Monthly Highlights: January 2022

•  West African equities were mostly in the red, except for Nigeria which was positive as the International Monetary Fund retained its 2022 growth forecast at 2.7% and increased 2023 projection by 0.1 percentage points to 2.7%.
•  East African equities posted mixed performance as Tanzania and Mauritius closed positive whilst Kenya and Rwanda were negative
•  North African equities were negative dragged down by Egypt and Tunisia
•  Southern African markets were dragged lower by Malawi and Zambia after positive performance in Zimbabwe, and Botswana
 

In January, African markets were mixed with nine posting negative performance and seven posting positive returns. The major losers were Zambia (-8.6%), Egypt (-3.8%) and Ghana (-2.4%), whilst, Nigeria (+11.3%), Zimbabwe’s Industrials (+4.7%) and Tanzania (+2.4%) were the biggest gainers. Zambia’s negative performance was almost entirely attributable to the currency, as the ZMW depreciated -8.6% against the USD.

West African equities were mostly in the red, except for Nigeria which was positive as the International Monetary Fund retained its 2022 growth forecast at 2.7% and increased 2023 projection by 0.1 percentage points to 2.7%

West African equities were mostly in the red, except for Nigeria which was positive as the International Monetary Fund retained its 2022 growth forecast at 2.7% and increased 2023 projection by 0.1 percentage points to 2.7%. On the earnings front, Guinness released impressive 1H22 results (T/O +50.8% y/y, PAT n/a) with the company returning to profitability from a loss position in 1H21, driven by strong revenue growth across all key categories coupled by strong operational efficiency as gross profit margins rose by 720bps to 33.5%. Ecobank Transnational released strong results for FY21 (T/O +5.7% y/y, PAT +295.7% y/y) as operating costs declined by -3% y/y driving cost to income ratio 400bps lower to 58.7% from 62.7% in FY20. Flour Mills of Nigeria released satisfactory results for 3Q22 (T/O +50.9% y/y, PAT +15.4% y/y) as strong topline growth was offset by increasing cost pressures with gross profit margins declining by 253bps. Vitafoam Nigeria posted strong 1Q22 results (T/O +46.7% y/y, PAT 51.9% y/y) as substantial sales growth drove overall profitability. MTN Nigeria released positive FY21 results (T/O +22.9%, PAT +45.5%) as service revenue grew by 20.9% y/y in 4Q21 (2021FY: +22.9% y/y), due to the broad-based expansion across voice (up 0.9% y/y; 56.8% of revenue), data (up +65.2% y/y; 33.5% of revenue), and value-added services (up +55.6% y/y; 4.5% of revenue). In Ghana, the central bank left its benchmark interest rate unchanged as they assess the impact of the previous hike even as the inflation rate continues to rise above its target band.

East African equities posted mixed performance as Tanzania and Mauritius closed positive whilst Kenya and Rwanda were negative

East African equities posted mixed performance as Tanzania and Mauritius closed positive whilst Kenya and Rwanda were negative. In Tanzania, CRDB reported strong FY21 results (GE +16.4% y/y, PAT 62.0% y/y) driven by higher non-funded income (+24.8% y/y) and lower impairment charges (-62.3% y/y). Similarly NMB Bank released positive FY21 results (GE +14.0% y/y, PAT +37.3% y/y) as cost to income ratio declined to 46.5% from 50.1% in FY20. Kenya's, East African Breweries released impressive 1H22 results (T/O +23.4% y/y, PBT +131.6%) on the back of easing of COVID-19 restrictions, which boosted on-trade beer sales and supported further growth in spirit volumes.

North African equities were negative dragged down by Egypt and Tunisia

North African equities were negative dragged down by Egypt and Tunisia. In Egypt, Taaleem Management services released strong 1Q22 results (T/O +27.3% y/y, PAT +23.4% y/y) driven by improved operational efficiencies with gross profit margin expanding by 360bp to 70.7% in 1Q22. CIRA reported weak 1Q22 (T/O +16.2% y/y, PAT -12.1%y/y), due to lower margins on start-up costs associated with expansion initiatives and higher net finance costs also related to expansion initiatives. Orascom Development released a trading update for 4Q21 which showed that contracted sales grew +61% y/y (+34% q/q) to EGP2.98bn, driven by strong demand for secondary homes, complemented by solid sales momentum in O West and Makadi Heights. Obour Land announced improved FY21 results (T/O +9.7% y/y, PAT +13.0% y/y) as white cheese volumes grew by 8.4% y/y and milk volumes were +27.3% higher.

Southern African markets were dragged lower by Malawi and Zambia after positive performance in Zimbabwe, and Botswana

Southern African markets were dragged lower by Malawi and Zambia after positive performance in Zimbabwe, and Botswana. In Zimbabwe, Africa Distillers issued a 3Q22 trading update stating that volumes went up +32% y/y for the quarter and 48% y/y for nine months. Econet Wireless also issued a trading update for 3Q22, announcing that data and voice traffic increased by +43% y/y and +6% y/y respectively. Management also reported that the company commissioned 80 LTE (4G) new sites as part of the LTE densification program, the including extension of high speed data coverage to the rural areas. In Zambia, the annual inflation rate of January 2022 has slowed to 15.1% from 16.4% recorded in December 2021.