Kenyan tea firms' profits slide, weighing on economy
09 June 2014, 16:14
Nairobi - Williamson Tea and Kapchorua Tea both posted a slide in annual profits on Monday with little imminent prospect of a pick-up, the latest firms to highlight a downturn in a valuable industry for the nation.
Williamson's pretax profit fell 10 percent to 1.04 billion shillings ($11.9 million), while Kapchorua Tea's dropped 29 percent to 182 million shillings. The firms, whose financial years end in March, share directors.
"The new financial year has started with weak markets and low tea prices while costs for inputs and labour continue to rise," Williamson said in a statement. Like Kapchorua, it blamed lower demand and prices for the dip in earnings.
Last month, tea and coffee producer Sasini issued a profit warning for its full year after first-half earnings slumped.
Tea exports, which earned black-tea specialist Kenya about $1.3 billion in 2013, are a pillar of the economy along with coffee production, horticulture and tourism, another industry in the doldrums.
Tourist bookings have been hit by a spate of bombings in the run-up to the July to September peak season, so a downturn in the tea industry adds to the economic headaches facing a government that came to office last year promising to drive up growth.
The economy expanded by a slower-than-expected 4.7 percent last year, well below the 6 percent plus target that economists say is needed to generate enough jobs for the nation of 40 million people and drag more people out of poverty.
The government, which is marketing its debut Eurobond, has said other sectors including a buoyant financial industry will help push growth back up to 5.8 percent in 2014.
Williamson's management said the firm had taken measures to rein in costs, including constructing a new solar power plant at one of its tea estates to cut electricity bills.
Williamson recommended a final dividend of 7 shillings per share, down from 7.50 in the prior year.