How 2017 election year sank listed firms into the red
SEE ALSO :Counties seek to unlock economyAs at half year in September, NBV posted a loss of Sh14.9 million compared to a profit of Sh1 million in previous half year. CEO Vasu Abotula said that the period was turbulent for his firm as well as many others in retail and fashion sector. “This was the period NBV continued making losses due to very low sales turnover coupled with working capital shortage, banks credit squeeze, economic slowdown, low purchasing power mainly due to uncertainty in political situation and ongoing election disputes during the period,” he said. Things were no better in the construction sector. Market leader Bamburi Cement issued a profit warning then went ahead to post a 67 per cent decline in profit to Sh1.97 billion. This means that they lost Sh3.9 billion last year. That was its lowest profit in over a decade, forcing the board to cut total dividends per share by more than half to Sh4 from Sh12 per share the previous year. Profit warning The board blamed the profit dip on lower sales in Kenya due to contracted market following “prolonged election period, tightening of credit, drought and delayed infrastructure projects.” Another cement maker, Athi River Mining Cement, issued a profit warning and is prepared to post a loss for the third year in a row. Its loss will widen from Sh2.8 billion to at least Sh3.5 billion. As at half year, the performance by East African Cables and East Africa Portland Cement pointed to a rocky full year performance. While the Portland Cement’s loss had quadrupled to Sh970 million, that of cable maker had widened by more than eight times to Sh232 million. But in insurance, save for Britam whose profit tumbled by 79 per cent to Sh527 million and Sanlam whose bottom-line declined by 24.9 per cent to Sh53 million, the rest of insurers posted gains. Jubilee Insurance grew its profits by 15 per cent to Sh4.23 billion, making it the tenth straight year to grow profits. “2017 was a challenging year for the insurance industry across the region. Adverse weather conditions, uncertainty as a result of the prolonged electioneering period in Kenya amongst others are some of the hurdles we faced as a business,” remarked Jubilee Holdings Chairman Nizar Juma. CIC insurance more than tripled its earnings to Sh478 million while Liberty Holdings profits grew by more than a third to Sh846 million. Kenya Re posted 8.8 per cent growth. All the four firms in the energy segment enjoyed green shoots to gain additional Sh2.9 billion even though KenolKobil’s growth was the slowest since 2013. KenGen’s profit was up 34 per cent to Sh9.1 billion as that of Total Kenya grew up 23 per cent to 2.7 billion. But in investment services, Kurwitu Ventures failed to strike any deal and ended up earning only Sh317 as revenue as its losses hit Sh10.6 million. This is even as Centum Investment firm also registered a 24 per cent drop in half year profits to Sh1.6 billion in November. The firm’s Group Chief Executive Officer James Mworia said the decline was due to poor performance by its subsidiary Sidian Bank. Trans-Century is on course to post a loss for the fourth year in a row. The firm issued a profit warning meaning that it expects a worse performance than the Sh864 million loss in 2016. In March, the company said that the expected dip in performance was due to delayed spending in infrastructure projects that “affected our customers as a result of uncertainties brought about by the prolonged electioneering period.” It also cited constrained access to credit due to banks being denied chance to use market controlled rates in pricing loans. Mumias Sugar’s woes continued seeing it succumb to Sh6.77 billion loss, being 42 per cent wider than that of 2016 as the manufacturing and allied sector had a tough outing. Cumulatively, the segment shed Sh5.2 billion. Four out six firms in this segment posted a drop in profit even as two- Mumias Sugar and Unga Group returned losses. Only Kenya Orchards Ltd had an improved year posting a 52 per cent growth in profit to Sh5.7 million. Tax exemption on maize imports failed to lift flour miller Unga Group, which reported a Sh32 million loss for the year ending June from a profit of Sh508 million. It lost Sh151 million in goodwill impairment over reduced operations in troubled Nakumatt stores, which included bakeries that have now been closed. “The bakery business was negatively impacted by credit challenges facing the retail sector, resulting in an exit from most Nakumatt stores, where it had bakery implants and counters,” the firm stated. Outside the stock market, it was no better. Firms such as Nakumatt have sunk into problems, closing one outlet after another. It is now in the hands of a receiver manager with its survival hanging in balance over Sh35.8 billion debt. In the banking industry, only 10 out of the 40 lenders managed to grow profits in the year of rate caps. Seven banks- Family Bank, Consolidated Bank, Ecobank, Jamii Bora bank, Middle East Bank Kenya, Sidian Bank and SBM Bank- succumbed into losses. Many companies are now expressing optimism that 2018 will be a better year. A Private Sector Market Perception Survey in March by Central Bank of Kenya showed that those banks that were polled showed almost unanimous optimism of a better year. “Respondents attributed their optimism to a stable macroeconomic environment, favourable weather conditions, improved business environment and investor confidence, continued public investment in infrastructure, expected direct flights to the US, and political stability,” said CBK Governor Patrick Njoroge. Recently, the latest Stanbic Bank of Kenya Purchasing Managers Index (PMI) showed that business confidence for the country’s private sector had surged to a 26-month high on the back of improved operating conditions. The index, which tracks private-sector activity, jumped to 55.70 in March from 54.7 in February as firms indicated improved operating conditions since 2016.