Q3 inflation claims more victims

Israel's consumer prices rose the most since 2002, jumping 2.5% during June, July and August.

By MATTHEW KRIEGER
October 25, 2007 07:23
1 minute read.

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later

The number of Israeli companies affected by higher third-quarter inflation grew on Wednesday as Discount Investment Corp. and Bezeq said financial costs were "significantly higher"due to rising costs, while Phoenix Holdings warned of a quarterly loss and Ma'alot, the Israel Securities Rating Company, said Avis and New-Kopel also would post losses. "These leasing companies have their liabilities tied to the Consumer Price Index and when it spikes, their financial expenses also spike," Yuval Torbati, the director of corporate ratings at Ma'alot, told The Jerusalem Post. "For the third quarter, they will record a net loss because of the huge spike in their financial expenses." Over the last few weeks, some of the country's largest companies, including Africa Israel Investments Ltd., Migdal Insurance Holdings Ltd., Housing & Construction Holding Co. Ltd. and Strauss Group Ltd. have warned that they expect to post substantial increases in financing expenses over the third quarter, with costs estimated to rise by tens of millions of shekels. On Tuesday, they were joined by Bezeq and Discount, which also said the value of its"assets linked to the dollar exchange rate" was lower, following the dollar's decline this year. Phoenix, an insurer, said it would report a loss for the quarter after inflation accelerated, returns on its investments fell and the dollar weakened. Israel's consumer prices rose the most since 2002, jumping 2.5 percent during June, July and August, the three-month period upon which Israeli accounting laws require companies to base third-quarter earnings. Price growth has since slowed, with a recent Bank of Israel economist poll showing anticipated inflation of 1.5% in the next 12 months. Comparatively, second-quarter inflation rose only 0.7% and third-quarter inflation last year rose 0.2%. The CPI is an index number measuring the average price of consumer goods and services purchased by households and the percent change in the CPI is a measure of inflation. While leasing companies are particularly vulnerable to significant spikes in inflation as their financing is all index-linked, Ma'alot's Torbati was not concerned about the financial stability of Avis and New-Kopel. "The third quarter rise in the CPI won't have any cash flow significance on these companies and I expect that over an extended period of time the losses will be recovered in index-linked leasing contracts," he said. "However, if unlike predictions inflation continues to rise in the fourth quarter and into 2008, then this will begin to hurt profitability." Bloomberg contributed to this report.

Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS