Flame Tree Group chairman George Theobald. PHOTO | DIANA NGILA | NMG
Flame Tree Group Holdings Limited has issued a profit warning, anticipating at least a 25 per cent decline in full-year profit for the year ending December 2022.
The maker of beauty products, including creams, nail polish, lotions and moisturisers blamed the increase in raw material prices, inflation and depreciation of local currencies against the US dollar for its expected drop in earnings.
READ: Flame Tree debt capacity drops, says ratings firm
“These factors combined have severely affected the margins and cash flows of the company, which also led to higher short-term debt, mainly LC lines to finance the purchase of raw material, hence leading to higher finance cost incurred,” said the company in a notice.
The Nairobi Securities Exchange-listed firm cited the sharp increase in raw material prices, especially plastics which are the main driver of its cost of sales.
The company blamed global supply chain disruptions that have seen shipping costs triple over the past 12 months, hurting business.
The shilling depreciated from Sh106 for every dollar in June 2021 to Sh124 end of this month.
READ: Flame Tree sets sights on corporate bond
The company whose head office is in Nairobi has operations in Mauritius, Rwanda, Ethiopia, Dubai and Mozambique and also manufactures plastic products for bulk water storage such as Roto Tanks and Jojo Plastics and mobile toilets.
Profit warnings give existing and prospective shareholders a guide to the results that may be shocking.
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