Companies hoard cash amid economic uncertainties
Companies have focused on cash preservation amid growing economic uncertainty characterised by weaker earnings and rising costs, among other headwinds.
Recent interim and full-year results published by listed companies have shown the increased conservatism that has seen most of the publicly traded firms defer, skip or slash dividends.
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At least 14 listed firms including Bamburi Cement, Centum Investment Company, BAT Kenya, East African Breweries Plc (EABL), WPP Scangroup and Kakuzi have announced losses or reduced profitability.
On the other hand, 11 companies including Equity Group, BOC Kenya, Co-operative Bank of Kenya, Stanbic Holdings and NCBA Group have posted higher profits among those that have published their results so far.
Even among the firms with higher earnings, cash preservation has become a top priority as seen by the rise in those skipping or reducing dividends.
Williamson Tea Kenya, Kapchorua Tea Kenya and Stanbic Holdings are the only companies to pay higher dividends of Sh30, Sh25 and Sh1.15 per share respectively on their latest results.
BAT left its interim payout unchanged at Sh5 per share while EABL halved its total dividend to Sh5.5 per share.
NCBA declared an interim dividend of Sh1.75 per share, lowering it from the prior year’s Sh2 per share despite growing its net profit 20 percent to Sh9.3 billion in the six months to June.
Most banks have seen a surge in defaults as borrowers suffer from tighter budgets. All the other listed firms opted to retain cash, including those that had a tradition of paying interim dividends.
“The board of directors has considered it prudent not to declare an interim dividend at 30 June 2023 because of current working capital needs,” BOC Kenya said in a statement on Friday.
“The company is funding the various medical gases infrastructure tenders through its own cash resources rather than borrowings,” the company said in remarks accompanying its results for the half year ended June.
BOC Kenya had paid an interim dividend of Sh1.6 per share a year earlier. Skipping an interim dividend in the review period has seen it retain Sh31.2 million to help fund its operations in an environment where interest on bank loans has risen to the top the 18 percent mark for a section of corporate borrowers.
The company grew its net income to Sh50.3 million from Sh39 million as revenues increased to Sh589.9 million from Sh504.1 million.
BOC Kenya says it faces significant cost escalations that affect the general business environment such as higher prices of fuel, electricity and a weakening of the Kenya shilling.
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“Demand for industrial gases during the six-month period ended 30 June 2023 was depressed due to the prevailing economic conditions, the most acute being a significant increase in the cost of electricity, diesel and other distribution fleet costs as well as the depreciation of the Kenya shilling,” said BOC Kenya. BY BUSINESS DAILY
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