Money Markets
By DAVID HERBLING, hdavid@ke.nationmedia.com
In Summary
- Profit warnings make 2015 one of the toughest at the bourse as firms grapple with weak shilling, accounting fraud and rising competition.
- Notices of lower earnings at the NSE were also recorded at 11 last year, compared to eight in the period to December 2013.
Profit alerts at the Nairobi bourse have hit 11 this year after Standard Chartered Bank last week warned full-year earnings for 2015 would fall making it the second year in a row for such a number of notices.
Other companies that have issued profit alerts since beginning of the year are Uchumi Supermarkets, ARM Cement, Mumias Sugar, Car & General, East African Cables, Express Kenya, Standard Group, Sameer Africa, Atlas Development and Crown Paints.
The profit alerts make 2015 one of the toughest at
the NSE and are blamed on factors including weak local currency,
accounting fraud and increased competition.
Notices of lower earnings at the NSE were also recorded at 11 last year, compared to eight in the period to December 2013.
“We remain neutral with a bias to negative on
equities given the lower earnings growth prospects for this year,” says a
research note by Cytonn Investments. “The market is now purely a stock
pickers’ market, with few pockets of value.”
The Capital Markets Authority requires companies to
make the disclosures — if earnings are projected to fall by more than
25 per cent — to warn investors of the risks of capital losses and
reduced dividend due to the profit fall.
StanChart — owned 73.89 per cent by London-based
Standard Chartered plc. — is grappling with mounting volumes of bad
loans which grew by nearly a third in the quarter to September to hit
Sh10.7 billion.
“There will be a redundancy charge which will
impact our full year 2015 performance,” the bank said in a regulatory
filing announcing a profit warning.
Uchumi at the weekend sank into the red for the
first time since emerging out of receivership and relisting on the
Nairobi bourse in May 2011.
The fourth-placed retailer posted an after-tax loss
of Sh3.4 billion in the year to June 2015 following a decline in
revenue and a Sh1.04 billion write-off to cover manipulated books of
account and concealed losses.
ARM Cement — which also blends fertiliser — slipped
into the red with a Sh469 million loss in the nine months to September
2015 compared to a profit of Sh1.1 billion a year earlier, on the back
of increased borrowings and margin pressures.
The cement maker has already issued a profit alert
for this year, with its finance costs tripling to Sh1.1 billion in the
period under review.
Troubled sugar miller Mumias nearly doubled its
loss to Sh4.6 billion in the financial year ended June 2015, after sales
more than halved to Sh5.5 billion following a drop in other additional
revenue streams such as electricity, bottled water and ethanol.
Express Kenya, which is currently under
investigation by the taxman, has also issued a profit warning after
making a net loss of Sh23.2 million in the half-year ended June 2015.
Car & General expects a maximum net profit of
Sh208.7 million in the year ending September compared to a net profit of
Sh278.3 million a year earlier on the effect of weak regional
currencies.
East African Cables forecasts its net profit not to exceed
Sh255.8 million in the year ending December compared to last year’s net
profit of Sh341.1 million.
The company already sank into losses in the
half-year ended June at a net loss of Sh70.9 million as revenue declined
22 per cent to Sh2 billion.
The Standard Group in August said it expects its
full-year earnings to be at least 25 per cent lower than last year, hurt
by disruptions from a countrywide digital migration of TV signals.
Tyre-maker Sameer Africa has also warned investors
of poor earnings after net profit fell 40.7 per cent to Sh47.9 million
in the half year ended June 2015.
Logistics firm Atlas Development sank deeper into
losses after it recorded a loss of $9.6 million (Sh1 billion) for the
full-year ended June compared to $1.4 million (about Sh150 million)
posted during the same period last year.
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