       Reported net income: EGP867mn, -22% Y-o-Y, -16% Q-o-Q,  
       Revenue: EGP3,367mn, +4% Y-o-Y, -9% Q-o-Q
       Gross profit (ex-lease): EGP1,357.2mn, -5% Y-o-Y, -13% Q-o-Q
       EBITDA: EGP1,208.9mn, -5% Y-o-Y, -14% Q-o-Q
 
Eastern Co. released its 3Q18/19 financial statements (posted KPIs on 30 April), with headline earnings down 22% Y-o-Y (-16% Q-o-Q). Excluding FX losses (EGP62mn in 3Q18/19 vs. EGP11mn in 3Q17/18), provisions (EGP32mn in 3Q18/19 vs. EGP161mn in 3Q17/18) and a small capital gain (EGP3.5mn in 3Q18/19 vs. EGP2mn in 3Q17/18), recurring earnings would have declined 11% Y-o-Y, mainly on margin pressure and lower interest income (-61% Y-o-Y to EGP67mn on a 13% Y-o-Y decline in the company’s cash balance to EGP5.1bn, post the payment of a one-off dividend of EGP3bn in the last fiscal year and lower interest rates). Revenue was up 4% Y-o-Y (-9% Q-o-Q) as revenue from EC’s own brands (83% of 2Q18/19 total revenue) inched up 3% Y-o-Y on mix (this is the first quarter with no price increase effect) as volumes were flat for the second quarter in a row. Meanwhile, the company’s USD-denominated toll manufacturing revenue grew 11% Y-o-Y on higher volumes.
 
Margins declined for the fifth consecutive quarter: gross margin (ex. lease expense & depreciation) contracted c3.7pp to 40.3%, with gross profit down 5% Y-o-Y (-13% sequentially) as direct labour costs (c23% of COGS) rose 14% Y-o-Y and raw material costs (c77%) increased 10%. The company’s raw tobacco inventory holding stood at 14 months. EBITDA margin narrowed a slightly tamer c3.4pp Y-o-Y to 35.9%, aided by a 3% Y-o-Y decline in SG&A costs, with EBITDA also declining 5% Y-o-Y (-14% Q-o-Q). (Company disclosure)