UAP, Eaagads issue first profit warnings on expected 2019 earnings

Insurer UAP-Old Mutual and coffee grower Eaagads have become the first publicly trading firms to issue profit warning on expected 2019 earnings.

In a pair of statements issued on Thursday by the respective company boards, the firms attributed the expected 25 percent dip in full year earnings to the continued stay of a tough operating environment.

UAP, which issued another warning last year, attributed its projected decline in earnings to the continued slump of the property market which points to the likely re-calibration of the group’s real estate portfolio.

“There are indicators that the weakening performance of the property market in Kenya and the uncertain political environment in South Sudan will likely lead to further impairments in the carrying value of certain investment properties,” read part of the board’s statement.

The very same fears saw UAP slide into a full year loss of Ksh.518 million for the first time in more than a decade in 2018 as the underwriter took a heavy hit from huge impairments.

The group incurred bruising from the write-off of a combined Ksh.400 million from the collapse of Bank M in Tanzania and the local demise of Athi River Mining (ARM) limited.

Further, the insurer lost Ksh.604 million from the devaluation of properties in South Sudan while the 2018 bear market run at the Nairobi Securities Exchange (NSE) costs a further Ksh.478 million as equity values tanked.

Moreover, UAP incurred higher operational costs from an additional Ksh.780 million in loan loss provisions.

Nevertheless, UAP clapped back at the depressive earnings from last year in June, doubling its half year earnings to Ksh.383 million from an increase in net earned premiums and a 8 percent drop of operational costs.

Meanwhile, coffee grower Eaagads has largely attributed its anticipated slide in earnings to the depressive global coffee prices which have reduced significantly this year in the face of market oversupply.

“The drop in profitability was further exacerbated by an increase in coffee production costs, notably increased labour costs, which have been on an upward trend year over year,” noted the company’s board.

Coffee prices have in the year to date fallen by more than 25 percent over Eaagads reporting period from Ksh.380.83 ($3.73) to Ksh.286.90 ($2.81) per kilo.

At the same time, early crop volumes have fallen by 51 percent to 46 tons from 96 last year.

Eaagads ended its loss making run to post a narrow Ksh.2.6 million net profit in the year to March 31, 2019 on the back of higher alternate income even as production remained buoyant from greater small-holder farmer participation in coffee farming over the period.

The company’s fears are however mirrored in its 2020 half year results released Thursday which put realized sales revenues down 58.5 percent to Ksh.14.9 million from Ksh.35.9 million in spite of the firm’s marginally narrowed net loss to Ksh.43.3 million from last year.

15 NSE listed firms issued profit warnings across the last full year financial reporting seasoning painting gloom prospects for millions of job seeking youth.

Among the firms were; UAP, Britam, East African Portland Cement, Housing Finance, Kenya Power, National Bank of Kenya, Sanlam, Bamburi Cement, Carbacid, Deacons, Crown Paints, Kapchorua Tea, Sameer Africa, Williamson Tea and Kenya Reinsurance.