EA Cables makes way for Kenol on index

A profitability drop has seen East African Cables make way for oil marketer KenolKobil on the NSE 20-share index- a benchmark group of stocks that is used by investors and market analysts to track performance of the stock market.

The Nairobi Stock Exchange (NSE) said in a statement issued on Friday that the substitution of the cable maker with KenolKobil was as a result of the firm’s poor performance.

“A company should ideally be a ‘blue chip’ with superior profitability and dividend record,” said the NSE executive Peter Mwangi.

The NSE 20-Share Index is reviewed periodically and companies are picked based on criteria such as turnover, market capitalization and profitability.

The last time that the index was revised was in December 2009 when Co-operative Bank was included at the expense of investment firm Centum.

East African Cables made a Sh56.9 million loss in the first half of the year, against a Sh248 million profit posted over a similar half in 2009.

Restructuring costs

The decline in profits was from its Tanzanian subsidiary where it incurred a Sh193 million bill in debt write-offs and restructuring costs.

East Africa Cables was the only listed firm which made losses in the first half of 2010.

KenolKobil, on the other hand, made a Sh1.17 billion profit in the first half of this year having recovered from a loss of Sh431 million in a similar period last year bouyed by an increase in demand and prices of petroleum products.

Johnson Nderi, a research analyst at Suntra Investment Bank, said EA Cables is likely to fall off many investors’ and fund managers’ portfolios.

Alex Muiruri, a research analyst at Dyer and Blair Investment Bank, said that the change was “expected.”

KenolKobil is one of the most heavily traded shares and has a float of 1.4 billion shares while East Africa Cables has 202 million tradeable shares.

“I don’t see any likely effect on East Africa Cable’s share price,” said George Bodo, a research analyst at Genghis capital.

In 2008 the NSE introduced the Nairobi All Share Index (NASI) as an alternative to NSE 20 Share Index, arising from concerns that the latter is more prone to wild fluctuations of the few constituent counters that make it.

The Pine Bride Investments 27 Index is the third index.