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Market Report – 7th January 2022


Faida Research - January 13, 2022 - 0 comments

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Features of the week

 

Kakuzi Issues Profit Warning for FY2021

Kakuzi announced a profit warning for FY2021 expecting earnings for the year ended December to contract compared to the previous year. This implies that after tax profits for FY2021 will not exceed KES 622.0 million.

The profit warning was primarily attributed to lower avocado production and a decline in avocado prices in European markets. According to management, the profit warning arose from trading information, market forecasts and preliminary unaudited full-year financial results, among other data sources.

 

Commentary

  • Capital Markets Regulations require listed companies to issue profit warnings when they expect projected earnings for the current financial year to be at least 25.0% lower than the earnings realized in the preceding financial year.
  • This implies after tax profits could fall to at least KES 466.5 million owing to the lower export volumes and reduction in prices.
  • The company remains focused on its income diversification strategy (avocados, macadamia, wood products, blueberries), we opine that revenue diversification would help cushion performance from the negative effects of price fluctuations.

 

Equities Market Summary

Nairobi Securities Exchange Performance

 The All Share Index (NASI) and the NSE 20 edged up by 3.2% and 0.9% w-o-w to close the week at 171.74 and 1,920.38 respectively. We attribute the gain in the index to a 5.1% w/w price gain on Safaricom to KES 39.90. Equity turnover rose by 179.2% to KES 1.9 billion and the volume traded increased by 135.2% to 52.1 million. Notable price gains included; NMG (5.4% w/w to KES 19.45), BOC (4.3% w/w to KES 73.00) and NCBA (3.0% w/w to KES 25.95). We expect price stability this week.

 

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