Monthly Highlights: July 2020

•  West African equities recorded mixed returns with Nigeria in the positive whilst the BRVM closed -86 basis points lower in USD terms and Ghana followed closely behind declining -81 basis points
•  East African equity markets were generally weaker with only Rwanda recording positive returns
•  North African equities were dragged down by Egypt after Tunisia and Morocco posted positive returns
•  Southern African equities were mixed as Botswana and Malawi reported positive returns while Namibia, Zimbabwe and Zambia were weaker
 

In July, African markets were generally weaker with only six exchanges posting positive performances in dollar terms led by Tunisia (+3.10%), Botswana (+1.34%) and Morocco (+0.65%), while Kenya (-8.13%), Namibia (-4.61%) and Uganda (-4.61%) were the biggest losers. Tunisia’s positive returns were driven by a 4.2% appreciation of the TND against the USD and the announcement by the World Bank of a USD 700m finance package to help the government respond to the effects of the coronavirus crisis.

West African equities recorded mixed returns with Nigeria in the positive whilst the BRVM closed -86 basis points lower in USD terms and Ghana followed closely behind declining -81 basis points

West African equities recorded mixed returns with Nigeria in the positive whilst the BRVM closed -86 basis points lower in USD terms and Ghana followed closely behind declining -81 basis points. In Nigeria, Dangote Cement posted slow growth in 1H20 results (T/O: +2.0% y/y; PAT: +5.8% y/y) driven by relatively flat revenues from both the Nigerian and Pan Africa operations up +1.2% y/y and +3.5% y/y respectively. MTN Nigeria Communications released mixed 1H20 results (T/O: +12.5% y/y; PAT: -4.7% y/y) as strong top line growth was offset by staff and finance costs which increased by +28.4% y/y and +38.2% y/y respectively. We also digested mixed 1Q20 results from Airtel Africa (T/O: +6.9% y/y; PAT: -56.9% y/y) dampened by higher finance costs (+21.0% y/y) and higher effective tax rate of 48.6% compared to 20.9% in 1Q19. Nestlé Nigeria released 1H20 results which were largely in-line with our expectations (T/O: -0.6% y/y; PAT: -16.8% y/y), as a result of weak top line growth and growing operating costs in particular administrative expenses (+50.7% y/y). Nigerian Breweries exhibited poor 1H20 results (T/O: -10.8% y/y; PAT: -58.0% y/y) reflecting pressure within the industry as brewers struggled to grow revenues amid weaker disposable income and the impact of the restriction of alcohol sales in some states. International Breweries announced mixed 1H20 results (T/O: -11.7% y/y; PAT: +36.8%y/y) as weak revenue growth was driven the restrictions of alcohol slowed demand, however, profitability was up strongly driven by lower operating costs and finance expenses -11.3% y/y and -67.6% y/y respectively. Unilever Nigeria posted disappointing 1H20 results (T/O: -35.9% y/y; PAT: n/a) as EBITDA margin contracted to 0.5% from 19.6% in 1H19. Cadbury Nigeria reported poor 1H20 results (T/O: -18.2% y/y; PAT: -19.9% y/y) driven by weak top line growth which we attribute to the impact of economic slowdown as a result of lockdown restrictions. Lafarge Wapco posted impressive 1H20 results (T/O: +2.3% y/y; PAT: +47.29% y/y) as administrative expenses were -30.6% y/y lower and finance expenses declined by -66.8% y/y. Okomu Oil Palm released healthy 1H20 results (T/O: +57.9% y/y; PAT: +58.5% y/y) driven by strong growth in Nigeria operations up +74.6% y/y on the back of price and volume recovery. In the financial sector, Ecobank Transnational Incorporated exhibited poor 1H20 results (GE: -3.3% y/y; PAT: -18.4% y/y) as non-funded income declined by -17.0% y/y while impairment charges increased by +149.0% y/y. FBN Holdings announced impressive 1H20 results (GE: +5.8% y/y; PAT: +56.3% y/y) as non-interest income grew by +46.8% y/y driven by fees and commissions which grew +13.7% y/y as well as improved efficiencies with cost to income ratio declining to 65.8% from 70.3% in 1H19. FCMB Group posted sturdy 1H20 results (GE: +9.4% y/y; PAT: +28.8% y/y) driven by strong growth in net interest income on the back of a +25.1% y/y growth of the loan book. In other news, the Central Bank devalued the official exchange rate by 5.5% to N381.00/$. In Ghana, we digested impressive 1H20 results from MTN Ghana (T/O: 19.5% y/y; PAT: +52.3% y/y) driven by growth across key revenue lines, voice (+14.1% y/y), data (+21.7% y/y) and mobile money (+24.9% y/y) as well as an EBITDA margin increase of 4.1pp to 53.6%. Ghana Commercial Bank posted sturdy 1H20 earnings (GE: +21.3% y/y; PAT: +41.9% y/y) as strong top-line growth was driven by interest income (+18.8% y/y) alongside strong non-funded income growth of +30.3% y/y. In economic news the MPC held the key interest rate at 14.5% citing a need for macro-economic stability despite a slowdown brought on by the coronavirus pandemic.

East African equity markets were generally weaker with only Rwanda recording positive returns

East African equity markets were generally weaker with only Rwanda recording positive returns. In Kenya, we digested disappointing FY20 results from East African Breweries (T/O: -9.2% y/y; PAT: -39.0% y/y) owing to the weak performance in 2H20 which was significantly impacted by the varying lockdown restriction across the region to contain the spread of the coronavirus. In 2H20, revenues in Kenya and Uganda declined -37%y/y and -21%y/y respectively. In other corporate news, Safaricom named Ilanna Darcy as Interim CFO from 1 July 2020, Ms Darcy joined Safaricom in February 2017 as the head of Finance Planning, Analysis and Investor Relations. She previously worked for Digicel Group in South East Asia as its CFO. In economics news, Kenya’s inflation fell to 4.36% y/y in July from 4.59% a month earlier. In Uganda, MTN Uganda plans 2021 stock exchange listing, the MTN Group unit plans to invest as much as USD 350m in expanding its network during the next five years.

North African equities were dragged down by Egypt after Tunisia and Morocco posted positive returns

North African equities were dragged down by Egypt after Tunisia and Morocco posted positive returns. In Egypt, we digested weak 2Q20 results from Commercial International Bank (GE: +2.0% y/y; PAT: -4.1% y/y) due to a +398.2% y/y increase in loan loss provisions. Talaat Moustafa Group Holding posted poor 2Q20 (T/O: -16.4%y/y; PAT: -27.4% y/y) as contracted sales declined -69.4% y/y with gross profit margin narrowing 4pp y/y to 32%. Edita Food Industries reported disappointing 2Q20 results (T/O: -10.9% y/y; PAT: -86.3% y/y) as top-line growth was affected by lower volumes due to the pandemic related restrictions, with a gross profit margin of 31.7% vs. 33.5% in the same period last year. MM Group for Industry and International Trade announced uninspiring 2Q20 results (T/O: -13.8% y/y; PAT: -13.0% y/y) on the back of lower mobile sales, and telecom revenues impacted by the precautionary measures taken to confront COVID-19. In other corporate news, Madinet Nasr for Housing and Development received formal letter from ODIN Investments to acquire its 52.46% stake in Nasr Company for Civil Works NCCW, NCCW contributed c12% of MNHD’s consolidated revenue of EGP273mn in FY19 with a gross margin of 23%.

Southern African equities were mixed as Botswana and Malawi reported positive returns while Namibia, Zimbabwe and Zambia were weaker

Southern African equities were mixed as Botswana and Malawi reported positive returns while Namibia, Zimbabwe and Zambia were weaker. In Zimbabwe, Delta Corporation Limited published a mixed 1Q21 trading update as lager beer volumes declined by -18.0% y/y, sorghum beer volumes shrunk by -51.0% y/y and volumes at Natbrew Zambia increased by +17.0% y/y. In Malawi, FDH Bank Malawi IPO was fully subscribed with MWK 14.1bn raised, an over subscription of just 2%, investors subscribed for 1.41bn shares at MWK 10.00/share. FDH had offered 1.38m shares, trading of shares on Malawi Stock Exchange commenced on 3 August 2020.