Kenya Power’s KES 3.2B Loss
The shilling's depreciation was reflected in the 89.3% surge in finance costs
👋 Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a summary of key capital markets and business news items from East Africa.
This week, we cover earnings releases from listed energy sector players - Kenya Power and KenGen.
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Kenya Power’s KES 3.2B Loss
Expensive Inputs: A 21% rise in turnover from electricity sales was offset by a 22.4% rise in power purchase costs which increased to KES 143.58B from KES 117.35B owing to a rise in units purchased from 11,815GWh to 12,425GWh to meet the growing electricity demand. The resultant operating profit grew by 12.0% to KES 19.2B from KES 17.1B
Unrealised FX Losses: The depreciation of the Kenya Shilling was reflected in the 89.3% surge in finance costs to KES 24.2B from KES 12.8B the prior year. In the period ended June 2023, the company noted that the domestic currency had depreciated by 19.0% from KES 118/USD in June 2022 to KES 140/USD in June 2023.
Profit to Loss: The electricity distributor reversed the prior year’s KES 3.3B profit to post KES 3.2B loss for the year ended June 2023. This is the first full-year loss since the KES 939.5M loss recorded in 2020.
“The impact of the currency fluctuation as reflected in the finance costs and cost of power purchase eroded our business performance in the year, resulting in a net loss of KShs.3.2 billion”
Kenya Power
KenGen’s Net Profit Up 48.3%
Topline Grows 14%: For the year ended June 2023, turnover increased by 14.0% to KES 53.9B from KES 47.5B prior year. Operating expenses rose 22.3% to KES 19.3B owing to rising insurance and impairment costs. The resultant operating profit closed at KES 9.6B, up 57.4% from KES 6.1B the prior year.
Increased Dividend: The Board of Directors has recommended a first and final dividend per share of KES 0.30 up 50% from KES 0.20 declared the prior year. Book closure is slated for 30th November 2023 and payment on 15th February 2024.
Net Profit Rises 48.3%: With revenue growing 14% and the resultant operating profit growing 57.4%, the energy producer’s bottom line closed June 2023 at KES 5.0B, up 48.3% from the prior year.
Other earnings releases during the week included Carbacid Investments and East Africa Portland Cement. In Tanzania, NMB was the first bank to release Q3 2023 results.
Markets Wrap
NSE: In Week 43 of 2023, Sasini was the top-performing stock, up 13.7% to close at KES 24. Fahari I-Reit was the worst-performing stock, down 16.2% to close at KES 6.30. The NSE 20 index fell by 1.9% to close at 1,462.0 points, the NSE 25 dropped by 2.4% to close at 2,401.3 points, and the NASI index fell by 4.0% to close at 89.4 points. Equity turnover went up to KES 2.3B from KES 219.04M the prior week while bond turnover closed the week at KES 11.63B compared to the prior week’s KES 9.3B.
Treasury Bills: The weighted average interest rate of accepted bids for the 91-day, 182-day, and 364-day were 15.1112%, 15.1289%, and 15.3867% respectively. The total amount on offer was KES 24B with the CBK accepting KES 15.65B of the KES 18.2B bids received, to bring the aggregate performance rate to 75.63%. The 91-day and 364-day instruments recorded 265.97% and 18.43% performance rates, respectively.
Treasury Bonds: The CBK has issued a prospectus for a 6.5-year amortised infrastructure bond issue no. IFB1/2023/6.5. The amount on offer is KES 50B, and the minimum competitive bid amount has been revised to KES 2M per CDS account per tenor. The bid closure date is 8th November 2023 at 10:00 AM, and the results of the auction will be announced on 10th November 2023. Find the prospectus here.
Eurobonds: In the week, yields fell across the 6 outstanding papers.
KENINT 2024 fell the most week-on-week, down by 184.6 bps to 13.995% - closing sub-14% for the first time in 39 days, while KENINT 2032 fell the least, depreciating by 49.1 basis points to 12.278%. The average week-on-week change stood at -87.15 bps.
KENINT 2028 rose the most on a year-to-date (YTD) basis, appreciating by 303.0 bps to 13.342% while KENINT 2024 rose the least at 139.2 bps.
Prices rose across the board week-on-week, with KENINT 2048 rising the most at 5.9% to 69.300. KENINT 2024 appreciated the least at 1.3% to 95.693. Year-to-date, KENINT 2024 was the only price that rose, appreciating by 3.4%. The largest price losses YTD were 13.2% for KENINT 2034 to 67.233. The average price change week-on-week and YTD was 0.03% and -0.07%, respectively.
Market Gleanings
📈| AIB-AXYS Immediate Settlement | AIB-XYS Africa is introducing immediate settlement of trades, which allows investors to access their funds immediately after a sale. This is a new option that is not available on the Nairobi Securities Exchange and it will streamline and expedite the overall process for investors. A nominal charge is applicable for this expedited service.
💸| Airtel Money Withdrawal Charges Up | Airtel Money has increased its withdrawal charges for higher amounts from Airtel Money Agents. For instance, customers withdrawing between KES 50K to KES 250K will now pay KES 300 to withdraw at Airtel Money agents. However, charges on withdrawals in amounts between Sh1 and Sh49 will remain free of charge for all clients. The cost of transferring money to other networks including Mpesa also remains unchanged while Airtel to Airtel mobile transfer fees remain free.
📜| Airtel Uganda IPO Enhancement | Airtel Uganda doubled the number of incentive shares it will allocate to IPO applicants to encourage participation and promote allocation to Ugandan investors. Retail investors who apply for more than 2,500 shares will now receive 10 incentive shares for every 100 sale shares allocated, while professional investors who apply for more than 40 million shares will receive 20 incentive shares for every 100 sale shares allocated. Airtel is selling 20% of its equity in a move aimed at raising USD 213M.
🔴| Nation Media Profit Warning | Nation Media Group PLC this week announced that its earnings for the financial year ending 31 December 2023 will be lower than the earnings for the previous year by at least 25%. The increase in global prices of newsprint coupled with a weakened Kenya Shilling against the US Dollar and higher distribution costs arising from fuel prices have resulted in significant incremental direct costs compared to the previous year.
📈| Loop Adjusts Base Lending Rate| Loop, NCBA’s digital banking product this week announced an increase in its Base lending rate to 16.7%, effective 17th November 2023. The increase was attributed to the current macroeconomic environment where short-term rates have continued to rise. The increase in Base lending rate will affect all new and existing loans, as well as overdrafts. Furthermore, Loop has introduced risk-based pricing for all new loans.
📜| Zambia’s Debt Restructuring | The government of Zambia has reached an agreement in principle with the steering committee of the Ad Hoc Creditor Committee on the key commercial terms of a proposed debt restructuring transaction relating to its 2022, 2024, and 2027 Eurobonds. Under the agreement, bondholders will be invited to exchange or vote in favour of consent to amend the terms of their bonds for new fixed-income instruments.
🚜| CMC to Exit Passenger Market | This week, CMC Motors, a dealer of agricultural machinery, announced its decision to exit the passenger vehicle market and shift its focus to agricultural tools. This decision is part of a larger initiative aimed at revolutionising the African agricultural sector through strategic partnerships with organisations such as KALRO, WFP, and FTMA.