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Deacons warns of profit dip on polls

Deacons chief executive officer Muchiri Wahome. FILE PHOTO | NMG
Deacons chief executive officer Muchiri Wahome. FILE PHOTO | NMG 

Fashion retailer Deacons #ticker:DCON has indicated that its earnings for the full-year through December will drop by at least a quarter, raising to six the number of Nairobi bourse-listed firms that have issued profit warnings.

Deacons expects to post a maximum net loss of Sh208 million, blaming this poor show on, among other things, the electioneering period, impact of Nakumatt’s downfall as well as inflationary pressures occasioned by the prolonged drought in early 2017.

The fashion retailer, which operates in Kenya, Rwanda, Mauritius and Uganda, also blamed its financial woes on the credit crunch following interest rate cap as well as the cannibalisation effect of the shopping malls boom.

“The expected drop in profits was brought about by the presidential elections in Kenya..., which resulted in decreased consumer demand and spending, … non-performance and closure of some branches of major anchor tenants…reduced traffic into shopping malls. The prolonged drought … coupled with the lack of consumer credit from banks had a direct impact on consumer shopping trends,” Deacons said in a statement.

Deacons joins Bamburi Cement #ticker:BAMB, StanChart #ticker:SCBK, BOC Group #ticker:BOC, Standard Group, Flame Tree Holdings, which have issued profit warnings in the past two months, painting a gloomy picture of the state of the country’s economy.

These firms also cited the 2017 General Election, the drought’s inflationary pressure as well as a slowdown in credit due to the interest rate cap as some of the factors that led to the significant drop in earnings.

Mid-tier lender Family Bank, whose shares trade on over-the-counter market, also expects its full-year profit to fall by at least 25 per cent after it reported a net loss of Sh743 million in the nine months ended September.

Other companies that have issued profit warnings during the calendar year include Shelter Afrique, Kapchorua Tea, Williamson Tea, Mumias Sugar, Unga Limited, Limuru Tea, CIC, and Uchumi #ticker:UCHUM .

Scores of other firms are in losses, including the privately-held retailer Nakumatt Holdings, which is fighting bankruptcy proceedings in court.

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