GB Auto, Egypt's biggest listed automobile assembler, said on Sunday political turmoil in the country would weigh on its sales in the first half of 2011, but saw a rebound later in the year.

Chief executive Raouf Ghabbour said in a statement net profit margins were "substantially constrained" in the first quarter of 2011, but he saw them improving in the second half on market recovery in Egypt and stronger sales in Iraq.

The firm said its passenger car sales in Egypt declined 51.2 percent year-on-year in the first quarter of 2011 to 6,372 vehicles due to market disruption after mass protests erupted on January 25 to oust President Hosni Mubarak.   

But passenger car sales in Iraq almost quadrupled to 5,311 vehicles in the quarter. GB Auto began operations in Iraq in February 2010.

"We expect the market dynamics will prove similar to those seen in 2009, when the effects of the global financial crisis spilled over into our market," Ghabbour said.   

"A slower first half, with a noticeable pick-up in the second half starting with the onset of the high season in June."    

Shares in GB Auto fell 1.2 percent by 1209 GMT, while Egypt's benchmark index was down 1.4 percent.   

Egypt's economy nearly ground to a halt during weeks of protests that toppled the government of Mubarak, and some of its main sources of foreign exchange, including tourism and foreign investment, have collapsed.   

The finance minister estimated on Monday that the political turmoil would reduce economic growth to 2.5-3 percent in the financial year to end-June from the government's previous forecast of 6 percent.   

GB Auto said on March 3 its net profit fell 55.4 percent year-on-year in the fourth quarter of 2010 to 40.1 million Egyptian pounds.
   
Ghabbour said then he expected demand for passenger cars to bounce back quickly, but demand for commercial vehicles, which accounted for 9.7 percent of revenue in 2010, would take longer, hurt by economic and tourism slowdown.

In the first quarter of 2011, commercial vehicles sales in Egypt were hit by the political turmoil and would be the slowest segment to recover, GB Auto said.

Bus and truck unit sales slumped 59.2 percent in the quarter and trailer sales 33.8 percent.  - Reuters