TransCentury says earnings hit by lower infrastructure spend, credit crunch

TransCentury’s chief executive, Ng’ang’a Njiinu. FILE PHOTO | NMG
TransCentury’s chief executive, Ng’ang’a Njiinu. FILE PHOTO | NMG 

Investment firm TransCentury #ticker:TCL has warned that it fell even deeper in the red in the year ended December 2017 on account of interest rate caps and political uncertainty.

The company has issued a profit warning, saying that its net earnings would fall at least 25 per cent in the year to December 2017 in comparison to a similar period in 2016.

“The decrease in net earnings is attributed to… declined performance in the operating units due to delayed spending on infrastructure projects that affected our customers as result of uncertainties brought about by the prolonged electioneering period during the year,” said TransCentury in a statement Friday.

This will be a partial reversal of gains made in the previous financial year for a company that has been facing difficult times for the past few years.

TransCentury in 2016 reported a net loss of Sh864 million, on account of difficulties it faced accessing credit. Despite this, the company was optimistic at the time as this was a significant improvement from the Sh2.4 billion made in losses in the year to December 2015.


Credit crunch

In 2016, it faced a credit freeze amid bad publicity as it came under pressure to repay a Sh8 billion bond.

The matter was put to a close after the bondholder agreed to a Sh4 billion haircut and a New York-based PE Fund, Kuramo Capital, paid creditors Sh2 billion while the rest of the debt was rolled over into a new loan.

TransCentury is only the latest listed company to warn shareholders that the negative effects of an extended political season will significantly erode its bottom line.

At least nine other firms have issued profit warnings for the 2017 financial year citing similar reasons. They include Insurance firm Britam #ticker:BRIT, Mumias Sugar #ticker:MSC and Unga Group #ticker:UNGA.

The government in January lowered its economic outlook, citing drought and politics.

The new forecast for 2017 economic growth is 4.38 per cent, down from 5.1 per cent.