At least 14 companies have issued profit warnings this year, with most blaming the economic fallout from the Covid-19 pandemic for their weaker earnings. FILE PHOTO | NMG At least 14 companies have issued profit warnings this year, with most blaming the economic fallout from the Covid-19 pandemic for their weaker earnings.
Britam Holdings , Absa Bank Kenya , East African Breweries Limited (EABL), Kenya Power , East African Cables , Kenya Orchards , Longhorn Publishers , Nairobi Business Ventures , Nation Media Group and Unga Group are among the companies that have warned investors of reduced earnings
Others are NCBA Group , TPS Eastern Africa , I&M Holdings and Standard Chartered Bank Kenya .
Double blow
The move sets up investors for dividend cuts at a time when most stocks have depreciated by double digits, dealing them a double blow. Listed banks alone have been paying annual dividends of more than Sh30 billion, indicating the size of lost income investors are staring at.
Some of the companies such as EABL have already announced the weaker earnings they were bracing for, with most of the diminished profits expected in the first quarter of next year for firms whose financial year is ending this month.
The tally of profit alerts, usually defined by earnings falling by 25 percent or more, is expected to increase in the coming weeks as firms prepare to announce their end year results.
Companies are required by law to issue profit warnings at least 24 hours before they publish full year results which show that their earnings have dropped by a quarter or more compared to the prior year.
The Capital Markets Authority (CMA), however, encourages listed firms to issue such notices as soon as their managers become aware of the likely drop in profits.
Such announcements are meant to give existing and prospective shareholders a guide to a company’s performance well in advance of what would otherwise be shocking results.
Biggest victim EABL is one of the biggest victims of the measures taken to control the spread of the pandemic.The brewer’s after-tax profit fell 39 percent to Sh7 billion in the year ended June, hurt by closure of bars and other entertainment venues.Its net sales dropped nine percent to Sh74.9 billion, contributing to the weaker bottom-line.“The first half of the year was characterised by a stable operating environment which resulted in EABL reporting volume growth of five percent, sales growth of 10 […]