Egypt’s shortage of US dollars has hit profits for one of America’s biggest crop handlers.
The Andersons Inc. reported third-quarter earnings that fell below analyst expectations, in part due to a currency squeeze in Egypt, the world’s largest wheat importer. The disappointing results sent shares tumbling more than 13% for the biggest daily decline in six months.
The economic fallout of Russia’s invasion of Ukraine hammered Egyptian finances, causing a rapid outflow of billions of dollars. The North African country, which is struggling to pass the International Monetary Fund’s delayed reviews of a $3 billion rescue program, has devalued its pound several times since early last year, with bond investors worried about a default.
“This loss resulted from an unfortunate and unique situation where we accepted a lower exchange rate from key customers for product already delivered,” Chief Executive Officer Pat Bowe said during a conference call with analysts on Wednesday. “This was an issue isolated to Egypt.”
Andersons, based in Ohio, sells crops to countries in the Middle East and Africa via its Swiss subsidiary. The company posted a pretax loss of $19 million in Egypt, but noted that other business handled by the Swiss unit showed improvement for the period.
The lack of dollars has curbed Egyptian wheat imports by about 10 million metric tons over the past two years, Hesham Soliman, president of Mediterranean Star for Trading Co., said during a conference in Geneva this week.
Brian Valentine, Anderson’s chief financial officer, said the currency squeeze was an isolated event and applied only to “a few deliveries” within Egypt. Still, it resulted in a revaluation of its remaining Egyptian receivables.
“This one really was the result of some highly unusual events,” he said. “It’s not applicable to the rest of the Egyptian business, let alone the remaining international footprint.” The company is now only doing Egyptian sales in US dollars.
Andersons set up its Swiss office in 2021 in a bid to expand its global reach, and since then has been supplying grain from the Black Sea region to destinations including North Africa and the Middle East.
--With assistance from Áine Quinn.
(Updates with comments from CEO and CFO starting in fourth paragraph.)
