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Edita to proceed with soft entry into biscuits segment post Ramadan Company will take advantage of expected easing of lockdown measures to pull up revenues
Edita Food Industries is set to proceed with a soft entry into the biscuits segment after Ramadan, to take advantage of the expected easing in lockdown measures. The company's construction activity in Morocco remains on track, with operations set to being by the end of 2020. The general global fallout from the coronavirus (COVID-19) pandemic has created an overall weaker demand environment. The lockdown and closure of schools and universities, in particular, has crippled snack food consumption and decreasing Edita's daily sales volume by almost 30%. It is anticipated that the new product launches in the bakery and cakes segments, alongside strong marketing efforts, will slightly offset the pull-down in recent sales volumes. The company reported that its recently launched layered cake and savoury sandwich products have already contributed about 10% of revenues in the first quarter (Q1) of 2020. These two product areas were successful in pulling up the company's average price points. Despite taking the necessary precautionary measures since the beginning of the coronavirus outbreak, the company reported positive cases at a production facility in late April. The facility houses 10 production lines out of a total of 30 lines. It is expected to resume operations this week following its closure to implement disinfection and sterilisation protocols as outlined by the World Health Organization (WHO) and Egypt's Ministry of Health. Edita's management has created a contingency plan that will see coverage for imported raw materials increased from 45 days to three months, and finished goods from three days to six days. This will mitigate against future disruptions, and will see two longer production shifts instead of the usual three in operation, to limit the risk of infections but reflecting higher labour and overtime costs. The company has also adjusted its distribution strategy, to ensure timely restocking within limited working hours by capitalising on the recent additions to its distribution fleet. There has been an added trimming of the marketing and distribution budget to counter the expected weakness in sales for Q2 of 2020. Edita has also cut back on capital expenditure (CapEx), from an initial EGP 950m, of which EGP 650m was earmarked for Egypt and EGP 300m for Morocco, to EGP 650m. This happened through a scaling back of the budget for Egypt to EGP 350m, of which EGP 186m had already been spent on the biscuit line and distribution additions in Q1 of 2020.
