For Online E-newspaper
The East African : Feb 14th 2015
56 FEBRUARY 14-20,2015 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 5,340.08 1.12% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 2,747.60 1.11% USE All Share Index Uganda 2,047.00 1.54% RSE All Share Index Rwanda 135.81 0.28% JSE All Share Index South Africa 52,907.62 2.06% NGSE All Share Index 27,585.26 Nigeria -8.00% shield themselves from wild swings in oil prices, has emerged as the latest hindrance to consumers enjoying the benefits of record low prices. Through hedging, car- Hedging in the skies keeps ai≥ ticket p≥ices high H edging, a practice through which airlines riers agree with suppliers on a floor and ceiling price within which jet fuel is bought over a period, meaning that they now cannot review air ticket prices until new contracts are signed. “The implication is that although the oil price has dropped markedly, some airlines are still paying a much higher price depending on the hedge and the period covered by the hedge. Therefore, the fuel price drop will take some time to impact airline operating costs,” said Elijah Chingosho, secretary general of the African Airlines Association. With projections that Af- rican airlines will register flat revenues this year, experts expect the carriers to Kenya Airways Dreamliner plane at Jomo Kenyatta International Airpot. Ticket prices remain high depending on the hedge and period covered by the hedge Picture: File use the windfall from lower oil prices to shore up their margins. “Most airlines will be re- viewing their hedging costs downwards, hoping to ride on the oil prices that are anticipated to continue falling for the next two years,” said Michael Gichohi, business development manager at NIC Securities. Market data indicates that the airlines are tied to hedging contracts above $100 per barrel, which looked a bargain when oil was at more than $120 per barrel two years ago. However, it is oil com- pany executives who are having the last laugh with fuel prices having dropped to about $50 per barrel. A The implication is that although the oil price has dropped markedly, some airlines are still paying a higher price depending on the hedge and the period covered by the hedge. spotcheck on airlines operating from Nairobi indicated that air ticket prices would not be reviewed downwards. Another airline said the gains in oil prices were not enough to warrant a fall in ticket prices. A research note by Deloitte titled “Falling Oil Prices – Winners and Losers,” estimates that airlines’ fuel bills could drop by up to 13 per cent. Experts said most air- lines would not lower fares but would instead seek to renegotiate the hedging policies to favour them. “Internationally, a lot of airlines hedge their oil as part of strategic risk management. At the moment, the airfares remain the same since we hedge long term. The price curve is going steadily down and we will see probably some benefit in the near future. Many other airlines have not reduced their airfares based on oil prices,” said Kenya Airways finance director Alex Mbugua. G≥owth in Tanzania sales ≥esto≥es EABL spi≥its A REVERSAL of its fortunes in Tanzania helped East African Breweries Ltd (EABL) to post a 12 per cent growth in pre-tax profit for the six months to December 31,2014. The company’s net earnings jumped to Ksh6.8 billion ($74.72 million) from Ksh6.08 billion ($66.81 million) in the corresponding period the previous year. As a result, shareholders of the firm cross-listed in Kenya, Uganda and Tanzania will benefit from an interim dividend of Ksh1.50 ($0.02) per share subject to shareholders’ approval. Tanzania delivered net sales growth of 17 per cent, driven by strong performances from Kibo Gold Lager, spirit brands and innovations such as Jebel Coconut and Serengeti Platinum. “The emerging beer category sup- ported double-digit net sales growth in Tanzania. We have started to establish spirit brands in Tanzania and extend the Serengeti brand,” group managing director Charles Ireland told reporters in Nairobi. Mr Ireland, however, said growth in other markets such as South Sudan had been constrained by currency challenges. “Despite the currency challenges, however, our export markets supported by the establishment of the local depot in Juba delivered over 100 per cent growth,” Mr Ireland said. According to the company’s unau- dited financial statements, net sales in Uganda grew seven per cent compared with three per cent in Kenya, where Senator Keg sales dropped after the government imposed excise duty on a product that had previously been exempt. Uganda spirits sales grew by 28 per cent while Kenyan bottled beer grew by five per cent, mainly driven by Guinness. In the previous financial year (2013/2014), distribution challenges in Tanzania and political instabil- ity in South Sudan contributed to weaker growth in the profits of the Diageo Plc-controlled brewer. EABL is listed on the Nairobi, Uganda and Dar es Salaam stock exchanges. During the period under review the group’s total revenues grew nine per cent to Ksh34.76 billion ($382 million) from Ksh31.85 billion ($350 million).Profit after tax increased 11 per cent to Ksh4.62 billion ($50.77 million) from Ksh4.16 billion ($45.71 million). During the year, the company completed a new furnace at its Central Glass Industries facility and an effluent treatment plant upgrade in Uganda. Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Af≥ica Oil to ≥aise $125m fo≥ Kenya oil ext≥action AFRICA OIL Corporation of Canada plans to raise $125 million in a private placement for preparation of oil exploitation in northern Kenya. The firm and its partner Tul- low Oil Plc are required by the government to file, by the end of this year, field development plans for blocks 10BB and 13T where 600 million barrels of crude oil await extraction. Dundee Securities Europe LLP and Pareto Securities are the joint book runners for the placement of about 57 million common shares. The offering is expected to close next week on Monday, February 23, if it is approved by the Toronto Stock Exchange and the Stockholm Stock Exchange, where Africa Oil is listed. Africa Oil chief executive Keith Hill said the net proceeds would be sufficient to drill at least four exploration wells, further well tests in the Amosing and Ngamia fields and reservoir and engineering studies.
Feb 9th 2015
Feb 23rd 2015