British-American 2011 profits to dip by 25pc as stocks plunge

British-American Investment Company is expecting its profits for the financial year 2011 to fall by at least 25 per cent.

In a profit warning letter to the Capital Markets Authority (CMA), the firm’s board attributed decline to poor performance of its stock portfolio driven by deteriorating global financial markets, high prevailing interest rates as well as volatility of the Kenyan shilling against other currencies.

“The weak performance of our quoted equity portfolio driven by the poor performance of the stock market will negatively impact on the overall profitability of the company and the group,” the board said.

However, the firm maintained that its insurance and asset management businesses had emerged stronger in 2011 than they were in 2010.

Last year, the Nairobi Securities Exchange was the second-worst performing bourse in Africa having shed 30 per cent of its value in the face of untamed inflation and a weak shilling.

“This profit warning is based on estimated performance bearing in mind the Group’s significant exposure to the stock market,” the firm said.

Experts are forecasting a loss in the company’s share value as investor shock induced by the warning takes root.

“We will be seeing a decline in the price of the stock within the next two days,” noted Dyer and Blair analyst Eric Munyoki.

He added that there would be no dramatic declines given that the share price had already taken a hard beating and was trading perilously close to its price-to-book value of Sh5.