Limuru Tea expects full year earnings to dip by 25% on back of low supply

KENYA – Limuru Tea, Kenyan tea plantation firm, has projected a 25 percent decline in its net profits for the year ended 31 December 2021, attributed to lower green leaf volumes compared to 2020.

According to reports by Capital News, the Nairobi Securities Exchange listed firm attributed the decline in profits to rising cost of production amid Covid-19 economic disruption.

“The company is expected to record a decline of more than 25 percent in the net profits. The board is of the view that the estimated decrease in profits is mainly due to the lower green leaf volumes that were realized in 2021 compared to 2020,” the firm said through a notice.

Tea has continued to perform dismally in the international market with the earnings of the commodity dropping by 9.1 per cent in the third quarter of 2021 compared to a similar period in 2020, Kenya Nation Bureau of Statistics (KNBS) data shows.

According to the Q3 2021 Balance of Payments report prepared by KNBS, earnings from the export of tea deteriorated from Ksh30.5 billion (US$268m) in the third quarter of 2020 to Ksh27.7 billion (US$244m) in the review period.

“The decline was largely attributable to the decline in the export quantities that fell from 138.6 thousand metric tonnes to 124.5 thousand metric tonnes,” said KNBS.

During the period under review, the company’s parent entity Unilever initiated plans to divest from it to a new owner Holdco UK Limited (TeaCo).

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The board of the company approved the transfer which is subject to regulatory approvals, reports The Star.

The move follows a decision by Unilever Group to separate its global tea business including tea plantations to become a separate entity and divest in most markets.

Kakuzi issues profit warning due to lower prices in key markets

Meanwhile, Kakuzi, another Kenyan agricultural firm expects its earnings for the full year ended December 2021 to fall to levels seen at least six years ago on the back of reduced avocado exports and depressed prices.

The listed firm issued a profit warning, signalling that its full-year earnings will fall by at least a quarter, reports Standard Media.

The profit warning is despite the half-year results to June 2021 having been relatively steady, falling from Ksh285.9 million (US$2.52m) to Ksh276.7 million (US$2.44m) and indicating that its woes relate to the second half.

Kakuzi in 2020 posted Ksh622.03 million (US$5.49m) and the profit warning means the earnings will not be above Ksh466.53 million (US$4.12m) — a level that only beats the Ksh459.7 million (US$4.06m) posted in 2015.

The firm’s chairman Nicholas Nga’ng’a attributes the profit warning on an 18 per cent fall in avocado production due to biannual bearing — a phenomenon where an unusually heavy crop in one particular year is followed by a year of low production.

The decline in earnings is also due to lower global market prices in Kakuzi’s European markets amid low consumption trends due to the Covid-19 disruptions.

“This is due to an oversupply of fruit from Peru and Columbia which impacted prices during the same period that our fruit was also in the market,” said the firm.

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