High interest rate storm hits insurer Sanlam
Insurer Sanlam Kenya has joined the growing list of Nairobi Securities Exchange-listed companies warning that their net earnings this year will suffer at least a 25 percent dip.
In an update to the public, Sanlam said its net earnings for the fiscal year ending on December 31, 2023, will decline due to the prevailing high-interest rates regime in the country, causing the insurer to incur high finance costs.
The company added that high interest rates have also led to unrealized fair value losses on its portfolio of government securities. In the period ending June 30, Sanlam Kenya widened its net loss position by 179 percent to Kes171.94 million compared to the Kes9.1 million loss suffered in June 2022.
Sanlam joins nearly a dozen companies listed on the NSE that have announced profit warnings this year, as a tough business environment characterized by high-interest rates, increased taxation, reducing disposable incomes, coupled with global economic shocks, throttles businesses.
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Other listed firms facing profit dip
In early December, Express Kenya Limited, a logistics company, issued a profit warning attributing it to a deceleration in economic activities within East Africa’s most robust economy. The company stated that this slowdown has substantially diminished the demand for warehousing operations.
“The warehousing operations of the company are still significantly low due to the decrease in demand and low economic activities leading to reduced income, further resulting in a negative impact on the business performance,” said Express Kenya.
On December 5, fruit exporter Kakuzi issued a similar warning, noting that its macadamia export business will suffer losses due to reduced demand and lower global prices in its key export markets of China, the USA, and Japan.
However, in a note signed by Board Chairman Nicholas Ng’ang’a, Kakuzi noted that its avocado export business is experiencing strong performance this year. In 2022, Kakuzi reported KES 845.8 million net profit, implying that the net earnings for this year will not exceed KES 634.4 million.
Since March, several prominent companies on the NSE, including Sameer Africa, Crown Paints, WPP Scangroup, Longhorn Publishers, Sasini, Car & General, Nation Media Group, Centum Investment Company, Unga Group, and Kenya Power, have issued warnings. These companies have experienced significant shifts in their financial outlook.
