Listed firms have issued profit warning since the year began, a move coming after the Kenya Shilling crossed the 150-mark against the dollar.
This signaled a tougher business environment for businesses in the country, making firms to tighten their grips and cut on expenditure.
This in addition to a general increase in commodities and taxes in the country further inflamed the business environment in the country.
The pinch, being felt mostly by Micro Small and Medium Enterprises (MSMEs), has not spared blue-chip listed firms.
What Is A Profit Warning
A profit warning occurs when a firm informs shareholders and the general public that its earnings will fall short of analyst projections.
Most companies usually issue a profit warning before the public announcement of their official earnings results.
Firms listed in the Nairobi Securities Exchange (NSE) are required by the Capital Markets Authority (CMA) to alert investors and the public should they expect their full-year net earnings to shrink by at least 25 per cent.
Since the beginning of the year, a total of 12 NSE-listed firms issued profit warnings.
In January, batteries distributor Eveready East Africa issued a profit warning for the year ended September 2022, citing a reversal of tax benefits of Ksh38 million during the trading period to the expected 25 per cent drop in profits.
“The main contributor to the reduction in profitability levels in the period was the impact of the de-recognition of the deferred tax asset in the amount of Ksh38 million,” stated Eveready in a statement.
National carrier Kenya Airways (KQ) issued a profit warning the same month for the financial year ended 31st December 2022, warning its profit will shrink by at least 25 per cent.
KQ attributed it to forex losses from currency hedging positions it took on its US dollar-denominated debt which was taken over by the state.
Utility firm Kenya Power and Lighting Company (KPLC), Longhorn Publishers and Unga Group also raised alarm for an expected dip in their profits for the trading period ended 30th June 2023.
KPLC attributed the profit plunge to be 25 per cent lower than what it recorded the previous year to the weakening of the Kenya Shilling against major global currencies.
Longhorn publishers cited rising costs of paper, currency depreciation and shrinkage of consumer wallets while Unga Group attributed the profit plunge to dollar shortage and sharp depreciation of the Kenya Shilling.
“The difficult economic environment has been exacerbated by the sharp depreciation of the Kenya Shilling and shortage of US Dollars. These led to margin erosion, high forex losses and increased interest expenses,” said Unga Group Company Secretary Winnie Jumba.
Towards the end of July, listed firm Centum Investment also indicated its profit for the trading period to 31st March 2023 will dip by at least 25 per cent compared to a similar period a year before on impairment provisions related to the operations of its subsidiary Two Rivers Development Limited (TRDL).
For the fiscal year ending 31st December 2023, a total of six NSE-listed firms have already issued a profit warning.
The listed firms are in the sectors of commercial, agricultural, automobile and construction.
The Board of Directors of Nation Media Group PLC (NMG) issued a profit warning for the financial year ending December 31, 2023, citing the weakening of the Kenya Shilling, rising interest, higher taxes and a surge in the global price of newsprint to the expected slump in profits.
Read: Sameer Africa Issues Profit Warning On Depreciation Of Local Currency
Leading supplier of automotive, power generators, construction and industrial engineering equipment Car & General Kenya PLC also joined the list of firms issuing profit warnings.
Car & General warned its profit for the fiscal year ending 31st December 2023 will sink by more than 25 per cent compared to the prior year on account of foreign exchange losses and deterioration of unit economies of motorcycles which hurt motorcycle sales in Kenya.
Agricultural firm Sasini PLC’s profit for the trading period to 30th September 2023 is expected to drop by at least 25 per cent compared to what it reported a year prior occasioned by the very high cost of production due to the unplanned escalation of input costs.
Sasini has also attributed the performance to the prolonged severe drought that hit the country during the first six months of the financial year which negatively affected coffee production volumes.
Listed paint maker Crown Paints Kenya PLC, Marketing and Communication group WPP Scangroup PLC and Sameer Africa have also alerted the public and shareholders that the profit for the fiscal year ending 31st December 2023 will drop by at least 25 per cent.
Crown Paints attributed the expected drop in performance to the increased cost of raw materials, increase in transportation costs and weakening of the Kenya Shilling against the dollar.
On the other hand, WPP Scangroup has attributed the expected dip in earnings to a subdued economic environment in the market which has led to cautious spending by its clients on advertising, marketing and communication.
Sameer has attributed the decline in profit to the depreciation of the Kenya Shilling against major currencies.
“This has seen the company incur substantial foreign exchange losses for the period arising from the translation of foreign-currency-denominated liabilities,” stated Sameer Africa Company Secretary Mercy Mbijiwe.