The Kenya Shilling’s exchange rate depreciation against the US dollar and a tough business environment have continued to drive more listed firms, especially those that rely on imported raw materials, to issue profit alerts.
- A profit warning is a declaration issued by a listed company that warns investors that the profit of the company will significantly decline or even run into a loss.
- Crown Paints Kenya and WPP ScanGroup becoming the latest casualties to issue profit warnings this year.
- Others are Nation Media Group, Sasini, and Car &General.
In its statement, WPP ScanGroup Plc said it expects lower earnings in 2023 due to a subdued economic environment that has led to firms cutting down on their advertising, marketing, and communications spending.
The media industry has been struggling with Media Edge Interactive Limited and Redhouse Group Limited, leading public relations and marketing communications firms, being the latest casualties after being placed under receivership due to financial problems.
According to a recent gazette notice, the high court has appointed Mark Gakuri as the official receiver that will oversee the liquidation of these two firms.
- The business environment in the PR business and media is under strain at a time when Nation Media Group, a leading media house has issued a profit warning.
- Its nearest competitor, Mombasa road-based loss-making Standard Group is also in deep financial doldrums and has set in motion another round of staff reduction exercises, to remain afloat.
According to Crown Paints, its earnings for the period are expected to dip by more than 25 percent compared to the previous year.
- Sasini PLC profits for the financial year are expected to shrink by at least 25 percent occasioned by the high cost of production due to the unplanned escalation of input costs.
- Similarly, Car & General’s profit for the fiscal year will also drop by more than 25 percent due to the weakening of the Kenya Shilling against the US dollar while NMG’s profit will also sink by at least 25 percent on higher taxes and surge in the price of newsprint.
Figures from Kenya’s Purchasing Managers Index(PMI) show a decline in business condition in 2023, with the averaging 48.70 in H1’23 from 49.25 in H1’22. The PMI is expected to remain below the 50-point threshold in the short term on the back of high input costs and depreciation of the shilling, but gradually improve in the long term.
Near-term concerns are driven by elevated inflationary pressures, elevated input costs, and the continued depreciation of the Kenya Shilling.
Kenya’s Shilling is expected to extend its gradual march lower as foreign-currency demand ramps up from all sectors before the end of the year. When the forex markets opened this morning, the CBK quoted the Kenya Shilling a mean rate of 152.97 compared to 152.70/90 per U.S. dollar last Wednesday and Thursday’s closing rate of 152.20/40.
ALSO READ: Nation Media Group Issues Profit Warning
