Profit warnings persist as Covid fallout lingers

Guests follow proceedings during the launch of a pension product by an insurance firm in Nairobi. 

Photo credit: File | Nation Media Group

What you need to know:

  • Liberty Kenya Holdings is the fourth firm listed by the Nairobi Securities Exchange to declare that its profits for the 2021 financial year would fall by at least a quarter.

The economic effects of the Covid-19 pandemic are far from over as more corporates warn that their financial performance for the year ended December would fall substantially compared to the previous period.

Liberty Kenya Holdings on Thursday became the fourth firm listed by the Nairobi Securities Exchange (NSE) to declare that its profits for the 2021 financial year would fall by at least 25 percent due to the negative impacts of Covid-induced disruptions.

Other listed firms, Kakuzi, Sanlam, and Limuru Tea have also issued profit alerts in recent weeks. Liberty said higher risk claims on the insurance business from the impact of Covid-19 last year are expected to chop its profit in the year by at least 25 per cent compared to net profit recorded in 2020, indicating net earnings could fall to Sh505.97 million.

The firm made Sh675.95 million net profit in 2020, a two per cent drop from Sh689.61 in 2019, blamed on reduced investment returns from poor performance of listed equities and bonds, and lower valuations of properties.

Financial results

“Based on preliminary unaudited consolidated financial results, the board of the company wishes to announce that, the consolidated earnings after taxation for the year ended December 31, 2021, are likely to be lower by at least 25 per cent than the audited earnings after taxation reported for the same period in 2020,” the firm stated.

This means no dividends for shareholders for another year. Directors withheld dividends in 2021 as earnings dropped.

Insurer Sanlam Kenya has also said the uncertainty of the business led to increased provisioning for premium default amid higher claims on medical insurance.

This indicates the persistence of the economic fallout from the pandemic for the second year since the outbreak in March 2020, which has continued to affect businesses revenues, led to reduced demand and disrupted global supply chains.

The return of economic activity triggered increased premiums and claims last year after a slowdown in 2020.

“The prolonged Covid-19 pandemic negatively impacted various aspects of the economy including our business. Both corporate and retail segments were adversely affected by increased premium default and claims from Covid-19 fatalities,” Sanlam said.

Cost of production

Agricultural firm Kakuzi has also issued a profit warning for the year ended December, citing reduced avocado production and lower prices of the commodity in European markets.

Limuru Tea attributed its expected declined in profits to the rising cost of production amid Covid-19 economic disruption.

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