Tea firms warn of poor annual earnings after H1 profits dip
25 November 2014, 08:41
Nairobi - Tea firms Williamson Tea and peer Kapchorua reported on Monday weaker first-half pretax profits, and both said falling tea prices would reduce their respective full-year earnings by at least a quarter.
Williamson Tea, which shares owners with Kapchorua, said its pretax profit fell by 54 percent to 240 million shillings ($2.66 million), while that of Kapchorua fell 38 percent to 68 million shillings for the first half to the end of September.
Earnings per share at Williamson Tea tumbled to 18.42 shillings compared with 41.18 shillings from a year ago, while Kapchorua's EPS fell to 12.20 shillings versus 19.67 shillings, both companies said in separate statements.
The companies said a higher crop and falling prices for tea at the Mombasa-based tea auction that handles sales for the commodity from Kenya and other countries in the region, had hurt profits, at a time when wages and other costs were escalating.
A weakening local currency during the period compared to the prior year helped mitigate the losses, the companies said.
"There are no indications of the global tea market picking up in the near future. As the weather continues to be favourable, we expect that the crop and stock levels will continue to rise depressing tea prices further," they said.
"It is therefore reasonable at this time to anticipate earnings for the financial year ending March 2015 to be lower than the previous year's earnings by at least 25 percent.
The East African country is the world's leading black tea exporter and the crop is a major foreign exchange earner in east Africa's largest economy, alongside horticulture and tourism.
Tea earnings have slumped this year owing to a global glut, hurting earnings for both big companies and smallholder farmers.
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