Category Archives: EABL

Urban Inflation Index: December 2008

Four months ago last review (should be a quarterly exercise going forward) . 2008 has been a year with high prices and cost of living factors in the news. From the post-election violence in January to the (then) world oil prices, the pinch has been felt in Kenya.

The Government has come under pressure, but without addressing of its own excesses (procurement, new offices & limousines, parliemantarians, councilors and judges who refuse to pay income tax), has likewise tried to run the screw on the corporate sector – resulting in efforts to reduce the price of petrol and now maize flour (staple food)

Gotten more expensive

Staple food: Maize flour which is used to make Ugali, that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 97 which is 1/3 more than the Kshs. 73 four months ago. Farming woes continue, the crop this year is bad and Unga who said that they ran out of flour, among other revelations at their AGM, also stated that the maize harvest in 2009 will be worse and high prices will continue. There have been allegations of dodgy imports and the Government is today trying to arm-twist the price of Unga down to Kshs. 55 (EDIT – the Government announced today that maize will cost Kshs. 72 in urban areas and Kshs. 52 in rural areas)
Other food item: Sugar (2 kg. Mumias pack) is at Kshs. 160, up from Kshs. 145 three months ago. For Mumias customers and shareholders, the price is even lower for other unbranded sugar(s) on shelves.

Foreign Exchange: 1 US$ equals Kshs. 79.08, (18% weaker) than the Kshs. 67.4 four months go. This is partly the strengthening of the dollar, partly outflows from Kenya (at the NSE) – and comes after the shilling (while strong) had cushioned some impact of high oil prices.

Gotten cheaper

Fuel: Litre of petrol fuel (at local petrol station) is now Kshs. 92.7 (~$5.40 gallon) which is about 10% cheaper than the Kshs. 101.50 seen last time. While that is still higher than it was at the beginning of the year, and oil prices are down over 60% from the record highs of mid-2008, it is remarkable that for once fuel prices have reduced. In the past they have merely stagnated and oil companies, not passed on savings to consumers, but the threat of the government to regulate the prices, and a sustained media campaign (web/radio) has resulted in a slight reduction in petrol prices. (EDIT – A leading oil marketer – Shell announced today that prices will drop by Kshs. 15)

Entertainment: Bottle of Tusker beer (at local pub) is Kshs. 120 down from Kshs. 130 (cheaper by 8% from four months ago). Don’t know if this is one pub decision or the competition from new Summit beet launched by Keroche in October 2008 – the first true local competitor since (South African) Castle folded shop about six years ago. How will EABL fight back, and do they have to? Keroche got off to a good start but there has been little post launch marketing.

Communications: Continues to get cheaper as two mobile phone companies have become operational in the last quarter of the year – Orange (France Telkom) and Yu (Essar/Econet). The tone was set by Zain’s successful Vuka tariff, priced at Kshs. 8 per minute to call any network. Market leader Safaricom responded with Jibambie (up to a 63% discount) which enabled their subscribers to make calls at prices ranging from Kshs. 8 down to Kshs. 3 per minute if they bought a bigger denomination airtime voucher. The battle for subscribers is shifting now from voice calls which have reached unprecedented lows to data and money transfer where Safaricom is effectively Kenya’s largest ISP and money wallet.

No change: Electricity: My November KPLC bill is still Kshs. 1,900, same as it was in August, with a fuel surcharge reduction yet to be effected. High electricity prices have been a major cause for concern among Kenyan companies leading to President Kibaki to call for a reduction in the taxes levied on petrol prices and electricity.

But: Related: Is the quality of official statistics inflation data in question?
EDIT – Challenged by inflation, but with a view to improving liquidity, the Central Bank of Kenya today lowered the CBR rate (implied base rate) from 9 to 8.5% and also lowered the bank minimum cash ratio from 6 % to 5%

EABL 2008 AGM

The 86th annual general meeting (AGM) of East African Breweries was held on 30/10/08 at Safari Park Hotel. The actual meeting business (passing of accounts, election of directors, and approval of auditors) all took about 10 minutes. There was only one question on the accounts and the rest of the meeting was left to a myriad of shareholder questions.

Why Financial Markets Crashed: The meeting began with a talk from the former chairman of the Nairobi Stock exchange Kibuga Kariithi (Director Afrika Investment Bank). He traced a path of American economic exuberance, greedy investment bankers, sub-prime-mortgages, careless insurers which all led to a liquidity crunch and loss of confidence in the markets – eventually reached Kenya

He exhorted EABL shareholders that their company was strong, with growing sales, profits, products and almost 7 billion shillings in the bank. He said the market would remain so for a few more months, maybe with a few more bank crashes, but the fundamentals of EABL and other companies were strong and this was a time for shareholders not to panic or sell, but to consider buying more shares.

Mini-controversies:

  • Crap Calendar: One of the goodies handed out was a (single-sheet) wall calendar. Which was not well received by several shareholders. It was called, cheap, not in keeping with the image of the company, not as good as the one which was given to distributors, and eventually, even the chairman had to admit that it was a poor quality item.
  • End for Chami?: Mr. Chami is a (small) shareholder in almost every listed company and a feature at almost all NSE-listed company AGM’s held. He unusually is the first to ask any questions and almost all directors know him. He usually asks but occasionally hits the mark. Today he got off to a bad start giving a 5 minutes speech that led to a round of boos by shareholders. When he finally got to asking questions, he was challenged by the Chairman on the accuracy and validity of his questions – and told not to waste the time of the other 700 shareholders present if he had no questions. Hope it does not spread to other meetings

Mr. Chami

Trivia some questions asked by shareholders

  • Start with prayers
  • More environmental plans; will consider energy savings from steam and have participated in forestry activities in Ndakaini and may look at (the) Mau when government sorts out the matter
  • Unclaimed dividend: a bill has been prepared on unclaimed assets that will soon be in parliament after which companies will get guidelines on compliance
  • Is Alvaro alcoholic? No it is not
  • Can dividend be cashed at banks?
  • Give more bonus shares please?
  • Give more dividend to long term shareholders – asked by an old lady who has been a shareholder for 35 years)
  • Can we have cheaper AGM’s? e.g have the meetings at a venue like Kasarani Stadium and serve African foods, not expensive hotel foods that give high blood pressure!

Goodies: T-shirt, Calendar (see above), Safari Park Lunch box [with meat (big chicken slice, cake, beef & cheese sandwich) fruit (banana, apple), drinks (yoghurt, alvaro, water, orange juice)]

Lunch on the controversial calendar

Kutwa Tuesday: Reverse Safaricom IPO and other such tales

Safaricom needs a reverse stock split to get rid of their unhappy shareholders.
– Anyone who has less than 10,000 shares by December should be paid off by the Government or Vodafone at the IPO price of 5 shillings or market price, whichever is lower at the end of the year. Investors will not sell their shares at a loss and the least they can do is recoup their money from this mess (excluding their loans)

Kenol tweak: 36.67 million shares change hands worth 3.3 billion shillings on Friday. Meanwhile kenol/kobil stations have the most expensive fuel in Nairobi. Diesel has hit 101 shilling per litre ($1.55), while petrol is at 108, that’s about 6 shillings more than my station of choice.

Cola tweak: After enduring a difficult first quarter, coca cola is having a bit of a tumble in the second quarter due to to EABL’s Alvaro – at least in urban areas where it has become the non-alcoholic drink of choice for many previous soda (and juice) sippers. Coke has unleashed another multi-million shilling giveaway promotion to win back customers


alvaro cases at Nakumatt

Celtel tweak – More celtel confusion; The ink is not dry on posters for their newest promotion and already the terms have changed (for the better) [for customers to get free calls will now cost 65/= ($1) a day down from 99/=].

August will be a significant month for the mobile sector as Celtel switches to the Zain brand, Safaricom release their first quarterly results after the IPO, and Econet should finaly/hopefuly roll out operations.

Media tweaks: All journalists and correspondents practicing in Kenya must be registered with the Media Council of Kenya – and to do so they must each pay Kshs. 2,000, while foreign journalists will have to pay 10,000 ($154) per year [those on short term assignment of up to 3 months pay 5,000]. Amounts due by 30/9. Television radio and newspaper organizations also have to pay a quarterly fee depending on the number of media outlets

– Standard tweaks Two weeks after the launch of the new Standard, their strap line of the standard has changed;


new standard at launch


standard yesterday

Sunday Nation tweaks now has the best of best of Whispers – favorite columns of the late humorist Wahome Mutahi and some articles of the New York Times

From the blogs
– Pointer for Access Kenya shareholders to read
– There are only 60 lions (adult) in the Mara – but that’s an improvement by 50% from year 2001
– How bad are things for those who took IPO loans for Safaricom? Ssembonge shows that small investors are hurting more than bigger borrowers.
– Cautionary tales on life insurance from Tujuane
– Peer pressure: tales of GDP growth of rates of 8% in Ghana and
21% in Angola
– Link to a puff piece in memory of the former finance minister
-US Airways to remove all in-seat movies from their planes, while Emirates is targeting to remove all paper (in-flight magazines and publications) to save a ton of weight on the new A380 (to compensate for a ton of water for showers in first class (from airliners.net)

Opportunities

African Banker Awards. deadline for nominations if 31 July in the following categories: African Banker of the Year, African Bank of the Year, African Investment Bank, Best Development Bank in Africa, African Microfinance Bank, Best Issuing House, Most Innovative Bank, Deal of the Year, Socially Responsible Bank of the Year, Best Global Bank in Africa, Award for Gender Sensitivity

Jobs
from the daily papers last week
– Aircraft Leasing Services: captains, first officers for Embarer 135. als@als.co.ke
– HR director at Housing Finance. Apply through deloitte esd@deloitte.co.ke by 1/8
– MD of KCB Rwanda. Apply to recruitement@kcb.co.ke by 8/8
– KPMG Uganda: Internal Audit Services manager, Senior Internal Auditor, Internal auditor, forensic auditors. Apply to talentrecruit@kpmg.co.ke by 1/8
– Corporate affairs manager of Nation media group.
– Independent sales agents at Standard Chartered Bank. Apply to Susan.Ombati@ke.standardchartered.com by 31/7

Others vacancies at Kencall, Kenya Airways, and Family Bank [Credit officer, Procurement Officer, Works Officer, Accountant, Accounts Assistant, Administrative Assistant, Assistant Manager, Audit Manager, Branch Accountant]

Beach plots too good to be true? Lots of land available in Mombasa for real estate investment from Datkit agents including 3 acres creek in new Nyali with 120m sea frontage, 1.3 acres over looking Nyali golf club, 5 acre lots in kikambala, 14 acre beach plot next to Neptune beach, 25 acre beach plot next to kaskazi hotel with 168m beach front, 1/3 acre residential plots in shanzu (2nd row from beach)

East African Breweries AGM

The 2006 EABL AGM was held at Safari Park Hotel on November 2 at 11:00 a.m. Registration was a breeze – with almost as many proxies as shareholders and it was a very quick AGM thereafter with the agenda– approval of accounts, dividend, directors’ election & remuneration and auditors – all done within a half-hour. The meeting was wiith a full board, led by Chairman Jeremiah Kiereini and MD Gerald Mahinda, and all directors present except for Evans Mwaniki (KQ chairman).

New finance director C. Caldwell was added to the board while Wanjiku Mugane was also re-elected. However, two directors, the Chairman and Richard Kemoli, who are both over 70 years, have to be endorsed each year to continue as directors.

I had thought of putting a shareholders vote over the matter in the interests of opening up the board to younger people and women but I felt that I would have been lynched. Needless to say, no shareholders objected on account of their age.

AOB
The Chairman had urged shareholders, many of whom who – in addition to proposing or second agenda items – also congratulated the board, made speeches or tried to ask questions, to refrain till after the agenda was done. One of the first was on the race with Safaricom and the Chairman assured shareholders that the company would strive to wrest back the top earnings crown from Safaricom. Early on it appeared that there would be very few questions, but here are some of them:

  • Increase dividend and bonus shares: is a recurring them at all AGM’s and EABL also had its share. There were many variations of the same question, some shareholders talking of previous board who had been more generous. Chairman explained that they can’t increase dividend for a few small shareholders as everyone get an increase. It was also troubling to see a graphic in the annual reports that showed shareholders receiving 20% of payments from the company earnings while 70% goes out as taxes to the government.
  • Minority interest: There’s a huge payment of profits for minority interest that doesn’t compute in the list of shareholders. MD explained that South African Breweries owned 20% of Kenya Breweries and Diageo owns 54% of UDV. KBL and UDV pay dividends to these two companies and whatever is left now goes to EABL shareholders.
  • CSR: are you meeting your commitment to devote 1% of profit to corporate social responsibility? MD said CSR last year was allocated about 45m and this year will get about 80m. However, like at the Standard Chartered meeting, CSR is not a popular topic at AGM’s. One shareholder, while commending EABL and Nation media group for helping with famine relief and other disasters, they should put shareholders first – and he went on to lament how the company has never acceded to repeated shareholder wishes for more dividends or bonus shares.
  • Are all shares fully issued re: ESOP? MD explained that shares for the ESOP are acquired from the market
  • Why have sports sponsorships declined? Chairman replied is that they still sponsor a lot of sports such as soccer and horse racing – but the funds are disbursed from HQ for better control and monitoring.
  • Missing or discontinued beer brands; MD replied that they discontinue slow-moving brands like pilsner ice and senator special to put more effort into others like white cap light and citizen. He also said they would announce such decisions to the public in future.

Hot Button: Barclays Bank It started with a misunderstood question from one shareholder who wanted dividends to paid as cash in rural areas for those who don’t have bank accounts. Chairman answered that the company had a program with Barclays bank where dividend cheques were banked without commission. One manager was there from Barclays who unsuccessfully tried to explain the issue. More questions were shouted out leading the Chairman to ask that they talk to the Barclays man after the meeting had ended. I went through this problem a few years ago – many shareholders want to cash their dividend cheques immediately – and while this is free for Barclays account holders, there’s a fee of a few hundred shillings if you don’t have a Barclays account. (also banks make some easy money when new investors choose to cash their IPO refund checks immediately – for a fee of course)

Goodies cap (pilsner), t-shirt (sengenge), lunch box (chicken, sandwich, juice, yoghurt, water, cake, apple, orange, egg)

Brew Fast

Taken a (just ended) month long fast from beer which was very enlightening in terms of impact it has on life and business networking.

Some Positives

  • Potential to save money over time – anywhere from 1,000 to 2,000 shillings a week in theory. But in practice, I still have to spend the money on others I socialise with (see more later)
  • Better health over time
  • No morning hangovers

Some Negatives

  • Too much time to fill, and I get bored and impatient. Before, if waiting for someone in town, before I’d just got to bar have a drink and chat/do some reading, now I’m in the car, on the phone asking, “where are you?”
  • Actually, I am more dehydrated. Beer has a lot of water, and I find myself having to drink more tap water at night now.
  • Networking: so much of our lives are networked in bars with friends and associates. People tell you to network at conferences and workshops, but in bars much more networking goes on, across all sectors, from bankers to teacher, businessmen to nurses, as our guards are down, and people are more relaxed also, people tend to be wary around others who are not drinking with them, or in the same mind-state. . It is also noted that people who don’t drink have other more serious problems, or have to find other outlets to release their excess energy e.g. excessive womanising, worshipping or scheming?. As a result, sitting in a bar, I get so much information for this blog – sample these nairumours/observations I picked up at the end of the break.
    (a) Observed an out of control minister (and soon to be former MP) who has lost touch with reality. He has made so much unimaginable money, he lives a reckless lifestyle and believes he can buy anyone/anything – it’s just a matter of price.
    (b) A former minister has conned a foreign government out of a multi-million dollar contract and is now persona non grata there
    (c)The true story behind CDF woes of an MP.
  • No suitable alternative drinks. Not Coffee (can only do one cup), soda (bad for teeth), juice (quality & availability never consistently available), appletiser (not at 160 a bottle)
    http://www.imdb.com/title/tt0110912/

moment of clarity

  • Lack that spark i.e moment of clarity, that inspires writing, when you are able to combine information or observation with the law and practice.