An Equity Bank stand at an international trade fair in Rwanda last year. The bank’s subsidiaries contributed seven per cent of its pre-tax profit in 2012. File
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Firms listed at the NSE reported increased turnover and profit, aided in part by strong business performance in the maturing East Africa bloc besides South Sudan.
Firms operating in the region last year received a significant boost in profitability from their subsidiaries in Uganda, Tanzania, Burundi, Rwanda and even South Sudan, underscoring the impact the regional markets have on corporate Kenya.
Firms listed at the Nairobi Securities Exchange (NSE) reported increased turnover and profit, aided in part by strong business performance in the maturing East Africa bloc besides South Sudan.
“(DTB) management cited improved performance by its subsidiaries in Tanzania, Uganda and Burundi which contributed Sh3.9 billion to total interest income and Sh1.4 billion to pretax profit,” said a market report by NIC Securities.
DTB total interest income stood at Sh16.6 billion while profit before tax totalled Sh6.03 billion which translates to subsidiaries accounting for nearly a quarter in both profit before tax and total interest income.
ARM said cement sales increased by 64 per cent as it raised its market share in Kenya, Rwanda and Tanzania thanks to its newly-commissioned plant in Dar es Salaam, which became operational last October.
Total sales increased by 39 per cent to Sh11.4 billion from Sh8.18 billion as net profits rose by to Sh1.24 billion from Sh1.15 billion over the same period.
Analysts said investments made in earlier years were starting to pay off and that the trend was likely to be maintained. Eric Musau, a research analyst at Standard Investment Bank, said the subsidiaries of many firms had matured to the point where their market share is now large enough to return a profit for the company or at least break even.
Mr Musau added that as the eastern African subsidiaries become bigger they will begin to rank at par with their parent companies in contributing to overall revenues and profits, which explains why firms are keen on expanding outside Kenya.
“A bigger portion of revenues will come from these markets and we will see many Kenyan companies becoming more East African,” said Mr Musau.
CFC Stanbic Bank subsidiary contributed to its profitability within one year of setting up shop and the growth has given its management the impetus to expand its network in the country.
“Our South Sudan subsidiary contributed Sh150 million to our bottom line just nine months after we established operations in that country. We see high growth prospects in that market and we plan to open another branch this year,” said chief executive Greg Brackenridge when releasing the bank’s results.
South Sudan is expected to restart exporting oil meaning Kenyan firms, especially banks, have something to look forward to.
NMG’s subsidiaries in Uganda, Tanzania and Rwanda had combined revenue of Sh2.76 billion or 22 per cent of the Sh12.34 billion that the firm made in 2012.
“Our acquisitions and investments are maturing and contributing to both our top and bottom line. We hope to continue building on this base,” said chief executive Linus Gitahi while releasing the 2012 results last week.
Equity Bank’s subsidiaries contributed seven per cent or Sh1.26 billion of the Sh17.3 billion pre-tax profit the bank made in 2012. KCB, the region’s largest banker, derived Sh1.4 billion of the Sh17.2 billion pre-tax profit outside Kenya over the same period representing an eight per cent contribution.
Co-operative Bank is expected to open its subsidiary in South Sudan by the end of this quarter. It has partnered with the government in Juba which is seeking to found a cooperative movement in Africa’s newest country.
Apart from the listed firms, private companies including cement and fast moving consumer goods’ manufacturers have also taken full advantage of the regional market.
