TANGA Cement has emerged as the top performing stock of the week, marking a remarkable increase of 7.5 per cent.
This surge came in the wake of significant news regarding its acquisition. Scancem International DA has proposed to buy 43,504,403 Tanga Cement shares, equivalent to roughly 68.33 per cent of all issued shares.
This offer is valid from October 31, 2023, to November 21, 2023. Shareholders have the choice to sell their shares based on the conditions set by the acquirer during this period.
The offer is initially priced at US$ 42,492,369 (equivalent to TZS 2,442.4 per share at the exchange rate as of September 19, 2023, although the TZS price is indicative only and will be affected by the applicable exchange rate on the relevant date).
The final price will be adjusted for debt, working capital, other expenses, and potential post-sale modifications agreed between the acquirer and eligible Shareholder. The cement industry has an estimated annual production capacity of 10.4 million tonnes.
However, it currently operates at just 63.1 per cent of this capacity, with only two out of eleven factories utilizing over 90 per cent.
Tanga and Twiga cement companies, among the major producers, operate at over 80 per cent capacity, while Dangote Cement operates at less than 35 per cent due to energy constraints. Producers attribute cement production to factors such as construction demand, raw material availability, power supply, market proximity, transportation, and workforce skills.
On the other hand, CRDB released its Q3 financial results, highlighting a substantial 27 per cent increase in interest income when compared to the same period last year.
The cumulative interest income now stands at TZS 861 billion, and on a quarterly basis, it amounts to TZS 304 billion. In parallel, interest expenses have also surged by 74 per cent compared to the corresponding period, reaching TZS 251 billion cumulatively, primarily due to increasing funding costs on both local and global fronts.
As a result, the net interest income settled at TZS 609.8 billion, reflecting a substantial 15 per cent year-on-year growth.
Shifting our focus to non-funded income, which includes activities like foreign exchange dealings, fees, commissions, dividend income, and other operating income, this revenue stream has experienced an 11 per cent increase, reaching a total of TZS 322.87 billion.
Notably, this category accounts for 35 per cent of CRDB’s total income for the third quarter. Non-interest expenses have also increased by 16 per cent year on year, amounting to TZS 471 billion.
In spite of the rise in noninterest expenses, the operational income has exhibited a remarkable upswing, reaching TZS 411.4 billion. This represents a 12 per cent year-on-year growth compared to TZS 367 billion during the same period last year.
After accounting for tax, the reported profit for the period stands at TZS 280.4 billion, indicating a 9 per cent increase from the TZS 256.6 billion achieved in Q3 2022. Examining other key performance indicators, the Return on Assets (ROA) is at 4.5 per cent, and the Return on Equity (ROE) stands at 24.2 per cent.
The Cost to Income ratio has stabilized at 51 per cent, which is slightly below the recommended 55 per cent advised by the Bank of Tanzania.
However, due to rising funding costs and increased competition, the net interest margin has declined to 7.6 per cent from 9.2 per cent in 2022, indicating that the bank is encountering challenges in maintaining its interest rate spread.
Reviewing the bank’s balance sheet, Loans, advances, and Overdrafts have reached TZS 8.1 Trillion, marking a 6 per cent increase from TZS 7.6 Trillion in Q2 2023. Regarding total assets, the bank has observed a 2 per cent increase quarter on quarter, with total assets now standing at TZS 12.76 trillion.
This positions CRDB as the largest bank in Tanzania. Conversely, customer deposits have experienced a 1 per cent decline, settling at TZS 8.57 trillion. As per the latest statement from the Bank of Tanzania’s Monetary Committee, the banking sector remains well-capitalized, liquid, and profitable.
Non-performing loans decreased to 5.2 per cent in September 2023 from 7.3 per cent in September 2022. Credit to the private sector grew strongly, reaching 22 per cent in July and August, moderating to 19.5 per cent in September 2023, surpassing the projected 16.4 per cent for December 2023, driven by a better business environment.
Moody’s has awarded a B2 rating to the Tanzanian economy, and CRDB holds the same B2 rating from the agency, along with a positive outlook.
This rating reflects the country’s robust macroeconomic fundamentals compared to its peers. The 2023 Finscope Survey reveals that only 22 per cent of Tanzanians are currently using banking services, with just 3 per cent of the population borrowing from a bank.
This presents a unique opportunity for CRDB to tap into the large unbanked population and drive its growth.
To capitalize on this opportunity, CRDB has launched a series of strategic initiatives, placing a strong emphasis on strengthening its digital presence through advanced applications such as SimBanking and expanding its agency banking network.
As a result of these endeavours, an impressive 96 per cent of all the bank’s transactions now occur through digital channels. Moreover, thanks to the adoption of technology, the productivity of the banking sector’s employees has seen significant growth, increasing from 24.1 per cent in 2018 to 87.1 per cent in 2022, as reported in EY’s Tanzania Banking Sector Report.
Furthermore, the bank has recently ventured into issuing a sustainable bond through its multi-currency Medium Term Note program, with a goal of raising TZS 780 billion ($300 million).
In the first tranche, CRDB successfully secured TZS 171 billion ($68.3 million), demonstrating an exceptional oversubscription rate of 429 per cent.