Three more Kenyan firms issue profit warnings
Monday March 27 2017
Three more companies have joined the list of Kenyan companies warning of a decline in profit for the 2016 financial year, signalling a difficult operating environment and the poor performance of the economy.
Pan African housing financier Shelter Afrique and agricultural firms Williamson Tea Kenya and Kapchorua Tea, expect their earnings for the year 2016 to drop by more than 25 per cent from the previous year's.
Shelter Afrique said it expects a huge portfolio of bad debts to dent its profit.
“The main reason for the lower earnings in the restated 2015 results and 2016 is a sharp increase in the level of impairment charges to provide for expected losses from the portfolio,” company chairman Jean-Paul Missi said in a statement Monday. “The company has identified the loans and has taken measures to manage the recovery of the debts.”
Williamson Tea Kenya and Kapchorua Tea Company Ltd said their earnings have been hit by erratic weather patterns and spiralling labour costs.
“The anticipated decline in full-year’s profit is attributed in part to uneven and unpredictable weather patterns, but more so, the primary cause is an inability to control aggressive and rising labour labour costs,” said Ezekiel Wanjama, the chairman of Williamson Tea Kenya Ltd and Kapchorua Tea Company Ltd.
He added: “With employee numbers, our anticipated wage and other benefits increases dating back to 2014 require huge financial provisions which if repeated would be unsustainable.”
In 2013, eight companies saw their profit decline by more than 25 per cent. In 2014 and 2015, the number rose to 11 and 18 respectively.
Shelter Afrique has been in the limelight for lending malpractices and under-provisioning for its loan losses, a vice that claimed the job of the then managing director James Mugerwa last year.
The malpractices include giving out mortgage loans to unqualified borrowers, resulting into a huge increase in the level of non-performing loans and failure to provide sufficient provisions for toxic loans.
It is estimated that at least 59 per cent of the lender’s $246 million loan book was classified as non-performing by February 2016.
READ: Shelter Afrique boss resigns in the wake of sham accounting
ALSO READ: Shelter Afrique now turns to AfDB for $60m bailout
Shelter Africa was created solely to finance the development of the African real estate and housing sector, and is owned by a group of 44 African countries together with the African Development Bank and the African Reinsurance Corporation.
Other firms that have issued profit warnings for the 2016 financial year include CIC Insurance, Mumias Sugar Company, tyre maker Sameer Africa, clothing retail firm Deacons, Nairobi Securities Exchange, tea producer Sasini and Family Bank.