Half year results show strong recovery in corporate Kenya
A number of Kenya’s leading companies have reported stronger-than-expected earnings, underlining the strength of corporate recovery and signalling that the economy is on course to realising the target of 4.5 per cent growth.
Heavyweight names such as KCB, Nation Media Group, Athi River Mining and Uchumi have all reported double digit growth in half-year profits and backed it up with robust earnings expectations in the remaining part of the year, hinged on rising optimism in all sectors of the economy.
Analysts are expecting corporate earnings to rise about 25-35 per cent this year before rising to an average of 40 per cent next year.
The banking sector that is known to front-run the economy has led the recovery with the big players turning in billions of shillings in profits that only looked remote at the beginning of the year.
Equity, KCB , DTB and National Bank have all racked up double digit growth in their loan books with the easing of lending rates since May, pointing to an accelerated credit expansion in the economy.
Nation Media Group reported double digit growth in earnings to post Sh558 million for the first half of the year compared to Sh364 million in the same period last year.
NMG’s performance was underlined by corporate Kenya’s increased spending on brand visibility to recover lost ground after two years of muted economic growth.
Kenyan firms spent Sh20 billion on advertising in the six months to June —nearly as much as the annual spend for 2008 — signaling a rising optimism in the economy and the jostling for brand visibility in a market where consumers are regaining lost purchasing power.
Purchasing power
Uchumi, the country’s second largest and the only listed retail chain, nearly doubled its profits after chalking up Sh865 million in the first half of the year from Sh420 million last year, signalling a strong rebound of consumer purchasing power.
The retail chain recorded an 11 per cent rise in customer numbers to 18 million from 16 million last year – attesting to an increase in consumer spending with the ongoing recovery.
“This is the confidence that we have been looking forward to,” said Mr Jonathan Ciano, the chief executive officer of Uchumi Supermarkets, that emerged from statutory management in March.
Kenya’s third largest cement maker, Athi River Mining, returned a 16 per cent increase in pre-tax profit to Sh519 million for the first half of 2010 from the Sh449 million it recorded during a similar period last year.
Turnover rose from Sh2.4 billion to Sh2.8 billion, a 19 per cent jump, of which the cement business contributed 53 per cent.
This outcome has been linked to accelerated property development and infrastructure projects throughout East Africa that have continued to provide an impetus for earnings despite costly price wars in the marketplace.
PM poised for reshuffle
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Economy stablising?
Greek economic sentiment improved slightly for the second straight month in July with better outlooks in industry and services offset by declining readings in the retail and construction sectors, a survey showed.
The Foundation for Economic and Industrial Research (IOBE) said on August 4 its economic climate index – based on business expectations sub-indices covering industry, construction, retail trade, services and consumer confidence – rose to 66.3 from 63.8 points in June.
“In essence, business expectations have simply stabilised and the economic climate is not particularly changed as the feel feel of broader discontent about the course of economic activity remains strong,” the IOBE said.
Greece’s economy, which makes up about 2.5 percent of the eurozone, is going through its deepest recession since 1974 and is seen contracting by 4 percent this year as a result of belt-tightening to secure eurozone and IMF emergency funding. The IOBE said despite a small uptick in consumer confidence, the reading remained very close to a historic low seen in the last months.
Reduced household incomes, higher taxes and uncertainty were taking a toll in the retail trade sector, weakening demand as consumers worry about rising unemployment. “The percentage of households expecting unemployment will increase in the next 12 months stood at 92 percent from 95 percent in June,” the IOBE said. The slight improvement in Greece’s overall economic sentiment contrasts with a strong rise in the euro zone’s reading in July, which was buoyed by Germany.
The 16-nation bloc’s economic sentiment benchmark rose to a 28-month high of 101.3 points, reflecting a recovery momentum that looks to be overcoming the sovereign debt crisis.
CRB’s hoped to stabilise credit market
Kenya is poised to have a more stable credit market with the introduction of credit referencing and information sharing by commercial banks.
According Mr Rashid Ahmed, a consultant of credit information sharing, a healthy flow of this information will boost confidence and increase volumes for firms.
“This will also minimise debts and result into more profitable firms to offer services to the market,” said Mr Ahmed.
The Central Bank of Kenya (CBK) and the Kenya Bankers Association (KBA) introduced credit reference bureaus (CRBs) as a tool to gather and store information on borrowers’ loans history.
The bureaus are expected to help banks abandon the extensive reliance on physical assets as collateral, whose values have at times, been questionable after default.
The information will then be shared among banks and customers too, will be allowed to access their reports once a year.
“However, this will also require sufficient intervention at various stages to help in resolving emerging issues as Kenya goes through the process,” he said.
A consultant from South Africa, Mr Ahmed was speaking on Thursday during a workshop to sensitise employees from commercial banks in Kenya on the project.
CBK introduced the Banking (Credit Reference Bureau) Regulations 2008, which were published in July 2008 and became operational on February 2, 2009 with the licensing of the first credit reference bureau, CRB Africa, in February 2010.
All banks have complied and now the CBK will take the data and analyse it.
New Master Builders Training Centre
The Master Builders Association of WA has opened up a new training centre in Perth. The new centre located on 594 Hay St, Jolimont/Subiaco, will be the new training centre for Master Builders members. The centre features 3 generous-sized training rooms, and a large and well-equipped practical training room at the back. The centre is 5 minutes from the Subiaco train station, and provides for ample free parking. Paradigma Solutions will conduct all Master Builders training sessions at this new venue. For details of the latest courses on offer, please see our date calendar, or contact us on info@paradigma.com.au
