The Nation Media Group (NMG) has issued a profit warning, expecting a decline of over 25 percent in its full-year profits for the year ending in December 2023. This announcement comes as a result of the challenging business environment, and it marks the second such warning in the past decade.
NMG released a notice on Wednesday, addressing its shareholders, investors, and the general public, highlighting the anticipated decrease in earnings. The company attributes this decline to the tough economic conditions prevailing in the country.
According to NMG, the economic challenges facing Kenya have significantly impacted the media industry. The company points to factors such as continuous increases in the prices of essential commodities, a sharp rise in fuel prices, the depreciation of the Kenyan Shilling, higher interest rates, and increased taxes as contributing to this situation.
The rising global prices of newsprint, coupled with the weakening of the Kenyan Shilling against the US Dollar and higher distribution costs due to increased fuel prices, have resulted in substantial additional direct expenses compared to the previous year.
As a result of these economic pressures, the spending power of consumers has been reduced, while the cost of conducting business has risen. In the previous year, NMG recorded a profit of Kshs 318.5 million after tax, a decline from Kshs 493.1 million in 2021. This marks the third consecutive year of declining profits, potentially impacting the region’s largest media outlet as advertising revenue and print sales continue to shrink. In the first half of the current year, the company reported profits after tax of Kshs 2.9 million.
Over the past decade, the media giant has been reducing its workforce to manage costs, as newspaper sales have declined, and advertising revenues have dwindled. NMG stated in the notice that it would be challenging to offset the increased operating costs by increasing prices for consumers.
Nevertheless, the company is actively implementing cost-containment measures to mitigate financial losses. The Board expressed confidence in the investments made to accelerate product innovation, diversify revenue sources, and transform the organization into a customer-centric, data-driven media company, aiming to deliver long-term value to shareholders.
Earlier this year, NMG downsized its workforce, which was preceded by a similar exercise in the last quarter of 2022.
