NSE firms profit warnings hit 12 to surpass last year
The BOC Kenya plant in Nairobi’s Industrial Area. PHOTO | FILE
What you need to know:
BOC became the twelfth listed firm to issue an alert compared to 11 for last year.
Other companies that have issued profit alerts since beginning of the year are ARM Cement, Stanchart, Uchumi Supermarkets, Mumias Sugar, Express Kenya, East African Cables, Standard Group, Atlas Development, Car & General, Sameer Africa and Crown Paints.
The companies issuing profit warnings this year have also been spread across five market segments at the Nairobi Securities Exchange (NSE), meaning that the problems are cross-cutting.
The number of companies issuing profit warnings this year has surpassed last year’s after BOC Gases became the latest to announce that its full year projected earnings will be lower by at least a quarter.
BOC became the twelfth listed firm to issue an alert compared to 11 for last year.
This is partly based on the fact that its income will not gain the benefit of a tax credit this year, which coupled with exchange losses and increased competition means the firm expects to earn no more than Sh172.2 million this year, compared to Sh229.63 million in 2014.
“Net earnings for the year ending December 31 2015 may be at least 25 per cent lower…due to a lower level of sales in 2015 due to competition from oxygen and nitrogen imports. These have also constrained the company’s ability to recover cost increases through pricing,” said BOC in a statement.
The companies issuing profit warnings this year have also been spread across five market segments at the Nairobi Securities Exchange (NSE), meaning that the problems are cross-cutting.
Listed firms are required by law to disclose in advance to their shareholders if earnings are projected to fall by more than 25 per cent in order to forewarn investors of the risk of reduced dividend yield and potential capital losses.
Analysts say BOC’s share, which is trading at Sh95 and is 24 per cent down year-to-date, could still come under further pressure in the aftermath of the profit warning.
“Due to this we anticipate that minority shareholders’ confidence will taper resulting into heightened supply side pressures,” said Genghis Capital in a market report Thursday.
All the firms which have announced profit warnings have suffered a decline in share valuations this year, with Standard Group recording the smallest decline at 5.7 per cent and Atlas Development the biggest at 84 per cent.
In its half-year results, BOC announced a 23.9 per cent decline in net profit to Sh65.1 million. The firm however maintained an interim half-year dividend of Sh2.20. In the full-year ending December 2014, BOC paid a total dividend of Sh5.20, which was unchanged from 2013.
According to BOC’s latest regulatory filings at the end of August, 75 per cent of the firm’s 19.52 million issued shares are in the hands of foreign investors, with the majority stake of 65 per cent held by British parent BOC Holdings.
The firm has about 780 local individual shareholders, who hold only three million shares representing about 15 per cent of the issued shares.
This means the share lacks liquidity in NSE trading, a factor that could prevent it from suffering a sustained price slide once full-year results are announced.
Thursday it traded unchanged at Sh95.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
