Kenya Power drops after profit warning

Kenya Power acting managing director Jared Othieno. FILE PHOTO | NMG

What you need to know:

  • Monday’s share price was the lowest that Kenya Power has touched since April 2003.
  • Acting managing director Jared Othieno said the firm's net profit would be at least 25 per cent lower than the Sh7.26 billion booked in a similar period last year due to the depressed economy and high finance costs.
  • The news also coincided with that of the trial of former Kenya Power managing director Ben Chumo and his successor Ken Tarus alongside other senior managers failed to start after a crucial file went missing.

Kenya Power’s share plunged by 7.95 per cent in Monday’s trading at the Nairobi Securities Exchange (NSE) to close at Sh4.05 as investors factored in a profit warning that signalled a sharp drop in the utility firm’s earnings for the financial year ended June.

Monday’s share price was the lowest that Kenya Power has touched since April 2003. Acting managing director Jared Othieno said the firm's net profit would be at least 25 per cent lower than the Sh7.26 billion booked in a similar period last year due to the depressed economy and high finance costs.

“Revenue growth in the year was constrained by the depressed economic environment, poor hydrological conditions in 2017 and the protracted electioneering period. This slow business environment led to a significant decline in the Company's financial performance,” he said.

This means that the expectation, based on the unaudited results and the evaluation the board made, will plunge Kenya Power to profits last seen in 2014 or even lower should the anticipated decline be more than a quarter.

Considering the Sh7.26 billion profit registered last year, profit for financial year ended June will not surpass Sh5.44 billion, being the lowest since the Sh6.99 billion posted in 2013/2014 financial year.

Mr Othieno further blames the expected drop in profitability for the NSE-listed firm on increased financing costs and delayed review of retail electricity tariffs led to reduced earnings.

The news also coincided with that of the trial of former Kenya Power managing director Ben Chumo and his successor Ken Tarus alongside other senior managers failed to start after a crucial file went missing.

Having closed 2017 at Sh9.15, Kenya Power’s share price of Sh4.05 means that more than half (55.7 per cent) of investor wealth has been eroded since January.

Mr Othieno said Monday the board and management are now undertaking strategic initiatives to improve the financial results of the firm going forward.

This includes boosting demand for electricity and diversifying revenue streams in addition to improving customer service.

“The measures above together with the improvement of operational and network efficiency are expected to improve returns to our investors and drive the future success of the company,” he said.