Friday, December 1, 2023

Top Kenyan companies that have issued profit warning in turbulent year

Several listed companies on the Nairobi Securities Exchange (NSE) have issued profit warnings to investors, with most attributing their weaker earnings to the depreciating shilling and the rising inflation rates in the country.

The move is in line with the Capital Markets Authority (CMA) directive, which requires all listed companies to issue a profit warning beforehand if they expect that their full-year net income will drop by at least 25 percent.

The regulator has previously fined companies as little as Sh50,000 for failing to issue profit warnings.

Various firms, including Kenya Power and Lighting Company (KPLC), Unga Limited, and Longhorn Publishers, warned of full-year loss in the year ended June 2023 due to a tough business environment.

Trading firm Car & General (C&G) is the latest firm to issue a profit warning for the 15 months ending December, preparing investors for an earnings decline of at least 25 percent.

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“The board of directors … wishes to inform the shareholders of the company, potential investors, and the general public that based on the assessment of the unaudited consolidated accounts for the period to 30th September 2023, the earnings for the fifteen months ending 31st December 2023 of the group are expected to decrease by more than 25 percent in comparison to the prior year,” C&G said in a notice.

The group’s performance is mainly attributed to a combination of factors including the depreciating Kenya shillings against the US dollar, low motorcycle sales in Kenya an increase in finance costs, and demurrage costs in Tanzania.

The company had posted a net income of Sh679.4 million in the year ended September 2022 and a net profit of Sh96.6 million in the six months to March 2023, representing an 84.6 percent decline from Sh629.3 million a year earlier.

The Nation Media Group (NMG) also announced that it is expecting a more than 25 percent decline in full-year profits for the year ending December 2023 due to a tough business environment.

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In a notice on Wednesday, 25 October 2023, NMG warned its shareholders, investors, and the general public that it would record depressed earnings, marking the second such warning in a decade.

The media company attributed the weaker earnings to the depreciating Kenya shillings against the dollar, the rising interest rates, and the rising inflation rates.

“Like most sectors of the economy, media business, particularly in Kenya, has been adversely impacted by headwinds mainly attributable to the relentless increases in prices of basic commodities, a drastic rise in fuel prices, runaway depreciation of the Kenya Shilling, rising interest rates and higher taxes,” NMG stated.

“In addition, the increase in global prices of newsprint coupled with a weakened Kenya Shilling against the US Dollar and higher distribution costs arising from fuel prices have resulted in significant incremental direct costs compared to the previous year.” It added.

Last year, NMG recorded a profit of Sh318.5 million after tax, down from Sh493.1 million in 2021. In the half year to June, the company recorded Sh2.9 million profits after tax.

The declining profits mean shareholders in the respective companies expect to receive lower dividends by the end of the year.

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