A staff monitors the trading board at the NSE: Investors are staring at lower dividends this year. PHOTO | SALATON NJAU
What you need to know:
At least 18 firms, representing nearly a third of the publicly traded companies, have since the start of the year announced lower earnings and losses attributed mainly to high cost of loans and weakening of the shilling.
The drop in earnings and share prices means investors are staring at lower dividends this year besides missing out on substantial capital gains in the near term.
The currencies’ depreciations have inflated costs of their foreign currency loans besides raising operating costs, with increased competition making it difficult to grow margins by raising prices.
More listed companies are announcing drop in profitability and losses for the half-year to June in a trend that is set to worsen the current bear run at the Nairobi Securities Exchange (NSE).
At least 18 firms, representing nearly a third of the publicly traded companies, have since the start of the year announced lower earnings and losses attributed mainly to high cost of loans and weakening of the shilling.
Most of the companies have announced double-digit declines in their share prices since January, with the exception of a few like Kakuzi.
The spreading weakness in corporate earnings comes at a time the stock market has recorded a double-digit decline as captured by the broad NSE All Share Index (NASI), which has dropped 12.5 per cent since the beginning of the year to close at 142.8 points on Tuesday.
The NSE 20-Share Index, which reflects the performance of blue-chips, fell 17 per cent to 4,242.7 points in the same period.
The drop in earnings and share prices means investors are staring at lower dividends this year besides missing out on substantial capital gains in the near term.
Infrastructure investment firm TransCentury is the latest to announce a net loss of Sh676.1 million in the half-year ended June, narrowing the bigger net loss of Sh1.6 billion it made a year earlier.
The firm posted a five per cent revenue growth to Sh5.2 billion in the period, but which was overtaken by costs including debt repayments that jumped 29.5 per cent to Sh496.9 million.
TransCentury said the slow revenue growth was partly caused by production disruptions at one of its main subsidiaries, East African Cables (EAC), which is also listed on the NSE.
EAC’s sales in the same period fell 21.5 per cent to Sh2 billion, combining with higher operating and finance costs to result in a net loss of Sh70.9 million.
This reversed the net profit of Sh231.8 million the company made a year earlier.
“The overall decline in performance was attributable to significant interruptions in our production processes as we conclude the last phase of our capacity upgrades,” the producer of power cables said in a statement.
“Despite the interruptions, the Kenya business remained profitable but the group recorded a loss owing to our Tanzania operation which was heavily impacted by foreign exchange losses.”
The currencies’ depreciations have inflated costs of their foreign currency loans besides raising operating costs, with increased competition making it difficult to grow margins by raising prices.
Sameer, for instance, saw its net profit drop 40.7 per cent to Sh47.9 million in the half-year ended June when costs surpassed its turnover growth of 1.4 per cent to Sh2.6 billion.
Other companies have issued earnings alerts, anticipating wider losses or profit drops exceeding 25 per cent for their respective reporting period.
C&G, for instance, expects a maximum net profit of Sh208 million in the year ending September compared to a net profit Sh278 million the year before.
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