Daily Nation ­ Tuesday
Date: 19.01.2016
Page 31
Article size: 311 cm2
ColumnCM: 69.11
AVE: 149280.0
Why firms cannot
bank on 2016 to get
handsome profits
Analysts
attribute
the dim
prospects
to high
interest
rates and
weak
shilling
BY BRIAN NGUGI
@brian_ngugi
[email protected]
They included TPS Eastern Africa,
collection for the period to poor perform­
ance by local companies.
BOC Gases, Crown Paints, East African
This, KRA said reduced income from
warnings in 2014.
?ompanies in the country face the Cables, Standard Group, Uchumi Su­ corporate and payroll taxes.
continued risk of shrinking profit margins permarkets, Standard Chartered Bank,
Mr Mwebesa however painted an op­
this year, according to analysts at SBG Mumias Sugar, Express Kenya, among timistic outlook for the Kenyan stock
others.
Securities.
market in 2016 despite global turbulence
According to SBG Securities Chief Ex­
Earnings in 2016 may be depressed by
which has informed several gloomy pro­
high interest rates and a weak shilling, the ecutive Nkoregamba Mwebesa, corporate jections by sections of analysts.
analysts say. The elections slated for next profits are equally likely to come under
Major studies have downgraded global
year are also likely to dampen business strain in the first half of this year.
and emerging markets economic growth
activity.
"Corporate earnings in 2016 will most in 2016. With China's economy slowing
This is bad news for companies which likely remain subdued in first half of 2016 rapidly and its stock market in a melt­
hope that this year will be better than on account of rising interest rates and a down, Mr Mwebesa says there is a good
2015, when the performance of corporate weaker Kenya shilling. However we are chance global capital flows — the critical
earnings came under strain. This led to now 19 months away from the general driver of markets — may go back to their
several big projects by various companies elections in 2017 and it is likely that we traditional safe haven of US government
stalling. More weak balance sheets were will see increased spending on infrastruc­ bonds.
also witnessed last year, besides declining ture and Capital Investments by both the
"Certainly there is merit in the supposi­
new investments in the private sector.
central and county governments in the tion that in general, investment flows will
The sluggish performance in 2015 new fiscal year," Mr Mwebesa said in an revert to traditional safe havens," he said.
has been underscored by the increased interview with Smart Company.
"US treasuries will certainly be a benefi­
"Entities that will be able to tap into ciary of these reversals in 2016, especially
number of companies listed on the Nai­
robi Securities Exchange, (NSE) which this will certainly improve their pros­ now that the Fed has given direction by
making the first rate hike on the Fed­
issued profit warnings in 2015. The com­ pects."
During the first quarter of the current Funds rate in seven years."
panies rose to more than 15 compared to
about 11 companies which issued profit financial year, the Kenya Revenue Author­
ity attributed the shortfall in its revenue
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
Daily Nation ­ Tuesday
Date: 19.01.2016
Page 31
Article size: 311 cm2
ColumnCM: 69.11
AVE: 149280.0
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya