Unga Group Plc has issued a profit warning, with the group indicating that based on the company’s unaudited financial statement for 11 months and the June 2023 forecast, the result for the year ending June 2023 will be a loss compared to a profit of Kshs 311.4 mn they recorded in the previous year. As such, pursuant to the capital markets of Kenya regulations, “an issuer shall disclose all material information and make a public announcement of any profit warning where there is a material discrepancy between the projected earnings for the current financial year and the level of earnings in the previous financial year.” A material discrepancy in relation to projected earnings for a financial year means that such earnings are at least 25% lower than the level of earnings in the previous financial year.
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Unga Group Plc reported a scarcity of locally sourced raw materials, which has led to increased importation at higher global prices. This led to increased production costs, which could not be fully passed on to consumers. Maize supply declined in the first quarter, leading to an increase in the price of maize, considering that maize is one of the main raw materials used by the company. The shortage in both wheat and maize is attributable to the adverse climate conditions experienced in the fourth quarter of 2022 as well as in the first quarter of 2023, which led to a decline in harvests across the country.
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A Profit warning occurs when a company advises shareholders and the public that its earnings results will not meet their projected expectations. A profit warning may occur if the company is experiencing a challenging business cycle; however, since this event is more expected, it is often due to poor performance or a single challenging incident either internal to the company or external to the industry or business environment. A company usually realizes its profit warning statement two to three weeks before realizing its financial results.
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