Limuru Tea issues profit warning

Agricultural firm Limuru Tea expects its net profit for 2020 to decline by at least 25 per cent, citing challenges heightened by the pandemic.

In a notice to shareholders on Thursday, the Nairobi Securities Exchange-listed firm said business was weighed down by low tea prices and rising cost of production amid Covid-19 economic disruptions.  

Limuru Tea posted a Sh1.9 million after-tax profit in 2019, a drop from Sh2.5 million it made in 2018 after bouncing back from a loss-making streak.

“The company’s performance is expected to record a decline in the net profits attributable to the shareholders of the company for the financial year ended December 31, 2020 as compared with the audited financial results for the year ended December 31, 2019.

“The Board is of the view that the estimated decrease in the results for the period is mainly due to the lower tea market prices that were realised in 2020 compared to 2019 in the midst of rising cost of production and the prevailing global downturn on account of Covid-19,” the company said.

Limuru Tea is an outgrower for Unilever Tea Kenya and owns 282 acres of tea plantations in Limuru.

Harsh weather including reduced rainfall in 2019 decimated the company’s yields leading to reduced production of tea from 493 million kilograms in 2018 to 459 million kilograms.

Last month, the Kenya Tea Development Agency (KTDA) said surplus supply of tea on the global market, far outstripping its demand had pushed local prices down for the third year running.

However, the commodity still earned Kenya more money in 2020 than in the previous year, with data from the Central Bank of Kenya showing that tea export earnings stood at Sh134.3 billion in 2020, representing a 10 per cent increase from the Sh122.04 billion the beverage fetched in 2019.

Kenya is the world’s biggest exporter of black tea but global sales have been declining as consumers shift to herbal beverages.