Half year results show strong recovery in corporate Kenya

A number of Kenya’s leading companies have reported stronger-than-expected earnings, underlining the strength of corporate recovery and signalling that the economy is on course to realising the target of 4.5 per cent growth.

Heavyweight names such as KCB, Nation Media Group, Athi River Mining and Uchumi have all reported double digit growth in half-year profits and backed it up with robust earnings expectations in the remaining part of the year, hinged on rising optimism in all sectors of the economy.

Analysts are expecting corporate earnings to rise about 25-35 per cent this year before rising to an average of 40 per cent next year.

The banking sector that is known to front-run the economy has led the recovery with the big players turning in billions of shillings in profits that only looked remote at the beginning of the year.

Equity, KCB , DTB and National Bank have all racked up double digit growth in their loan books with the easing of lending rates since May, pointing to an accelerated credit expansion in the economy.

Nation Media Group reported double digit growth in earnings to post Sh558 million for the first half of the year compared to Sh364 million in the same period last year.

NMG’s performance was underlined by corporate Kenya’s increased spending on brand visibility to recover lost ground after two years of muted economic growth.

Kenyan firms spent Sh20 billion on advertising in the six months to June —nearly as much as the annual spend for 2008 — signaling a rising optimism in the economy and the jostling for brand visibility in a market where consumers are regaining lost purchasing power.

Purchasing power

Uchumi, the country’s second largest and the only listed retail chain, nearly doubled its profits after chalking up Sh865 million in the first half of the year from Sh420 million last year, signalling a strong rebound of consumer purchasing power.

The retail chain recorded an 11 per cent rise in customer numbers to 18 million from 16 million last year – attesting to an increase in consumer spending with the ongoing recovery.

“This is the confidence that we have been looking forward to,” said Mr Jonathan Ciano, the chief executive officer of Uchumi Supermarkets, that emerged from statutory management in March.

Kenya’s third largest cement maker, Athi River Mining, returned a 16 per cent increase in pre-tax profit to Sh519 million for the first half of 2010 from the Sh449 million it recorded during a similar period last year.

Turnover rose from Sh2.4 billion to Sh2.8 billion, a 19 per cent jump, of which the cement business contributed 53 per cent.

This outcome has been linked to accelerated property development and infrastructure projects throughout East Africa that have continued to provide an impetus for earnings despite costly price wars in the marketplace.