Another loss making Kenyan company part II

Another loss making Kenyan company part II

Geza Ulole

Geza Ulole

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Cash-strapped Nakumatt seeks financial rescue
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PRINTRATING

nakumatt.jpg

A Nakumatt outlet at the Victoria Mall in Entebbe, Uganda. PHOTO | FILE

By MARK KEITH MUHUMUZA in Kampala

Posted Thursday, October 27 2016 at 18:39
IN SUMMARY

  • Nakumatt said that it is engaging financiers to provide bridge financing options for the company to stay afloat.
  • Last year, Uchumi another Kenya-based supermarket closed its operations in Uganda, plunging unpaid suppliers into loss and protracted talks.

Empty stalls at several Nakumatt outlets in Kampala have sparked speculation over the future of the largest supermarket chain in East Africa.

Several suppliers are said to have stopped placing products on the shelves of Nakumatt at least until payments are made for previous supplies.

On Thursday, Nakumatt Holdings, the holding company that owns the supermarket chains in Kenya, Uganda, Tanzania and Rwanda admitted in a statement that it was in the red and was seeking a rescue.

“Like any other business operating in this market, Nakumatt Holdings has faced a number of unforeseen business challenges. These challenges range from a depressed economy, higher operating costs and extraneous factors including risk management due to prevailing security threats, among others,” the statement signed by Managing Director Atul Shah reads in part.

He notes that due to these factors, the retailer is faced with cash-flow problems, which has brought about a stalemate with suppliers who have opted to keep their products off the shelves. The statement adds: “…we have been actively engaging our current suppliers to review the current supply terms.”

Furthermore, the company said it was also restructuring the business at management level.

There are also new terms being introduced for the suppliers. This has delayed supplies getting back on the shelves, the firm said.

Nakumatt operates nine outlets in Uganda, but most of the shelves at Oasis Mall, Metroplex Mall, Mbarara, and Bukoto have largely been empty. The supermarket is facing similar challenges in its home market in Kenya.

Nakumatt said that it was engaging financiers to provide bridge financing options for the company to stay afloat.

“We are conscious that such financial restructuring remains a key imperative, thus our focus on long-term solutions, which are aligned to the overall business strategy. With the ongoing financial re-engineering engagements focused on accessing significant capital injection, we are confident that overall debt will further reduce once the process is concluded in the coming day,” the statement adds.

Last year, Uchumi, another Kenya-based supermarket closed its operations in Uganda, plunging unpaid suppliers into loss and protracted talks.

Cash-strapped Nakumatt seeks financial rescue
 
How about we start with...
ANOTHER.. (err sorry) ANY PROFIT MAKING TANZANIAN COMPANY PART 0...?
 
kwelko said:
no they don't invest. They are afraid of losses. They'd rather buy Albino soup when it comes to wealth creation.
Click to expand...
Awwww..... Nakumatt is dying.... You better close it in Tz also before hatujakamua kodi nyingi.... Thank for ur service and contributions.....
 
Sasa wale wa TANZA-KENYA wa JF waje wajitete hapa. Mnajijuwa tuambieni what's going on?
 
Nakumatt management admits challenges have impacted its operations, major ones being
  • Depressed economy (It is a more severe downturn than an economic recession)
  • Security threat in the country
  • higher operating cost
  • Debt tripled (means can't pay suppliers, service loans on time etc)
  • growing competition from established bigger players


Source: Kenya CitizenTv
 
Nakumatt’s $150m debt stalks bid to win suppliers
shelves.jpg

Empty shelves at Nakumatt Oasis Mall in Kampala. Analysts say supermarket chain should convert some of its debt into equity, refinance expensive short-term debt and find a strategic investor. PHOTO | MORGAN MBABAZI

IN SUMMARY

  • The retailer has in the past couple of months grappled with boycotts from its suppliers over delayed payments and changes in contract terms, which have led to empty shelves in some outlets, particularly in Uganda.
  • Last year its profits dipped to $3.05 million from $8.23 million in 2013, largely due to rising interest charges associated with the large debt that has been used to fund growth.
  • Nakumatt is said to have used the debt, with a mix of its cash inflows, to cover its rising operating costs owing to the establishment of new stores. It increased its branches to 58 across the region, with 43 in Kenya, nine in Uganda, four in Tanzania and two in Rwanda.
  • Analysts say supermarket chain should convert some of its debt into equity, refinance expensive short-term debt and find a strategic investor.


Regional retail giant Nakumatt Holdings is staring at some difficult options in raising capital to settle debts owed to financiers and suppliers.

The retailer has in the past couple of months grappled with boycotts from its suppliers over delayed payments and changes in contract terms, which have led to empty shelves in some outlets, particularly in Uganda.

Last December, South African rating agency Global Credit Ratings showed that the retailer’s net interest cover (firm’s ability to pay interest on its loans) had dropped to 1.2 times compared with 1.8 times two years ago, meaning that Nakumatt was burdened by debt servicing. Globally, a mark below 1.5 times raises a red flag.

Last year its profits dipped to $3.05 million from $8.23 million in 2013, largely due to rising interest charges associated with the large debt that has been used to fund growth.

“Whilst the capital expenditure costs have been high, the greater utilisation of debt has come from the working capital funding necessary to purchase stock for new stores. Gross debt has almost tripled from $42 million in 2011 to $150 million last year,” reads the rating.

Nakumatt is said to have used the debt, with a mix of its cash inflows, to cover its rising operating costs owing to the establishment of new stores. It increased its branches to 58 across the region, with 43 in Kenya, nine in Uganda, four in Tanzania and two in Rwanda.

Atul Shah, Nakumatt’s managing director said the retailer is currently engaging a number of local and international financiers for a financial bailout package.

“We are confident that the overall debt will further reduce once the process is concluded in coming days. We are confident that the process will allow us to regain our footing with full supplier settlements and sustainably continue the aggressive expansion plan we have set in our five-year business plan,” said Mr Shah.

Of interest to financiers will be how the retailer makes a paltry net profit of $3 million from revenues of $516 million, and what kind of debt restructuring will get it out of the hole it is in.

Only three options

Analysts say the retailer has only three options: Conversion of some of its non-bank debt into equity, refinancing some of its more expensive short term debt with long term cheaper lines of credit and finding a strategic investor.

“Looking at their results, they have a weaker balance sheet and a strong cost base despite their cost line only being employee and rental premises. From this, there is an element in the books that is sucking money and this coupled with the chain’s ownership structure, is a potential turnoff for any strategic investor,” an analyst told The EastAfrican in confidence.

Investors will also be keen to understand how the retail giant dug itself into a debt management hole, whereas it has continued its ambitious expansion drive, pumping $4 million in capital investment in five new branches in Tanzania, Rwanda and Uganda this year.

Robert Juma of Catalyst Capital said that the retailer’s problem could only arise when its debt management is impacted by lower than average sales, rising costs of operations (employees, rent and warehousing cost) as some of these new stores require the support of the existing ones.

“With that tight debt management, the net effect is little cash available and the first casualty is always the suppliers’ payments,” said Mr Juma.



Back to The East African: Nakumatt’s $150m debt stalks bid to win suppliers

Nakumatt’s $150m debt stalks bid to win suppliers
 
wadanganyika mnachefua jamani, mabenki yenu yanakufa kila uchao. your banks are in a pathetic state.
@samuel999 just google twiga bank tz na crdb tz alafu umwage data humu!
 
1academ said:
wadanganyika mnachefua jamani, mabenki yenu yanakufa kila uchao. your banks are in a pathetic state.
@samuel999 just google twiga bank tz na crdb tz alafu umwage data humu!
Click to expand...
CRDB made a loss of less than Tshs 2 bln in 3rd quarter if u take all the three quarters profil is over Tshs 20 bln!

CRDB bank posts Sh2bn quarterly loss


·



  • The loss is a significant dip from the Sh24.4 billion after tax it gained in the second quarter of this year. The bank got Sh37.6 billion profit after tax in the third quarter of 2015.

Dar es Salaam. Tanzania’s largest bank, CRDB, has posted a Sh1.9 billion loss in the third quarter of this year due to a large number of unpaid loans as well as accumulating tax bills from the past.
The loss is a significant dip from the Sh24.4 billion after tax it gained in the second quarter of this year. The bank got Sh37.6 billion profit after tax in the third quarter of 2015.
A financial statement published in newspapers over the weekend also showed the bank had also an extensive expansion drive which culminated in adding 82 branches for the whole CRDB group.
“The group’s cumulative profit was impacted by strong provisions from non-performing loans (NPL) to align with changing regulatory requirements… The group has also provided for past tax expense in relation to 2011-2013 tax claims,” the statement said in part.
The statement shows that the amount of bad loans written off by the CRDB’s accounting books reached Sh38.6 billion in September this year from Sh19 billion in June.
The CRDB Bank, which is listed in the Dar es Salaam stock exchange, is the largest bank with Sh5.3 trillion in total assets as by September 2016. The assets have, however, declined by Sh200 billion from the Sh5.5 trillion recorded at the end of the second quarter in June this year. The bank is also the largest in terms of customers deposits which remained unchanged at Sh3.9 trillion.
Even as CRDB Tanzania recorded a loss the CRDB group, which has operations in neighbouring countries such as Burundi, registered a Sh2.8 billion profit after tax at the group level in September, 2016, which is a decrease from Sh38.5 billion after tax it registered in the same quarter in 2015. The CRDB group earned Sh28.5 billion profit after tax by the end of June 2016.
The news of the loss of CRDB Bank comes after the Bank of Tanzania announced that it has taken over the operations of Twiga Bancorp which is on the verge of collapse. Twiga registered a loss of Sh694 million after tax in September 2016 from a profit after tax of Sh189 million in June, 2016. Bank of Tanzania governor Benno Ndulu said Twiga is significantly undercapitalised and it would close for the whole of this week as the BoT determines the way forward.
Experts say commercial banks are passing through difficult times currently because of a crackdown on tax evasion, corruption and embezzlement which has reduced people’s purchasing power and the capacity of some to pay back their loans.
Prof Honest Ngowi of Mzumbe University says what is happening in the banking sector is a reflection of the real situation in the economy.
“Banks’ main business is loans and when businesses are not performing very well then there is a possibility of an increase non-performing loans. So harsh tax and austerity measures implemented by the new government could be partly to blame,” he said.
Some other banks have recorded losses and others a significant reduction in profit after tax in the third quarter according to a survey done by The Citizen on published financial statements of banks. Amana Bank, for example, registered a loss after tax of Sh195 million in September, 2016 from a Sh517 million profit after tax in the second quarter that ended in June, 2016. NBC Bank’s profit after tax declined to Sh984 million in September 2016 from the profit of Sh4 billion in June of the same year.
Experts say the decision by the government to direct its institutions to transfer their money to the BoT also has affected the profits of many banks.

In January this year, the government ordered ministries, public corporations and local government authorities to immediately transfer their money to the central bank, a move that was estimated to remove Sh500 billion from commercial banks. Tanzania has over 50 banks but 70 per cent of the market is dominated by the 10 largest banks in terms of assets, deposits and gross loans.

CRDB bank posts Sh2bn quarterly loss | DAR ES SALAAM WIRE
 
hahaa i thought the tz banks were making bumper profits!! haya mwaga data za amana bank na twiga bank corp..
 
tz ni majanga tuu huko, crdb the biggest bank in tz is making super losses, that shows you things are headed to hell there. Twiga bankorp is under recievership, amana bank ndio hata usiseme. Banking sector analyst wanapredict hali ngumu sana for tz banks, kuna tetesi pia nbc bank ni hasara tupu wanaficha ficha non performing loans!.
 
Kinachoshangaza sasa:

NAKUMATT inamilikiwa na Atul Shah na wanufaika wakubwa ni Asians

Wakenya ni waajiriwa tu lakini povu wanalotoa sasa....duh!

Nakumatt si Tuskys ya Wakikuyu.
 
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