Listed companies including Umeme and dfcu Bank have cautioned shareholders and the public to exercise caution as they deal in the two companies’ stocks due to an expected drop in profits.
In statements issued through the Uganda Securities Exchange, power distributor, Umeme said it expects its net profit to decline by more than 60 per cent. “Based on the assessment of the company’s performance for the year ending December 31, 2020, it is expected that the company’s net profit will decline by more than 60 per cent compared to the year ended December 31, 2019,” the notice read in part.
The dip, Umeme said, was due in part to Covid-19, regulatory lag, and suspension of the free connections policy. Government suspended the free connections policy in 2020 after shortage but the suspension was recently lifted. By May 2020, Umeme which had over 100,000 connection applications pending held $23m in debt due to government. The funds are yet to be paid.
However, government has embarked on another free connections programme financed by African Development Bank, which will see Umeme connect about 87,500 households that do not require poles.
Dfcu Bank, Uganda’s fourth largest bank by assets also cautioned the public, noting that the bank’s profits for the year ended December 31, 2020 will decline due to an increase in non-performing loans that have resulted from Covid-19 disruptions reducing customers’ capacity to service loans.
The bank noted that a higher than anticipated write-off of some of the loans and advances that formed part of the financial asset had also impacted profitability.
Dfcu bank in 2017 acquired the assets of Crane Bank, a transaction that has since been controversial for the financial institution.