So far Kenya Airways, Crown Paint Kenya, Nation Media Group, Car & General, WPP Scan Group, Unga Group and Kenya Power have issued profit warnings
Others that have warned investors of impending lower earnings are Kakuzi, Standard Media Group and Bamburi Cement.
The Capital Markets Authority (CMA) requires companies listed at the Nairobi Securities exchange to inform shareholders and other interested parties of the state of their financial situation.
Any material information, such as significant changes to articles of association, profits, material discrepancies in financial statements and appointment of a receiver manager
This is attributed to a weak shilling that has devalued major international currencies, a hostile tax regime, high bank rates, and high fuel prices among other uncertainties.
They can have serious implications for investors and shareholders, including a drop in investor confidence.
William Ataga, a seasoned financial risk analyst says a profit warning signals to potential lenders or partners that the company may not be able to fulfil its obligations in the current period, thereby affecting the company’s future prospects of obtaining future finance.
"This is a very difficult moment. It is very unusual for almost half of active listed firms to issue profit warnings. This is worrying for sure,'' Ataga told the Star in a telephone interview.
He added that indications of a struggling economy are on display.
On Monday, the Central Bank of Kenya quoted the shilling at a new low of 152.90 units against the US dollar, having depreciated by 21 per cent in the past 12 months.
"High global fuel prices, uncertainties in the geopolitical space, high debt obligation, and high tax regimes are dancing on the grave of the weakening shilling,'' an economist Joan Kazungu echoed Ataga's sentiments.
Late last month, investor wealth at NSE dropped to a ten-year low on Thursday with the market closing under Sh1.4 trillion.
On October 27, the trading session closed at Sh1.399 trillion in what marks the first time in over a decade that the market cap at the NSE has fallen below the Sh1.4 trillion threshold, with the last instance occurring on February 4, 2013, when it closed at Sh1.4 trillion.
The decline in market capitalisation has been a cause for concern among investors and market participants.
Year-to-date figures reveal a staggering drop in investor wealth, with approximately Sh587 billion wiped off the books.
“Over the last 7 days, the market has dropped 3.9 per cent, driven by a decline of 9.3 per cent in the communication services sector. As for last year, the market is also down 31 per per cent,” Mwango Capital said in its periodic analysis.
It is therefore no wonder the Nairobi bourse was last month ranked the worst-performing in Africa in the first nine months of the year in dollar returns, highlighting the impact of foreign exits and global shocks on East Africa’s biggest stock market.
The ranking on the Morgan Stanley Capital International (MSCI) Index, a key source of investment information for foreign investors, comes on the back of another disputed analysis by Bloomberg that found the NSE was one of the worst-performing stock markets in the world, following the decline of the NSE All Share Index.
The MSCI Index that tracks three Kenyan blue chips—Safaricom, Equity Group and EABL— exposing them to foreign investors who have often dominated trading on these counters found that the Kenya Index shed 41.9 per cent, to stand at 627.4 points, with the Zimbabwe Stock Exchange coming as the second worst performer at negative 34 per cent.
The bear market is not just experienced at the NSE. Last week, most locally owned banks reported financial results, with Kenyan units reporting a drop in earnings.
Equity Bank Kenya reported a 20 per cent drop in earnings for the first nine months of the year, attributed to rising non-performing loans.
According to the Group's financial results released Monday, the bank's profit after tax declined to Sh19.3 billion, slowing the overall growth of the Group which rose to five per cent to Sh36.2 billion.
The unit last reported a drop in profit in 2016 when the government capped interest rates at four per cent above the base-lending rate.
"If you look at the countries we operate in, the country that has had the biggest impact of the global macro shock is Kenya. It is the country whose currency has had the highest depreciation. That has carried the biggest impact as it has translated to imported inflation at a time when the country had to import food and energy,'' Equity Bank Holdings MD James Mwangi said.
Even though KCB Group reported a slight growth in profits for the first nine months of the year to hit Sh30.7 billion compared to Sh30.5 billion in the same period last year, the Kenyan unit recorded a drop.
''The depreciation of the shilling, particularly for Kenya, has caught us. And you will see it in the numbers in many organisations. That comes with challenges, particularly on the credit book - on facilities that are dollar-denominated. And it's not a KCB issue, it is not a one institution issue, it comes with a challenge for banking." KCB Group MD Paul Russo said.
"The banking sector is the heart of any given economy. We are reviewing Q3 results, especially on Kenyan units with many worries. We do not know for sure when the shilling will stabilise," a senior executive at NCBA Group told the Star.
Latest data from the Central Bank of Kenya (CBK) show that the stock of non-performing loans (NPLs) in Kenya surged to a 16-year high of 15 percent in August, up from 14.5 per cent in July.
This translates to more than Sh596 billion, worked as a share of the total loan book.
This has seen the cost of borrowing rise as the government pushes up base lending rates to manage the rising cost of living and cater to the shilling that has devalued major international peers.
Inflation - a measure of the cost of living over the past 12 months - rose for the first time in five months to 6.9 per cent in October from 6.8 per cent a month earlier. This was the first increase since eight per cent in May.
Despite these, the government insists that the economy is on the right trajectory and is expected to expand by 5.5 per cent in 2023 and above 6.0 percent over the medium term.
"This growth will be reinforced by the Government's Bottom-Up Economic Transformation Agenda geared towards economic turnaround and inclusive growth,'' the National Treasury Cabinet Secretary Njuguna Ndung'u recently told journalists.
He however cautioned the public to tighten belts for a bumpy year as the state cleans up the mess left by the previous regime.
Several companies at the Nairobi Securities Exchange (NSE) expect their profits for this financial year to drop by at least 25 per cent, perhaps a glimpse of a nosediving economy.
So far Kenya Airways, Crown Paint Kenya, Nation Media Group, Car & General, WPP Scan Group, Unga Group and Kenya Power have issued profit warnings
Others that have warned investors of impending lower earnings are Kakuzi, Standard Media Group and Bamburi Cement.
The Capital Markets Authority (CMA) requires companies in Kenya to inform investors and other interested parties of the state of the financial situation.
Any material information, such as significant changes to articles of association, profits, material discrepancies in financial statements and appointment of a receiver manager
This is attributed to a weak shilling that has devalued major international currencies, a hostile tax regime, high bank rates, and high fuel prices among other uncertainties.
They can have serious implications for investors and shareholders, including a drop in investor confidence.
William Ataga, a seasoned financial risk analyst says a profit warning signals to potential lenders or partners that the company may not be able to fulfill its obligations in the current period, thereby affecting the company’s future prospects of obtaining future finance.
"This is a very difficult moment. It is very unusual for almost half of active listed firms to issue profit warnings. This is worrying for sure,'' Ataga told the Star in a telephone interview.
He added that indications of a struggling economy are on display.
On Monday, the Central Bank of Kenya quoted the shilling at a new low of 152.90 units against the US dollar, having depreciated by 21 per cent in the past 12 months.
"High global fuel prices, uncertainties in the geopolitical space, high debt obligation, and high tax regimes are dancing on the grave of the weakening shilling,'' an economist Joan Kazungu echoed Ataga's sentiments.
Late last month, investor wealth at NSE sunk to a ten-year low on Thursday with the market closing under Sh1.4 trillion.
On October 27, the trading session closed at Sh1.399 trillion in what marks the first time in over a decade that the market cap at the NSE has fallen below the Sh1.4 trillion threshold, with the last instance occurring on February 4, 2013, when it closed at Sh1.4 trillion.
The decline in market capitalization has been a cause for concern among investors and market participants.
Year-to-date figures reveal a staggering drop in investor wealth, with approximately Sh587 billion wiped off the books.
“Over the last 7 days, the market has dropped 3.9 per cent, driven by a decline of 9.3 per cent in the communication services sector. As for last year, the market is also down 31 per per cent,” Mwango Capital said in its periodic analysis.
It is therefore no wonder the Nairobi bourse was last month ranked the worst-performing in Africa in the first nine months of the year in dollar returns, highlighting the impact of foreign exits and global shocks on East Africa’s biggest stock market.
The ranking on the Morgan Stanley Capital International (MSCI) Index, a key source of investment information for foreign investors, comes on the back of another disputed analysis by Bloomberg that found the NSE was one of the worst-performing stock markets in the world, following the decline of the NSE All Share Index.
The MSCI Index that tracks three Kenyan blue chips—Safaricom, Equity Group and EABL— exposing them to foreign investors who have often dominated trading on these counters found that the Kenya Index shed 41.9 per cent, to stand at 627.4 points, with the Zimbabwe Stock Exchange coming as the second worst performer at negative 34 per cent.
The bear market is not just experienced at the NSE. Last week, most locally owned banks reported financial results, with Kenyan units reporting a drop in earnings.
Equity Bank Kenya reported a 20 per cent drop in earnings for the first nine months of the year, attributed to rising non-performing loans.
According to the Group's financial results released Monday, the bank's profit after tax declined to Sh19.3 billion, slowing the overall growth of the Group which rose to five per cent to Sh36.2 billion.
The unit last reported a drop in profit in 2016 when the government capped interest rates at four per cent above the base-lending rate.
"If you look at the countries we operate in, the country that has had the biggest impact of the global macro shock is Kenya. It is the country whose currency has had the highest depreciation. That has carried the biggest impact as it has translated to imported inflation at a time when the country had to import food and energy,'' Equity Bank Holdings MD James Mwangi said.
Even though KCB Group reported a slight growth in profits for the first nine months of the year to hit Sh30.7 billion compared to Sh30.5 billion in the same period last year, the Kenyan unit recorded a drop.
''The depreciation of the shilling, particularly for Kenya, has caught us. And you will see it in the numbers in many organizations. That comes with challenges, particularly on the credit book - on facilities that are dollar-denominated. And it's not a KCB issue, it is not a one institution issue, it comes with a challenge for banking." KCB Group MD Paul Russo said.
"The banking sector is the heart of any given economy. We are reviewing Q3 results, especially on Kenyan units with many worries. We do not know for sure when the shilling will stabilize,'' a senior executive at NCBA Group told the Star.
Latest data from the Central Bank of Kenya (CBK) show that the stock of non-performing loans (NPLs) in Kenya surged to a 16-year high of 15 percent in August, up from 14.5 per cent in July.
This translates to more than Sh596 billion, worked as a share of the total loan book.
This has seen the cost of borrowing rise as the government pushes up base lending rates to manage the rising cost of living and cater to the shilling that has devalued major international peers.
Inflation - a measure of the cost of living over the past 12 months - rose for the first time in five months to 6.9 per cent in October from 6.8 per cent a month earlier. This was the first increase since eight per cent in May.
Despite these, the government insists that the economy is on the right trajectory and is expected to expand by 5.5 per cent in 2023 and above 6.0 percent over the medium term.
"This growth will be reinforced by the Government's Bottom-Up Economic Transformation Agenda geared towards economic turnaround and inclusive growth,'' the National Treasury Cabinet Secretary Njuguna Ndung'u recently told journalists.
He however cautioned the public to tighten belts for a bumpy year as the state cleans up the mess left by the previous regime.
