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The East African : February 17th 2014
60 FEBRUARY 15-21,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,838.47 0.14% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 1,938.39 3.04% USE All Share Index Uganda 1,428.63 -0.30% RSE All Share Index Rwanda 140.78 0.24% JSE All Share Index South Africa 46,661.39 3.04% NGSE All Share Index 38,767.29 Nigeria - -4.79% EABL posts $49m in half-yea≥ p≥ofits R egional brewer East African Breweries Ltd looks on track to avoid last year’s embarrassment of issuing a profit warning. The brewer, controlled by Britain’s Diageo, said Friday that its net profit rose 5.1 per cent in the half year ended December 2013, on the back of increased sales in the spirits, mainstream and premium beer market segments. Net profits grew four per cent to Ksh4.16 billion ($48.9 million) in the period, against Ksh3.98 billion ($46.5 million) a year earlier. Sales surged 3.9 per cent to Ksh31.8 billion ($374.1 million), with the firm relying on cost-cutting measures to grow earnings. Last year, the Kenya-based firm saw its full year profits drop by 37.9 per cent, preceded by a profit warning on higher financing costs. A profit warning is a regulatory requirement that is issued when a company expects its earnings to drop by at least 25 per cent of the level reported in the previous reporting period. Finance costs continue to put pressure on the brewer, mainly due to a loan of Ksh19.5 billion ($223.5 million) extended by its parent company for the profit growth was due to the rise in net sales, especially in key brands such as Tusker and Guinness, which grew by 17 per cent and 24 per cent respectively. Bell brand lager, sold in Uganda, grew by 16 per cent while Serengeti Premium Lager grew by 3 per cent. To support growth in the Uganda Breweries Ltd products at a beer store in Kampala. The subsidiary registered the highest net revenue growth in the just-declared half-year profits. Picture: File purchase of a 20 per cent stake in Kenya Breweries. Analysts at Standard Invest- ment Bank (SIB) said the brewer’s performance in the three months to December was affected by reduced Senator Keg sales after its duty remission was halved to 50 per cent. “Overall, we think the brewer delivered a positive performance. We however maintain our sell recommendation primarily based on price, with a fair value of Ksh197.8,” SIB said in a research note. EABL’s share price has fallen 25.6 per cent over the past six months to average Ksh248 ($2.9) last week. Charles Ireland, EABL group managing director, predicted that revenues will register “solid” growth in the next six months that will increase to at least 17 per cent after the current financial year. EABL, which has subsidiaries in Uganda and Tanzania, said To support growth in the next six months, the firm has set out to grow its Tanzanian market. next six months, the firm has set out to grow its Tanzanian market, which registered the worst performance. EABL has a 30 per cent share in that market while competitor SAB Miller leads at 70 per cent. Tanzania was the only subsidiary that saw a drop in net revenue, which declined by 11 per cent as Serengeti Breweries Ltd reacted to the short-term impact of new route-to-consumer initiatives as the business moved to a new distribution model. Uganda registered the highest net revenue growth at 17 per cent as a result of improved availability, mix and pricing initiatives, Mr Ireland said. The international business posted a positive performance helped by Sudan. The good news is that the firm declared an interim dividend of Ksh1.50 ($0.01) per share. Hope fo≥ Ugandan bo≥≥owe≥s as lending ≥ates d≥op? FALLING LENDING rates have lately raised hopes of cheaper loans among Ugandan borrowers. With several banks beginning to wind down expensive fixed deposits priced at an average interest rate of 20 per cent almost two years ago, benchmark funding costs incurred by industry players have dropped, leading to fresh discounts on major borrowing rates, said Phillip Odera, Stanbic Uganda’s managing director. Huge fixed deposits locked in by local fund managers in 2011 have proved a nightmare for banks eager to slash their funding costs in contrast to asset managers, with most of the latter posting double-digit returns for 2012. Fixed deposits held by the National Social Secu- rity Fund (NSSF) under this category accounted for 25 per cent of all banking sector deposits as of June 2013, according to sources, while the Fund’s total fixed income portfolio stood at Ush2.8 trillion ($1.1 billion) which was equivalent to 81 per cent of its assets during the same period. The exit of these deposits coupled with massive liquidity in the interbank market that has seen overnight and one week rates drop to 8.5 per cent and 10.5 per cent respectively has cut industry funding costs and stimulated lending appetite. Significant volumes of repurchase agreement (repo) instruments issued by the Bank of Uganda, which grossed Ush707 billion ($284 million) last week, are cited for the high liquidity levels. So far, personal lending and mortgage rates among big banks have dropped to 16-18 per cent while the latter recorded a new low of 17.5 per cent this month. 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 Sleepless nights fo≥ CBK chief FOR CENTRAL Bank of Kenya Governor Prof Njuguna Ndung’u, the next few days will be critical. Seven years at the helm and at least one year to go before his term ends, he has over the past week faced perhaps the biggest setback in his career at the regulator. Director of Public Prosecu- tions Keriako Tobiko last week ordered the Ethics and Anti-Corruption Commission to charge the governor in a case revolving around the award of a tender to install security software at the bank. But Prof Ndung’u denies the allegations and has moved to block his arrest. The High Court on Friday blocked the anti-corruption tsar from arresting or charging Prof Ndung’u until his petition blocking the prosecutor’s order is heard next month. Charging the governor could see him suspended from office as required by the law and potentially trigger jitters in the markets.
February 10th 2014
February 24th 2014