Listed firms hit by slowing economy

NSE chief executive Geoffrey Odundo during ringing of the bell ceremony at Nairobi Securities Exchange in Nairobi on September 4, 2019. [Jonah Onyango, Standard]

The Nairobi Securities Exchange (NSE) is the latest entrant to the growing list of companies that expect their profit for this year to fall.

NSE has issued a statement saying its profit for the year to December 2019 will decline by more than 25 per cent, noting that a tough year that resulted in reduced activity at the bourse had dented its earnings.

The bourse reported a Sh190 million net profit last year, which was 12 per cent lower than the Sh216 million in 2017.

“The performance of the company in 2019 was adversely affected by a challenging economic environment and reduced inflow of capital from global frontier market investors who are key participants in our market,” said NSE in a statement Friday.

“Taking the foregoing into account… the company is expected to record a decline of more than 25 per cent in the net profit attributable to the shareholders of the company for the financial year ended December 31, 2019, as compared to that for the same period ending December 31, 2018.”

The company said it had made attempts to put in place measures to cushion itself from the downturn through diversificatin of its business to include the Derivatives Market, implementation of the Ibuka Programme and other products. It added that the new products will make an impact on its profits next year.

The NSE joins about 20 listed companies that have issued profit warnings this year while a number that already published their full-year results in June reported losses or a major drop in profit.

The declining performance, attributed to various factors including low spending power among consumers and delayed payment of bills by goverment agencies, have seen thousands of employees lose their jobs.

Among the companies that expect to report or have already published earnings substantially lower than last year’s include Kenya Power, Kenya Re, Sanlam, UAP, Eaagads, BOC Kenya and Standard Group.

Activity at the NSE can to some extent be taken to be a barometer of economic performance and it has been on the decline for the better part of this year.

The NSE 20 share index, which is the mean for the 20 best performing counters at the exchange, has declined since January when it was at 2,983 points to 2,584 points in yesterday’s trading.

The number of transactions declined 22 per cent to 208,073 between January and September this year, compared to 267,741 transactions over a similar period in 2018.