Nairobi Securities Exchange-listed agriculture firms Williamson Tea Kenya and Kapchorua Tea expect their profits to fall by at least 25 percent following an international oversupply of tea that saw prices plunge and the withdrawal of one of the country’s top tea buyers.
The two firms on Wednesday both issued profit warnings, meaning that their profits will not exceed Sh299.5 million for Kapchorua and Sh395.2 million for Williamson, going by their profits reported last year.
Data from the Tea Board of Kenya shows that tea production in Kenya increased from 570,449 tonnes in 2023 to 598,477 tonnes last year, while the average auction price declined to Sh295.75 per kilogram from Sh311.43 in 2023.
The appreciation of the shilling against the US dollar further compounded the challenges faced by tea firms, contributing to a continued drop in earnings.
Listed companies are required by law to issue a profit warning when they expect their earnings for a given financial year to drop by 25 percent or more compared to the previous period, notifying investors to expect reduced returns.
Both firms attributed the expected profit fall to an oversupply of the product in the local market, following the exit of one of Kenya’s largest tea buyers towards the end of last year.
Cargill Kenya, which had been the top buyer of Kenyan tea, controlling about 15 percent of the market share, announced its exit from the Mombasa Tea Auction in November last year, effectively reducing demand at the market.
“The drop in profits is largely attributed to depressed market prices following an oversupply of tea against demand as well as a strong Kenya shilling against the US Dollar,” said Williamson in a statement.
The two firms have their financial years running from April to March and are expected to release their results for the period ended March 2025 by the end of July, according to the requirements of the Capital Markets Authority.
In the year to March 2024, Kapchorua recorded a 27 percent jump in profit to Sh399.3 million from Sh314 million and paid a dividend of Sh25 per share.
Williamson, on the other hand, saw a six percent drop in profit to Sh526.9 million from Sh564 million, and cut its dividend to Sh25 per share from Sh30 in 2023.
The other listed tea firm, Limuru Tea, whose financial year runs from January to December, had already reported a drop in earnings for the period, attributing it to increased operating expenses and adverse market conditions.
During the period, the firm slipped into a loss, reporting a net loss of Sh15.2 million from a profit of Sh8 million in the previous financial year.
