By JAMES ANYANZWA
In Summary
Three more companies have joined the list of Kenyan
companies warning of a decline in profit for the 2016 financial year,
signalling a difficult operating environment and the poor performance of
the economy.
Pan African housing financier Shelter Afrique and agricultural
firms Williamson Tea Kenya and Kapchorua Tea, expect their earnings for
the year 2016 to drop by more than 25 per cent from the previous year's.
Shelter Afrique said it expects a huge portfolio of bad debts to dent its profit.
“The main reason for the lower earnings in the
restated 2015 results and 2016 is a sharp increase in the level of
impairment charges to provide for expected losses from the
portfolio,” company chairman Jean-Paul Missi said in a statement Monday.
“The company has identified the loans and has taken measures to manage
the recovery of the debts.”
Williamson Tea Kenya and Kapchorua Tea Company
Ltd said their earnings have been hit by erratic weather patterns and
spiralling labour costs.
“The anticipated decline in full-year’s profit
is attributed in part to uneven and unpredictable weather patterns, but
more so, the primary cause is an inability to control aggressive and
rising labour labour costs,” said Ezekiel Wanjama, the chairman of
Williamson Tea Kenya Ltd and Kapchorua Tea Company Ltd.
He added: “With employee numbers, our
anticipated wage and other benefits increases dating back to 2014
require huge financial provisions which if repeated would be
unsustainable.”
In 2013, eight companies saw their profit
decline by more than 25 per cent. In 2014 and 2015, the number rose to
11 and 18 respectively.
Shelter Afrique has been in the limelight for
lending malpractices and under-provisioning for its loan losses, a vice
that claimed the job of the then managing director James Mugerwa last
year.
The malpractices include giving out mortgage loans to
unqualified borrowers, resulting into a huge increase in the level of
non-performing loans and failure to provide sufficient provisions for
toxic loans.
It is estimated that at least 59 per cent of the lender’s $246
million loan book was classified as non-performing by February 2016.
Shelter Africa was created solely to finance the development of
the African real estate and housing sector, and is owned by a group of
44 African countries together with the African Development Bank and the
African Reinsurance Corporation.
Other firms that have issued profit warnings for the 2016
financial year include CIC Insurance, Mumias Sugar Company, tyre maker
Sameer Africa, clothing retail firm Deacons, Nairobi Securities
Exchange, tea producer Sasini and Family Bank.
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