Domty reported weak 2Q16 results, with headline earnings falling 48% Y-o-Y on weak revenue and margin pressures. Results were affected by accelerated shift away from sales through agents during the quarter, limited price increases, EGP devaluation and FX shortages. On a positive note, performance improved substantially in July 2016, with the company’s strategy bearing fruit being able to push through aggressive price increases and volume growth picking up – July 2016 carton pack cheese average prices were increased 11% in July 2016, with volumes up 42% vs. July 2015 and juice +12% with volumes +17%. We currently do not have quarterly estimates due to lack of historical quarterly financials. Top-line was up only 3% Y-o-Y (carton pack cheese +2% and juice +6%), affected partly by the cancellation of some contracts with third-party agents that led to sales returns of cEGP19mn in the quarter, excluding which, top-line growth would have been a still subdued 8% Y-o-Y. 2Q16 revenue was also affected by more Ramadan days falling in the quarter (weak for cheese sales) and some capacity constraints in juice. Price increases were minimal in the quarter, with average price per kilo up 2% Q-o-Q for carton pack cheese and down 7% for juice (like due to increased promotional activities), but this changed in July, as mentioned above, with more increases slated for the rest of the year. Guidance of c20% Y-o-Y top-line growth is still intact for 2016, according to management. Headline gross margin fell c4pp Y-o-Y with gross profit, dropping 13% Y-o-Y, weighed down by EGP devaluation and FX shortages, with limited ability to raise prices in the quarter. EBITDA margin eased a more significant c7.4pp Y-o-Y, with EBITDA falling 40% due to a 42% Y-o-Y surge in SG&A costs on increased marketing and promotional activities, as well as higher salaries and wages.   A weak set of results that indicates downside risks to our full-year numbers; however, we are encouraged by the July 2016 KPIs that demonstrate the success of the company’s strategy of squeezing out agents that should facilitate price increases going forward; however, growing FX shortages and further EGP devaluation could have an impact on costs and consumption trends. We will be revising our numbers to reflect the results. (Earnings release, Hatem Alaa, Nada Amin)   Domty: EGP7.45 as of 14 August 2016, Rating: Buy, FV: EGP12.65 per share, MCap: USD237mn, DOMT EY / DOMT.CA