A total of 13 companies have issued profit alerts this year. This year’s number is far much higher than that of last year.
These companies include ARM Cement, Standard Chartered Bank, Uchumi Supermarket, Mumias Sugar, Express Kenya, East African Cables, Standard Group, Atlas Development, Sameer Africa, Car & General, Crown Paints and BOC Gases.
According to the law, all the listed firms are needed to make it open in advance to their shareholders if projected earnings might fall by more than 25 percent. This is one of the ways of forewarning investors of the risk of reduced dividend yields as well as shielding them from a potential loss of capital.
In 2014, a total of eleven companies issued profit warnings. This was also an increase from eight profit warnings that were issued in 2013. This is an indication that the economic times facing the corporate sector are rough.
BOC Gases has become the latest company to issue a profit alert. This comes after the company projections seem not to gain the benefit of tax credit this year. This is as a result of losses as well as the increased competition in the sector. In 2014, the firm’s experts earned a total of 229.63 million shillings but this year, they are likely not to earn more than 172.2 million shillings.
Many companies that have already issued profit alerts have sited issues such as the interest rates that soared a record high this year, the increase in the cost of production, stiff competition from other companies as well as from cheaply imported goods, hard economic times that have reduced the capabilities of people to purchase goods and the ailing Kenyan shilling against the dollar for the better part of this year.
When a company issues a profit alert, it means that the shareholder should be prepared to either earn less dividends of none at all.
Article by Juma Fred.