Kenyan corporate sector revels in profit bonanza, KQ sinks deeper in red

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Kobil employee hanging price tags

Investors in corporations in Kenya can’t be happier; four major companies announced record profits and market values last week; KenolKobil, Safaricom, StanChart, Britam beat expectations by bigger margins, meanwhile the future looks bleaker for Kenya Airways;

KenolKobil cuts debt exposure by Sh4 billion

Oil marketer KenolKobil cut its short term debts by more than Sh4 billion last year, helping to reduce its finance costs by a quarter. The oil firm’s short term borrowings dropped to Sh10.4 billion in the year ended December from Sh14.8 billion the year before. Its long term debts also fell to Sh88.3 million from Sh522.5 million in the same period, helping to cut its overall finance costs to Sh1.3 billion.

The deep cut on finance costs saw the company’s net profit nearly double to Sh1 billion, even as sales declined to Sh91.3 billion from Sh109.6 billion reported in 2013. Chief executive David Ohana said reduction of the debt burden is a major focus area for Kenol, which is recovering from a Sh6.2 billion net loss in 2012 that was caused by currency hedging contracts that turned against the company.

“Our goal is to have very little debt by mid-2016. We have previously been working for banks,” said Mr Ohana in reference to the high finance costs borne by Kenol in the past few years. He added that the lower finance costs seen in 2014 is the product of debt repayments, cheaper fuel, renegotiation of loan terms and the exit from low-margin businesses like petroleum supplies to airlines and emergency power producers.

Safaricom’s historic Sh681bn market value excites investors

robert collymore

Safaricom CEO Robert Collymore

Safaricom on Thursday touched a historic trading high of Sh17 on the Nairobi Securities Exchange (NSE), raising its market capitalization by a hefty Sh41 billion compared to Monday this week. The new high price pushed the capitalization of the giant telecommunication firm to Sh681 billion compared to Sh640 billion on Monday, when it hit a price of Sh16.00 per share.

In terms of the average price for Thursday last week, the counter hit an all-time high of Sh16.45— and a capitalization of Sh659 billion. Compared to Monday’s average price of Sh15.90 and capitalization of Sh637 billion. It means that over the past four days the company’s market value has grown by an average of Sh22 billion. The latest high by Safaricom will be welcome news to shareholders including Vodafone Group and the government, who hold 40 and 35 per cent respectively in the company respectively. Retail investors hold the remaining 25 per cent in the company.

 StanChart crosses Sh10bn after-tax profit mark

StanChart (Standard Chartered Bank) Kenya hit the Sh10 billion after-tax profit mark for the first time riding on property sales to hold on to its ranking as the third most profitable lender in the country. The bank reported a net profit of Sh10.4 billion for the year ended December compared to Sh9.2 billion in 2013.

The lender relied on cost-cutting to compensate for a weaker performance in its core business, which saw its loan book and deposit base shrink. Loans declined by Sh7 billion to Sh122 billion while customer savings declined by Sh700 million to Sh154 billion.

“2014 was a challenging year due to increased non-performing loans. 2014 was also the year we reorganised our business repositioning it for the future,” Chief Executive Office Lamin Manjang said.

Its loans default book jumped to Sh10.7 billion from Sh3.8 billion, which it attributed to “a small number of problem accounts.”

The bank’s holding of loan securities shot up to Sh4.4 billion indicating that it is turning to collateral to protect itself from the bad loans. This saw its loan provisions grow marginally despite the jump in bad loans as provisions are net of security held by the bank. The bank, however, booked Sh2.2 billion in other income, which was attributable to a one-off gain from sale of a property. Its operating profit grew by a margin equal to Sh25.9 billion from Sh23.7 billion.

Britam posts 23pc jump in 2014 after-tax profit

Financial services group British-American Investments Company Limited (Britam) has announced an after tax profit of Sh2.8 billion for the year ended December 31 2014, up 23 per cent from Sh2.3 billion the previous year. Pre-tax profit growth was up 19.5 per cent to Sh3.7 billion, with gross earned premium and fund management fee income growing 55.8 per cent.

“The key drivers for Britam’s growth were new business opportunities in regional growth and expansion, strategic partnerships, new product offerings, real estate investment and opportunities in county governments,” Group Managing Director Dr Benson Wairegi explained.

Britam posted a comprehensive income of Sh6.4 billion, up from Sh3.7 billion in 2013, representing a 74.3 per cent increase. Revenue for the insurance business was up 59 per cent to Sh14 billion. “Regional subsidiaries contribution to revenue grew by 436 per cent to Sh1.6 billion from Sh294 million,” the group said in a statement.

Speaking during an investors’ briefing in Nairobi last week, Britam’s MD said the group had managed to sustain the high performance achieved over the last few years. “We have our eyes on Africa,” Dr Wairegi said. “Our focus for investment is in Information Technology, mergers and acquisitions, as well as regional expansion. Our goal is to support the continent’s economic take off through provision of a wide range of financial products and services.”

Britam is listed on the Nairobi Securities Exchange and has operations in Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi. The firm recently successfully concluded its acquisition of Real Insurance Company, effectively increasing its regional footprint to seven African countries. Their year was also marked by a successful Sh6 billion corporate bond. Following the results, the firm has recommended a dividend payout of 30 cents per share up from the 25 cents paid in 2013.

Broke Kenya Airways sinks deeper into debt to pay staff

Cash-strapped national flag carrier Kenya Airways has turned to debt to pay its workforce as it flies under the weight of liquidity problems that have seen its debt burden hit Sh70 billion. Chief Executive Officer Mbuvi Ngunze said the airline was experiencing tough financial times that had left it with no option but to rely on debt to sustain its nearly 4,000-strong workforce.

“So how am I paying my staff? I am paying them through debt,” Mr Ngunze said when he appeared on a local TV station’s business show on Wednesday night to address issues swirling around the airline. The national carrier has been going through turbulent times since booking a Sh10.45 billion after-tax loss for the six months to September last year.

It blamed the performance on dampened passenger numbers due to the suspension of flights to Ebola-hit Sierra Leone and Liberia and insecurity at the Kenyan Coast. The national carrier’s total current liabilities stood at Sh70 billion by September last year, Sh40.7 billion being short-term loans, suppliers are owed Sh16 billion, while pre-payments or cash due in advance of carriage amounts to Sh11.4 billion.