The Nairobi Securities Exchange (NSE) and Bamburi Cement have announced profit warnings, anticipating an earnings drop of at least 25 per cent in their results for the full year ending December.
The cement maker said the projected decline in profit was due to global disruptions from the war in Ukraine and low demand for construction materials.
“The expected decline in earnings is largely attributable to a slowdown in market demand for cement, high energy cost coupled with increased raw material costs due to global disruption of the supply chain,” the company said in a statement.
Last year, Bamburi reported a net profit of Sh1.38 billion, indicating that it expects to make maximum net earnings of Sh1.03 billion in the current financial year.
Meanwhile, the Nairobi bourse operator blamed its profit warning on reduced trading across equities and debt securities.
The exchange earns a commission on transactions, with the volume and value of trades being the key variables influencing its revenue.
“Over the course of 2022, the company’s performance was impacted by reduced trading in the equity and debt markets occasioned by continued economic challenges both locally and internationally,” said NSE in a statement.
“Key among them the rising inflation, increase in interest rates in local and international markets and re-allocation of funds from the frontier to developed markets, on the back of rising interest rates.”
The firm posted a net income of Sh132.5 million last year. This indicates that it is anticipating maximum net earnings of Sh99.4 million in the current year.
The issuance of profit warnings is meant to give existing and prospective shareholders a guide to a company’s performance well in advance of what would otherwise be shocking results.
A substantial drop in earnings could see companies reduce or suspend dividend payouts, hurting income-focused investors.