15 NSE firms issue alerts as profits plunge Sh14bn - VIDEO

By CONSTANT MUNDA
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Summary

• The 15 publicly traded firms have issued profit warnings in the period with three of the alerts coming last week, indicating that their earnings will fall by at least 25 percent over the previous financial year.
• The diminished earnings signal gloomy prospects for millions of youthful jobseekers as the affected companies slow down on new investments, hurting employment creation.
• The profit dip also dampens growth in payroll and corporation tax collections by the Kenya Revenue Authority (KRA).
• The Treasury is already feeling the pinch of the slowdown in corporate earnings through missed tax collection targets.
• Payroll taxes, for example, missed the target for six months through December 2018 by Sh8.59 billion despite increasing to Sh180.37 billion from Sh158.17 billion, a sign of sluggish growth in creation of new job opportunities.

Fifteen Nairobi Securities Exchange (NSE) listed firms are facing a Sh13.8 billion plunge in profits in nine months since June last year, as a tough economic environment and corporate governance malpractices eat into companies’ earnings.

The 15 publicly traded firms have issued profit warnings in the period with three of the alerts coming last week, indicating that their earnings will fall by at least 25 percent over the previous financial year.

The diminished earnings signal gloomy prospects for millions of youthful jobseekers as the affected companies slow down on new investments, hurting employment creation.

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The profit dip also dampens growth in payroll and corporation tax collections by the Kenya Revenue Authority (KRA).

The majority State-owned electricity distributor Kenya Power, Bamburi Cement, Kenya Reinsurance Corporation, Britam, Housing Finance, National Bank and UAP Holdings are some of the big publicly-traded firms that have either reported or warned investors to brace for at least 25 percent fall in full-year earnings.

Other Nairobi Securities Exchange-listed firms whose earnings are projected to drop sharply include State-controlled East African Portland Cement Company, industrial gas producer Carbacid Investments, Unga Group, Uchumi Supermarkets and Crown Paints.

Firms such as insurer Sanlam, battery distributor Eveready and tyre vendor Sameer Africa have sunk into full-year losses, while others such as ARM Cement, Nakumatt and Deacons are staring at possible liquidation having fallen into administration. The Federation of Kenya Employers (FKE) attributes the struggle by the erstwhile stellar performers to a slowdown in payments to government contractors, the weight of increased levies by national and county governments, high labour costs and erratic weather conditions which have stifled growth in corporate revenue.

“The business environment is not conducive to sectors that are rich in job-creation like agriculture, manufacturing and services (retail and wholesale sectors). The country continues to experience depressed job growth in the formal sector,” said FKE executive director Jacqueline Mugo. “The middle class in Kenya are getting trapped in poverty and, therefore, have no disposable income to support supermarkets, for example, which has led to the closure of many retail stores.” Former supermarket giants Nakumatt, Uchumi and Ukwala are all facing the prospect of shutting down having fallen into financial difficulties.

The Treasury is already feeling the pinch of the slowdown in corporate earnings through missed tax collection targets.

Payroll taxes, for example, missed the target for six months through December 2018 by Sh8.59 billion despite increasing to Sh180.37 billion from Sh158.17 billion, a sign of sluggish growth in creation of new job opportunities.