Monthly Highlights: April 2016

•  In West Africa Nigeria & Ghana declined whilst the BRVM continued along a strong trajectory
•  East African equities exhibited mixed performance as strength in Tanzania and Kenya was offset by weakness in Mauritius
•  In North African, Morocco & Egypt posted strong returns vs. negative returns in Tunisia
•  Southern African equities exhibited mixed performance as strength in Zimbabwe and Zambia was offset by weakness in Malawi
 


In West Africa Nigeria & Ghana declined whilst the BRVM continued along a strong trajectory

In West Africa Nigeria & Ghana declined whilst the BRVM continued along a strong trajectory, as 1Q16 reporting season moved into full swing with a plethora of results releases. In the financial sector, GT Bank reported weak 1Q16 numbers (GE: -4.6% y/y; PAT -3.6% y/y) as non-interest income fell -18% largely as a result of lower trading revenue (-79%) as foreign exchange income collapsed. Similarly, Zenith posted weak 1Q16 results (GE: -12.3.0% y/y; PAT -3.9% y/y) driven by a -9% decline in net fees & commissions, a NGN 1.89bn loss in trading income and an -83.5% decline in other operating income. UBA also reported a muted set of numbers (GE: -4.6% y/y; PAT flat) as non-interest income declined by -25% y/y, driven by a -71% and -42% decline in net trading and other operating income respectively. By contrast, Access posted impressive 1Q16 results (GE: +14.5% y/y; PAT: +42.1% y/y) as a -27% decline in admin expenses drove the bank’s cost-to-income ratio to 58% (from 62% in 1Q15). Looking at the consumer sector, Nigerian Breweries reported satisfactory 1Q16 results (T/O: +10.9% y/y; PAT +3.5% y/y) as the strong top-line performance was offset by a +55% y/y increase in net interest expense and a +10% y/y rise in operating expenses. Guinness Nigeria reported poor 3Q16 results (T/O: -32.9% y/y; PAT n/a) as a -17% y/y decline in opex failed to offset the combination of weak revenue growth and the -259bps y/y contraction in gross margin. Unilever reported impressive 1Q16 numbers (T/O: +12.5% y/y; PAT +76.4% y/y) driven by a +200bp y/y gross margin expansion to 36% and a -36% y/y fall in net finance charges as a result of a -30% reduction in short- term loans & borrowings in 1Q16. UACN reported weak 1Q16 results (T/O: -1.2% y/y; PAT -21.3% y/y) driven by poor performance from UPDC, the real estate business, which posted a loss before tax of -NGN 125m and CAP Plc, the core paints business where PAT decline of -13% y/y. In the oil & gas sector, Seplat released results which were in-line with guidance 1Q16 (T/O: -35.1% y/y; PAT n/a) owing to the force majeure at the main Forcados export terminal, this has impacted production since 21 Feb 2016. Crude production declined 47% q/q to 17.4kb/d (40% below the 2015 average), while gas production fell 12% q/q although it remained 17% above the avge production rate in 2015. Looking at the Francophone region, SocGen CI delivered weaker-than-expected results (GE: +9.5% y/y, PAT: -16.6% y/y) as loan losses increased vs. a recovery in 1Q15.

East African equities exhibited mixed performance as strength in Tanzania and Kenya was offset by weakness in Mauritius and Uganda

East African equities exhibited mixed performance as strength in Tanzania and Kenya was offset by weakness in Mauritius and Uganda. In Kenya, we digested disappointing FY15 results from ARM Cement (T/O: +7% y/y, PAT: n/a) as a result of an unrealized fx loss from the company’s USD denominated borrowings. Management also disclosed that the capital raise had been successfully concluded and was subject to regulatory and shareholder approval. Under the funding terms, ARM Cement will receive USD 140m from CDC Group for an estimated 40.4% equity stake . Proceeds will retire the company’s debt & strengthen its balance sheet. WPP Scangroup also reported weak FY15 results (T/O: -2.0% y/y, PAT: -23.5% y/y) on account of a higher tax charge (45.3% in FY15 vs. 31.4% in FY14) due to deferred tax adjustments and a +4.3%y/y rise in opex admin expenses. In Mauritius, tourists numbers rose +12.5% in 1Q16 from a year ago, thanks to increased arrivals from Europe and Asia.

In North African, Morocco & Egypt posted strong returns vs. negative returns in Tunisia

In North African, Morocco & Egypt posted strong returns vs. negative returns in Tunisia. In Egypt, we digested strong 1Q16 results from Juhayna (T/O: +27.5% y/y; PAT: +23.4% y/y) driven by a +62% growth in juice sales following the successful rebranding (larger pack sizes & new formulas). Emaar Misr released a mixed set of 1Q16 results(T/O: -20.5% y/y; PAT: +47.4% y/y) as locally contracted sales were weak. PAT was driven by higher than expected Interest-income +47% y/y.

Southern African equities exhibited mixed performance as strength in Zimbabwe and Zambia was offset by weakness in Malawi

Southern African equities exhibited mixed performance as strength in Zimbabwe and Zambia was offset by weakness in Malawi. In Zambia, Zambeef issued a trading update stating that turnover, operating profit, and adjusted profit before tax should be ahead of market forecasts after a strong operational performance in 1H16. In Zimbabwe, CBZ issued a disappointing 1Q16 trading update as total income and PAT fell -10.5% and -19.7%, respectively, driven by lower underwriting income (-25%). Delta provided a trading update for FY16, mirroring the current economic environment as volumes declined across all beverage categories.

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