East Africa businesses post mixed results, blame forex losses, devaluation
Posted Monday, March 7 2016 at 15:54
- Businesses shrugged off the weakening of regional currencies against the US dollar, the currency devaluation in South Sudan, inflation and high interest rates to post profits with the exception of retailer Uchumi Supermarkets.
- Executives attributed the performances to cost cutting and increased reliance on technology to deliver services to consumers.
East Africa’s publicly listed companies posted moderately positive performances despite the challenging business conditions that prevailed last year.
Businesses shrugged off the weakening of regional currencies against the US dollar, the currency devaluation in South Sudan, inflation and high interest rates to post profits with the exception of retailer Uchumi Supermarkets.
Executives attributed the performances to cost cutting and increased reliance on technology to deliver services to consumers.
KCB announced a 16.4 per cent increase in its profits to $196 million, even as it booked a $61 million foreign exchange loss, mainly from its South Sudan operations, where the national currency was devalued by 84 per cent in December. The bank saw its total interest income grow by 18.7 per cent to $56.3 million, with the loan book rising by 21.9 per cent to $345.9 million.
KCB bank chief executive Joshua Oigara said that the lender saw a 14 per cent dip in net profit largely attributed to lower non-interest income and a drop in earnings.
Maurice Oduor, an investment manager at Cytonn, said that the bank would have posted better results had it not been for the devaluation of currencies in Juba.
“This devaluation will hit most firms’ books as it was done late last year and they have to book it. But going forward, we expect a rebound in this market because it was a one-off thing,” Mr Oduor said.
CfC Stanbic, which also has operations in Juba, booked a $70 million loss also attributed to the devaluation that saw its net profits dip by 14 per cent. The firm’s profits in 2015 stood at $46 million compared with $54 million in 2014.
CfC Stanbic Bank chief executive Philip Odera said that the challenges in the Juba market are still there, making the business environment unpredictable.
“The South Sudan environment continues to deteriorate posing a challenge to not only us but firms within this market,” Mr Odera said “We saw our balance sheet move from $80 million in 2014 to $10 million last year after the South Sudan Central Bank announced the devaluation in December.”
CfC Stanbic saw net interest income grow to $93 million while its loan book surged 15 per cent to hit $101.5 million. The firms’ non-interest income ,which includes, fees, commissions and forex trading, dropped marginally by 0.1 per cent to $71 million.
NIC Bank, which has subsidiaries in Uganda and Tanzania, also booked a $31.6 million forex loss in the conversion of the foreign units into local currency. Both the Ugandan and Tanzania units have fared poorly against the dollar and the Kenyan shilling leading, to these losses.
Mortgage provider Housing Finance (HF) reported a 22.7 per cent growth in net profit due to increased lending. The firm’s net profit last year stood at $11 million up from $9.75 million, the previous year.
HF’s chief executive Frank Ireri attributed the growth to diversification of its banking products, a new insurance strategy and a growing property unit.