More than one third of the companies listed on the Nairobi Securities Exchange (NSE) have collectively shed Sh14.75 billion in provisional and final results so far announced in 2018, even as banks posted a total of Sh87.8 billion in profits, revealing the disconnect between the borrowing economy and the lending institutions.
The profit-shedding firms, spread across different sectors of the economy, have cited a challenging business environment and the persistent credit crunch that has sustained pressure on their ability to grow returns and avoid job cuts.
The latest market data shows that 23 firms registered losses or a decline in profits in the first nine months of the year, even as bank profits grew 13.5 per cent to Sh87.8 billion.
Two of the companies, Athi River Mining (ARM) #ticker:ARM and Deacons East Africa #ticker:DCON, went into administration, choked by a heavy pile-up of debt and a slide into loss making.
This performance is being seen as showing that most companies have yet to overcome last year’s election jitters and the depressed credit market that has seen banks abandon lending to the private sector in favour of buying government securities.
It also runs contrary to official findings that Kenya’s business environment has consistently improved in the past three years, causing the country to move 19 places from position 80 to 61 on the World Bank’s ease of doing business index.
Bamburi Cement #ticker:BAMB on Monday issued a profit warning that will potentially take its profits to a 12-year low, joining the growing list of companies that expect their earnings to fall by more than a quarter from previous year.
The cement maker attributed the dip in profit to difficult market conditions characterised by escalating energy prices in both Kenya and Uganda as well as increased power costs.
Bamburi’s half-year profits shrunk 4.6 times to Sh399 million from the previous half year’s Sh1.84 billion, meaning it must generate at least Sh601 million in the second half of the year to remain within the billion-shilling profit range.
Investors are already in pain after the cement maker cut the half-year dividend from Sh2.50 per share to Sh1 per share.
Last year, Bamburi also cut total dividend per share by 67 per cent as profits tumbled by the same margin.
Its competitor, ARM Cement, was in August placed under administration to shield it from creditors, having posted four years of losses.
Electricity distributor Kenya Power #ticker:KPLC also issued a profit warning as its earnings plummeted to a record 10-year low of Sh1.9 billion for financial year ended June 2018, a 63.7 per cent decline from the previous year. The firm is not paying any dividend.
Sameer Africa #ticker:FIRE also issued a profit warning after its turnover dipped by 31 per cent in nine months, putting it en-route to closing the year with less than Sh1 million in profits.
Fashion retailer Deacons East Africa last month sank into administration, forcing capital markets regulator to suspend it from trading on NSE.
Its half year losses widened to Sh229.5 million in June compared to Sh180.4 million last year as revenues fell by more than half.
Williamson Tea Kenya #ticker:WTK posted a Sh85 million half-year loss, down from the previous year’s profit of Sh43.4 million as Kapchorua Tea’s losses widened more than five times to Sh76.5 million.
This is despite government touting agriculture to help the economic growth rebound to 6.3 per cent because of improved weather.
Manufacturing firms Flame Tree and Kenya Orchards #ticker:OCH recorded 40 per cent and 17 per cent declines respectively in their half-year earnings.
Last year, Flame Tree’s #ticker:FTGH earnings fell by 73 per cent, which it blamed on higher debt provisioning stemming from challenges that has persisted in Uchumi and Nakumatt retailers where it was supplying goods.
Uchumi’s #ticker:UCHM half-year loss widened to 63.5 per cent to Sh895.1 million while Nakumatt sank into administration.
Home Afrika #ticker:HAFR also saw its half-year loss widen by 8.8 per cent to Sh111.6 million as that of East African Cables worsened by a third to Sh303.4 million.
In the insurance sector Sanlam Kenya #ticker:PAFR is in Sh1.53 billion half-year loss from a profit position, prompting it to issue a profit warning for the full year performance. UAP's profit dropped by 62 per cent to Sh190.9 million.
Other companies in losses are Eveready #ticker:EVRD, Housing Finance #ticker:HFCK, Kenya Airways #ticker:KQ, Express Kenya #ticker:XPRS, TPS Serena #ticker:TPS and Kapchorua Tea #ticker:KAPC.
Those in the list of declined profits are Crown Paints #ticker:BERG, Jubilee Insurance #ticker:JUB, Liberty Insurance #ticker:CFCI and Kenya Electricity Generating Company #ticker:KEGN.