Monthly Highlights: April 2018

•  West African equities declined as weakness in the Francophone region and Nigeria offset strength in Ghana. In Nigeria, the 1Q18 reporting season launched into full swing as we digested a plethora of results
•  East African equities were broadly negative with only Tanzania reporting positive returns
•  North African equities exhibited mixed performance as strength in Egypt was offset by weakness in Tunisia and Morocco
•  In Southern Africa, equity markets recorded mixed returns as Zimbabwe and Malawi led the gainers while Botswana and Namibia posted negative returns
 

West African equities declined as weakness in the Francophone region and Nigeria offset strength in Ghana. In Nigeria, the 1Q18 reporting season launched into full swing as we digested a plethora of results

West African equities declined as weakness in the Francophone region and Nigeria offset strength in Ghana. In Nigeria, the 1Q18 reporting season launched into full swing as we digested a plethora of results. In the financial sector, Zenith Bank posted impressive 1Q18 results (GE: +14.5% y/y; PAT +25.5% y/y) largely driven by the +88.9% y/y growth in income from treasury bills, reflective of the growth of Zenith’s treasury bills book (+52.3% y/y to NGN986.57bn in 1Q18). Stanbic IBTC also posted solid 1Q18 results (GE: +22.1% y/y; PAT: +43.5% y/y) driven by strong recoveries amounting to NGN5.1bn vs provisions of NGN3.3bn in the previous year. ETI reported positive 1Q18 results (GE: +11.6% y/y; PAT +49.4% y/y) driven by lower impairment charges which are indicative of successful management efforts on collections and recoveries. The performance was also boosted by an improvement in operational efficiency as operating expenses only grew by 4.2% y/y. Guaranty Trust Bank released satisfactory 1Q18 results (GE: +4.6% y/y; PAT 7.7% y/y) as non-interest income growth of +40.8% y/y was offset by a -9.7% y/y decline in net interest income. Access Bank released disappointing 1Q18 results (GE: +18.6% y/y; PAT -1.3% y/y) driven by a +11.6% y/y growth in operating expenses and higher impairment charges (+55.2% y/y). In the consumer sector, Unilever reported impressive 1Q18 results (T/O: +16.4% y/y; PAT +80.9% y/y) driven by strong growth in the home care & personal care division (+16.0% y/y) and food products (+16.8% y/y). EBITDA margin improved to 16.5% in 1Q18 vs 14.9% in the prior year, reflective of Unilever’s improved operational efficiency in the quarter, which saw operating expenses increase by only +2% y/y to NGN3.61bn. Similarly, Okomu delivered a strong set of 1Q18 numbers (T/O: +24.5% y/y; PAT +13.2% y/y) as CPO volumes grew by +36.5% y/y to 15,897 tonnes in 1Q18 while Rubber sales were +27.2% higher. Nigerian Breweries reported poor 1Q18 results (T/O: -9.1% y/y; PAT –10.9% y/y) as gross margins expansion of 126bps y/y was offset by the sales decline, and a +37% y/y rise in net finance charges after the company issued commercial paper worth NGN18bn in 1Q18. Nestle reported relatively flat 1Q18 results (T/O: +10.3% y/y; PAT +3.0% y/y) as strong top line growth was offset by an impairment loss of NGN3.4bn (NGN1.9bn on land and buildings and NGN1.5bn on PPE). In the materials sector, Dangote Cement reported impressive 1Q18 results (T/O: +16.3% y/y; PAT +29.1% y/y) supported by strong revenue growth and a net finance income of NGN4.62bn (vs. net finance cost of NGN5.93bn in 1Q17), which masked the impact of higher effective tax rate in the quarter. On the contrary, Lafarge Africa reported disappointing 1Q18 numbers (T/O: -0.8% y/y; PAT n/a) driven by significant increases in admin expenses (+47.4% y/y) and finance charge (+135.9% y/y) in the review quarter. Shifting to oil and gas, Seplat reported strong 1Q18 results (T/O: +10.3% y/y; PAT +3.0% y/y) driven by a recovery in oil sales which grew by +534% y/y to USD141m. Working interest oil production grew by +434% y/y to 27,306bpd while average realised oil prices were +31% y/y higher at USD65.8/barrel. Production uptime was around 82% while average reconciliation losses were 7.3% for 1Q18. In the Francophone region, SGBCI delivered healthy FY17 results (GE: +19.1% y/y, PAT: +11.8% y/y) despite provisions increasing by +235% to XOF6.28bn vs. XOF1.89bn in FY16.

East African equities were broadly negative with only Tanzania reporting positive returns

East African equities were broadly negative with only Tanzania reporting positive returns. In Kenya, we digested mixed FY17 results from WPP Scan (T/O: -14.7% y/y, PAT: +3.8% y/y) as negative top-line performance was offset by -17% decline in operating expenses primarily driven by an 11.8% y-o-y drop in staff costs. Shifting to Tanzania, Swiss Port delivered a disappointing set of FY17 numbers (T/O: -10.3% y/y; PAT -20.0% y/y) as passenger handling revenue and cargo handling declined by -12% and -8% y/y respectively driven by a significant decrease in the number of flights handled.

North African equities exhibited mixed performance as strength in Egypt was offset by weakness in Tunisia and Morocco

North African equities exhibited mixed performance as strength in Egypt was offset by weakness in Tunisia and Morocco. In Egypt, we digested solid 3Q17 numbers from Eastern Co (T/O: +17.1% y/y; PAT: +176.6% y/y) as ex-factory prices for all brands saw another round of price increases in November 2017 (Box (+21%), Queen (+6%) and King (+17%). Juhayna reported strong 1Q18 results (T/O: +20.6% y/y; PAT: +30.7% y/y) as all core segments saw stronger revenues during the quarter mainly on better volumes, with dairy (c52% of 1Q18 revenue) and yoghurt (c20%) continuing their recovery momentum growing by +29% and +25% respectively while juice revenues were +16% higher. Similarly, Domty also performed strongly in 1Q18 as the company recovered from losses recorded in the prior year (T/O: +25.6% y/y; n/a) driven by improving gross margins (5.4pps y/y to 23.9%) as gross profit increased 64% y/y, aided by volume recovery, higher prices and a shift in the product mix away from fighter brands towards the higher-margin Domty Plus. Medinet Nasr Housing and Development (MNHD) announced that its Board of Directors has authorised its Chairman to initiate discussions with SODIC’s board and management team to explore strategic options through a merger or an acquisition of the two entities. MNHD believes that a strategic combination would allow it to maximize shareholder value and help generate synergies on various fronts, including enlarging the company’s client base and expediting its land bank monetisation.

In Southern Africa, equity markets recorded mixed returns as Zimbabwe and Malawi led the gainers while Botswana and Namibia posted negative returns

In Southern Africa, equity markets recorded mixed returns as Zimbabwe and Malawi led the gainers while Botswana and Namibia posted negative returns. In Zimbabwe, Delta issued a trading statement for FY18 and 4Q18 stating that revenues increased by +52.0% (+45.0% excluding Natbrew) for the quarter and up +18.0% for FY18 (+17.0% excluding Natbrew) driven by Lager volumes which grew by +51.0% and +27.0% y/y for 4Q18 and FY18, respectively while sparkling beverages volume increased by 49.0% for the quarter and 15.0% for the full year. Lafarge Zimbabwe reported disappointing FY17 results (T/O: -4.1% y/y; PAT n/a) driven by lower sales volumes following heavy rains in 1Q17 that affected cement stocking patterns. Although EBITDA improved to USD 149k from a loss of USD 2.2m in FY 16, operating profit declined by 80.7% to USD 862k due to a reduction in other income to USD713k from USD6.6m in prior period.