Tea firms warn of poor annual earnings after prices dip

Local tea firms Williamson Tea and peer Kapchorua yesterday reported weaker first-half pre-tax 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 pre-tax profit fell by 54 per cent to Sh240 million ($2.66 million), while that of Kapchorua fell 38 per cent to Sh68 million for the first half to the end of September.

Earnings per share at Williamson Tea tumbled to Sh18.42 compared with Sh41.18 from a year ago, while Kapchorua’s EPS fell to Sh12.20 versus Sh19.67, 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 previous 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 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 per cent.

Kenya is the world’s leading black tea exporter and the crop is a major foreign exchange earner, alongside horticulture and tourism. Tea earnings have slumped this year due to a global glut, hurting earnings for both big companies and smallholder farmers.