers.
But Berzi cautioned that the boost to earnings might not be large, because the company only exported about 6 to 7 percent of its production and faced higher costs that would constrain its ability to sell into foreign markets for now.