East Africa businesses post mixed results, blame forex losses, devaluation

Monday March 7 2016

East Africa’s publicly listed companies posted

East Africa’s publicly listed companies posted moderately positive performances despite the challenging business conditions that prevailed in 2015. PHOTO | FILE 

By Allan Olingo

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.


Within the retail sector, Uchumi Supermarkets, which is now in negative equity, saw its loss position worsen to $10 million last year. The firm’s net sales drop by 37.6 per cent year on year to $43 million, which further led to a gross profit fall of 34.3 per cent, to $9 million.

The firm also saw its operating expenses rise by 11.7 per cent to $20 million with the loss from its operating activities also rising by a whopping 376.8 per cent, to $9.6 million. The retailer, which has closed its Uganda and Tanzania branches, is shopping for a strategic investor to take a controlling stake in exchange for a $50 million capital injection that will be used to offset its debts and fund its ongoing operations.


Within the energy sector, higher operating and finance costs of some firms hit bottom line. Kenya’s electricity generating firm KenGen saw its after-tax earnings grow to $56 million, up from $49.6 million the previous year. The firm also saw a 27 per cent growth in its revenues, closing the year at $148 million as compared with $117 million in 2014.

Mercyline Gatebi, an analyst at Genghis Capital, said that the firm’s performance was bogged down by its high finance cost.

“The firm’s 2015 performance went up by 25 per cent. This definitely ate into their profits. Without this inclusion, the firm’s performance would have been more impressive,” Ms Gatebi said.

Kenya Power on the other hand saw its profits dip by 16 per cent to $37 million compared with $42 million in 2014.

Kenya Power’s CEO Ben Chumo said that the drop in profits was largely due to the rise in power purchases with addition of new power to the grid and the ongoing power system reinforcement project to stabilise the electricity network.

The firm also saw its transmission and distribution costs rise by 25 per cent to $13 million, while its total revenue dropped two per cent to $56.7 million.


Human and animal feeds manufacturer Unga Group saw its net profit for the six months to December rise by 20.6 per cent, attributed to the gains from the disposal of Bullpak Ltd.

The firm also saw its revenue grow by 9 per cent, mainly driven by growth in sales volumes.  In a statement, the firm said that input VAT continues to affect margins given that a majority of the products sold fall under the exempt supplies category.

Analysts at Standard Investment Bank (SIB) said that the company has started implementing its new integrated enterprise business system aimed at improving operational efficiencies.

The gains on exports propelled cigarette maker British America Tobacco (BAT) into announcing better than expected results that saw its net profit grow by 17 per cent to $49 million up from $42 million the previous year.

The key outperformers being revenue which grew 5.8 per cent on the back of foreign exchange movements arising from export sales, improved performance of domestic market as well as increment in cut rag volumes.