All is not pretty in the corporate world, as six companies listed with the Nairobi Securities Exchange (NSE) market have issued profit warnings in the 2018 financial year.
The latest to issue a profit warning is Bamburi Cement, indicating that its profits would go down by over 25 per cent.
The company attributed the slump to difficult market conditions as well as escalating international energy prices in both Kenya and Uganda.
Cash strapped Kenya Power has followed suit, together with insurance provider Sanlam, Sameer Africa, Deacons and Housing Finance Group (HF Group).
Kenya Power’s profits shrunk by 63.7 percent to Ksh1.92 billion in the financial year ended June 2018 due to increased operational costs.
Housing Finance blamed the poor performance on unfavourable trading environment leading to a slowed real estate uptake hence several non-performing loans and the capping of interest rates.
Deacons East Africa blamed non-performance of its anchor tenants, Uchumi and Nakumatt who have closed a number of their outlets.
Sameer, which has issued a profit warning for 2018 financial year had its profit decline by 31 per cent in the first nine months as compared to the same period in 2017.
Sameer attributes the reduction in profits to severe stock shortages due to production challenges faced by some of its offshore manufacturing partners.
Sanlam attributed its decline in profit for the year ending December 2018 to the recent 100 per cent impairment of financial assets covering corporate bonds investments placed in prior year periods in now distressed local enterprises.
A profit warning is issued when full year earnings are expected to decrease by more than 25 per cent.
In 2017, Kenya’s Capital Markets Regulator (CMA) said it will begin taking harder positions on companies that persistently issue late profit warnings, triggering companies to issue profit warnings early.
In a circular sent to all market participants of the Nairobi Securities Exchange, the watchdog noted, “The authority notes that issuers who issue their profit warnings either at the same time they release their audited accounts or immediately prior to releasing their audited accounts shall be deemed to be in breach of the listing requirements.”
“Good corporate governance governance practices dictate that companies prepare prudent periodic management accounts and projections and a company’s management and board ought to be aware of the declining levels of profits well before commencement of external audit.”
The regulator said the management and board of the companies shall be held into account should any risks arise due to the late warnings.
Despite this, Mumias nad Kenya Power delayed publishing their audited financial year results.
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