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Kenyan retailer Uchumi eyes Rwanda, South Sudan
April 11, 2013 / 2:50 PM / 5 years ago

Kenyan retailer Uchumi eyes Rwanda, South Sudan

NAIROBI (Reuters) - Kenya’s Uchumi Supermarkets (UCHM.NR), the sole listed retailer in East Africa, plans to open six new stores in the next six months as well as expanding into Rwanda and South Sudan to tap new shoppers, its chief executive officer said on Thursday.

To fund the expansion Uchumi is preparing a cash call where 100 million shares will be offered to investors at a price that is yet to be determined, Jonathan Ciano told the Reuters Africa Investment Summit, confirming plans first outlined last year.

Shares in Uchumi, which currently operates 27 stores in Kenya, Uganda and Tanzania, were the top performer on the Nairobi bourse last year, with the price rising 150 percent to 19.10 shillings as investors bet the retailer would benefit from the region’s consumer growth.

The shares last traded at 22 shillings on Thursday, unchanged on the previous day’s close.

“We want to have at least five more branches in Tanzania. Three more in Uganda and approximately six or seven in Kenya,” Ciano told Reuters.

The firm is still working on how it will get into Rwanda and South Sudan but the first six stores to be opened elsewhere this year have been approved by the board, Ciano said, adding that the opportunities for retailers are not confined to the big cities like Kampala.

“The penetration of retail in this region is still very, very low so we have a lot of ‘unshopped’ people,” he said.

Uchumi runs a store in Gulu, northern Uganda, Ciano said, illustrating the potential in the region, with the main challenge being to take the concept of a supermarket to communities that have never had one before.

“We have our brothers and sisters who are 300 km (186 miles) in the hinterland, who have never seen a supermarket and you open one there and you can see the excitement,” Ciano said.

Meanwhile sales in existing stores had started to pick up again, he said, having been hit by fears of violence ahead of the presidential election in Kenya last month.

In the event the vote on March 4 proved peaceful, unlike the last election in 2007 when the disputed result led to widespread inter-tribal violence.

Uchumi’s sluggish sales in the last two months of 2012 sent pretax profits down by 35 percent for its fiscal first-half ended December to 131.93 million shillings ($1.56 million).

“The sales have been going on well,” Ciano said, adding he expected that trend to continue with the main risk to the outlook being higher energy costs that could drive up inflation and dent consumer spending.

Uchumi emerged under Ciano’s stewardship from a four-year receivership in early 2010 and its shares were re-admitted for trading on the bourse in mid-2011.

Local newspaper Business Daily said on Thursday that foreign investors have nearly tripled their shares in Uchumi since last June to 20.68 percent of the company, which is 10 percent owned by the Kenyan government, illustrating the demand for retail sector investments.

Ciano said the revival, following a near-collapse in mid 2006 under a mountain of debt, and the return to growth of the company, showcased the numerous opportunities available in Africa.

“Africa was called the dark continent. They didn’t know the sun was right in the middle of Africa. It is a very bright continent,” he said. ($1=84.4000 Kenyan shillings)

(For other news from Reuters Africa Investment Summit, click here)

(Follow Reuters Summits on Twitter @Reuters_Summits)

Editing by George Obulutsa and Greg Mahlich

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