Limuru tea projects decline in its full year earnings

Limuru Tea Company has issued a profit warning for the year ended December, becoming the latest publicly traded firm to issue a lower earnings alert.

The company is expecting a maximum net profit of Sh2.2 million in the period compared to Sh3 million the year before.

“The company is expected to record a decline of more than 25 per cent in the net profits attributable to the shareholders of the company for the financial year ended December 31, 2016, as compared with that for the same period ending December 31, 2015,” Limuru said in a statement.

Limuru’s expectation of lower earnings is driven by higher costs and a change in valuation of its tea bushes. The company says the plantations will now be classified as depreciating assets “which negatively impacts the earnings”.

Other listed firms that have issued profit warnings include human and animal feeds manufacturer Unga Group and Nairobi Securities Exchange. A similar guidance was issued by Sanlam Kenya, which later retracted it after reviewing its liabilities.

The announcements mean some of the firms will post losses or record significant declines in their profit, which in most cases leads to a freeze or cut in dividend payouts.

Cigarette manufacturer British American Tobacco is the only firm at the Nairobi Securities Exchange (NSE) with a publicly stated policy of paying out its entire profit as dividends.

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