Category Archives: Mumias Sugar

Proparco in East Africa

French financier Proparco had a mini cocktail while their CEO Luc Rigouzzo was in Nairobi last week. The CEO, who grew up in Africa (Ivory Coast) talked about the group investments and potential they see in Africa, being real, not just afro-optimism statement.

In the banking sector, Africa with its 1 billion combined population has a potential urban population of 300 million banking customers, hence Proparco’ intervention in the banking sector as well as infrastructure sectors

Proparco with € 1.5 billion assets has 37% of loans and 26% of equity investments to Africa, and their loan portfolio at 2008 comprised 146 million Euros in east & central Africa, and 154m Euros in West Africa
Proparco invests in social, environmental investments for the public good and that transom poverty.

The consumer may not see or feel this kind as Proparco’s intervention is at a higher level with loans of € 5 to 30 million per project (over durations of 5 to 20 years) and up to to 100m in infrastructure, and equity of € 2 to 20 million (over 4 to 10 years)

Tea estate

In Kenya they have invested in Mumias sugar, I&M bank, Zain, Bank of Africa, Serena Hotels, KTDA) , NIC Bank, Rabai Power, Kenafric. Ormat (Geothermal), while Uganda has bugajali hydro power, DFCU, and in Tanzania they have Tigo.

Banking on Other Income

It’s crunch time in Kenya’s economy and many companies are feeling the pinch. While operations may be hurting, listed (and unlisted) companies still strive to report (increasing) profits to shareholders and they will look to unconventional, or other income opportunities to deliver by year-end:

some examples; 

East African Portland Cement: Went from a profit warning issued at their ½ year to a full year profit increase thanks to a property revaluation exercise.

Mumias Sugar: Full year profits were attained due to a tax credit they gained from investing in electricity co-generation.

Scangroup: Profit in the ½ year was credited to income from their investment in Government bonds.

Access Kenya: Profit growth in the ½ year was attributed to the strengthening of the US$ against the Kenya shillings – and most of their revenue is dollar-denominated.

Counting on Other Income: Going forward, other companies can also employ similar measures to plug income gaps e.g.

  • Tax breaks from listing – Safaricom .
  • Green energy – carbon credits, co-generation – Kengen, Safaricom.
  • Fibre cable/IT investment writebacks.
  • Property and investment revaluations.
  • Forex: a weak shilling is usually good for Kenya Airways and tea companies.

Kutwa Monday

The Capital Markets Authority (CMA) seeks to extend the statutory management of Francis Thuo stockbrokers stockbrokers (by the Nairobi Stock Exchange) for another 6 months (this is due to expire on September 6)

Are we ready for Basel II
Diamond cash again?: 1 ½ years ago the bank raised 735 million shillings, and now they’re back for more cash as are NIC also with a rights issue (and bonus share). These fast growing mid-size banks want to comply with Basel II by 2010 which requires that they have adequate capital to cover not just credit risks, but also market and operational risks

Mumias glazing: Mumias dressed up some bad news glazed over reduced sales (-10%), profit (-9%), and cash with the promise of a dividend and a 2 bonus shares for each held – which apparently worked as the share closed 8% up on the previous week. . Still even the Business Daily was moved to decry insider trading in Mumias and EABL shares this past week

Opportunities

Road audits: from the Kenya Roads Board for engineering firms to team with financial audit firms to audit road construction work on behalf of the government by performing technical, performance and financial audits. D/l is 24/9

Strathmore finance seminar: on Friday September 7 at the Hilton on Kenya as an emerging capital market

Jobs

Celtel: revenue assurance & fraud manager, treasury & tax manager. D/l is 7/9

Director of information & public communications of the government of Kenya. details here and d/l is 7/9

Marketing managers (3) [branding, core network, wireless] at Huawei: apply to Kenya@Huawei.com by 14/9

Editorial staff at the Nation media group: they are looking for website editors, owners of popular blogs in east Africa, sub editor with niche publications – in their 20”s and 30’s. apply for positions by picking any story in the nation or east African, rewrite it and send it back to editstaff@nation.co.ke by 10/9

Popote wireless: head of sales, IT account manager, sales engineers. Apply to hr@popotewireless.co.ke 14/9

Safaricom: principal credit controller, retail center agent, sales analyst, senior marketing & planning analyst. D/l is 7/9

Governance advisor – Kenya for the World Bank – d/l is 13/9

Sugar crisis countdown

Mumias is Kenya’s main sugar company with diversified operations and whose future plans include ethanol production and electricity generation.

However, while they believe they are ready to compete in the future, they worry that other companies and the sector will be negatively affected and could collapse after March 2008 when an import restriction expires – thus allowing unlimited amounts of sugar to be imported duty-free from other COMESA countries.

As such they are commissioning a study (pre-proposals to be sent to the company by 5/4) to see what impact this will have on the sector and calling for urgent action.

Issues they are raising:

  • Other countries – Brazil, Pakistan, Australia, Mauritius, SA, Zambia etc. protect their sugar sectors through tariff and other non-tariff means like subsidies – so why not Kenya?
  • Is the sugar imported from COMESA country Egypt – truly Egyptian in origin? Mumias suspects much of it is dumped from Brazil and under-invoiced by the time it reaches Mombasa. Malawi and Swazi sugar are also suspect.
  • The sugar sector has not been supported by in terms of tax breaks, subsidies, infrastructure and incentives like other Kenyan agricultural sectors such as coffee, dairy, tea, and livestock. Also, when the sector was liberalized/privatized it was not recapitalized as expected leaving companies with debt burdens.
  • Does Kenya benefit from COMESA more than it loses by supporting the local sugar industry? What is the value of Kenya exports to / imports from other COMESA countries? Are sugar, ceramic, textiles and rice from Egypt truly Egyptian products. What is the value of exports to COMESA by Kenyan owned companies?
  • Ascertain Kenya sugar contribution to the economy in terms of taxes, infrastructure, and employment.

For Mumias: It’s troubling that you can buy rice from Pakistan at Uchumi or Nakumatt is priced cheaper than the local Mwea rice (which I buy). So what will happen with sugar? The March 2008 date has always been a crucial day for any Mumias shareholder to consider and the company will certainly benefit from a continued exemption. Mumias makes a great deal of mileage as the only widely circulated Kenya branded sugar product – with the connotation of buy Kenyan, your taxes at work etc.

NSE: Share split and divesture

EA Cables split
The Board of East African Cables which has been riding high atop the stock exchange has recommended a 10 for 1 share split – 20,250,000 of par value 5/= will be split in 202,500,000 of par value 0.5 each.

Shareholders will be asked to approve this (really a formality since the Trancentury Group controls 75% of shares) at an EGM on September 1, books close on September 4, and the new shares will be listed on September 5, 2006.

This is the third company after Kenya Oil and East African Breweries to split their shares, and the others appreciated significantly thereafter. EA Cable shares have already climbed by 10% this week from 364 to 399 per share.

Intriguing, but maybe out of reach for me now since, a typical investment of 10,000 shillings, will yield only 25 shares at the current price of 400 shillings. After the split, this becomes 250 shares of about 40 shillings, which still looks promising.

Mumias Divestiture
As promised in the 2006 budget speech the Government has now began the process of divesting from Mumias Sugar Company. GoK will sell 18.04% of its’ 38.04% shareholding through an offer for sale on the NSE and parcelling the shares through brokers should be cheaper than going the mwananchi route again. As such they have advertised for transaction adviser/lead broker, legal advisor, reporting accountant, receiving bank, and PR firm to assist with the process with applications expected at the Treasury by 24 August.