[SIZE=6]15 NSE firms issue alerts as profits plunge Sh14bn[/SIZE]
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[li]The 15 publicly traded firms have issued profit warnings in the period with three of the alerts coming last week, indicating that their earnings will fall by at least 25 percent over the previous financial year.[/li][li]The diminished earnings signal gloomy prospects for millions of youthful jobseekers as the affected companies slow down on new investments, hurting employment creation.[/li][li]The profit dip also dampens growth in payroll and corporation tax collections by the Kenya Revenue Authority (KRA).[/li][li]The Treasury is already feeling the pinch of the slowdown in corporate earnings through missed tax collection targets.[/li][/ul]
Link to full article: https://www.businessdailyafrica.com/news/15-NSE-firms-issue-alerts-as-profits/539546-5050954-5srq0q/index.html
[COLOR=rgb(97, 189, 109)]My Opinion
Companies declare profit warnings when they expect earnings to decline by over 25% from the previous year. NSE has about 60 listed companies, give or take. 1/4 of the listed companies will see a decline in earnings by more than 25%. I expect more than 15 companies to declare a profit decline (without profit warnings) i.e companies whose earnings will decline by less than 25%. Therefore, it is a safe bet that over half of the listed companies will register a decline in earnings. By the way, this is a very conservative estimate because if earnings follow a normal distribution, we could see over 30 companies registering a decline in earnings by less than 25%. This is very bad news. For ages, economists have used the stock market as a yardstick to determine how the underlying economy is performing. Reduced earnings are caused by reduced demand meaning that most Kenyans are financially worse off than they were in the previous financial year. The government and bloggers should not lie to you that the economy is performing well, it isn’t. We are officially in an economic recession. Other signs:
Houses and plots aren’t selling as fast as they used to. Tried selling your plot/property lately??
Businesses closing down in the CBD and empty watering holes even on weekends. I was surprised to find a half full club on a Friday night in the CBD. This was unheard of in 2011-2014. Kenyans don’t have as much to spend on leisure as they used to.
Watu hawana pesa, the sooner we accept that we are royally fucked the better. Go to westlands and see how entertainment joints are struggling to keep it together.
I converted 90% of my liquid capital to USD and EUR last week juu najua kutakuwa kubaya by the 3rd quarter of 2019.
The other day I realized that Club Mist along Tom Mboya Street was closed. That club used to be a beehive of activity even early last year. Most watering holes have already converted to restaurants e.g Zodiac is now Alfajri Restaurant etc. Just the other day, Subway and Pizza Hut relocated their branches in CBD and Westlands to Galleria Mall. They cited lower foot traffic in Westlands and CBD. These branches have been profitable for years but they felt the heat lately and moved.
He expects the Kenyan Shilling to depreciate against the USD and Euro, so he converts his Ksh to USD/Euro to hedge against that risk. USD is currently at Ksh 100. If it goes to Ksh 150, you will have lost 33% in USD terms. In a country like Zimbabwe, you would feel a lot safer holding USD or Euros than the local currency. Same logic applies.
I’d like to know how Ali Satchu Khan’s firm is faring…
There’s an article I saw on the dailies venye walifanya insider trading deal flani thru WhatsApp and raked in 200+ Million in a week!!
A few observations;
a)NSE is hardly representative of the wider economy, is dominated by the financial sector (banks and insurance). Banks are having a hard time adjusting to the interest rate cap hence flat or lower earnings.
b) plots and real estate is down,it should be. For ages Kenyans have been engaging in unsustainable investment in real estate. You buy plots in the middle of nowhere, wait for the value to appreciate then dispose it to the next fool down the food chain .No value added, just capital locked up in unproductive sectors as valuable agricultural land was subdivided into useless plots. The interest rate cap helped deal with that, besides this nation was running out of fools. Now capital is going to be allocated to more productive sectors.
c) customers moving out of cbd is a matter of preference. Start worrying when EABL starts reporting decline in sales. Or sportpesa
The economy is always moving in cycles. During periods of decreased economical output, the whole country will suffer some consequences including companies and currency. However, I agree that due to unstable macro environment, it is better to hold USD or EUR instead local currency