Poor weather eats into Sasini profit

Daniel Gathee shows the dried parch of his tea crop affected by drought at his farm in Iriaini, Othaya within Nyeri county, April 19, 2017. PHOTO: Mose Sammy, Standard

Poor weather and high labour costs have seen Sasini Ltd’s profits dip by more than half over six months to March 31 this year.

The tea and coffee producer reported a 60 per cent drop in net profit to Sh77.29 million in the half-year to March 31 from Sh197.52 million posted over a similar period last year.

The firm said a prolonged dry spell last year had affected the production of coffee and tea, resulting in reduced profits.

“The decrease in performance recorded over this period was as a result of adverse weather conditions which led to lower production volumes in both tea and coffee. The rising input costs, especially labour costs and lower prices in the first quarter, contributed to the decline in profitability,” said Sasini in a statement on Wednesday.

Revenues fell to Sh1.45 billion during the period under review to Sh1.59 billion over a similar period last year. The firm said it was exploring new revenue streams away from its mainstays of tea and coffee to strengthen earnings and cushion it against losses, including venturing into production of macadamia nuts and avocados.

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Sasini recently said it would spend Sh600 in the diversification programme, with some of the key investments being in a macadamia processing factory.

“In executing various projects, which include macadamia nuts and avocado production and processing, the company will be able to achieve underlying opportunities as they arise,”

The Agriculture Ministry’s Tea Directorate recently said tea production in the country had dropped 30 per cent over a nine-month period between July last year to March this year due to the drought. Scarcity of tea in the world market – with India – another major producer of black tea also experiencing a drought – had resulted in increased prices. Increased prices are expected to cushion producers from heavy reduction in revenues following the low tea volumes.

According to a Reuters report, the maximum price of the highest grade of Kenyan tea rose to $3.92 (Sh400) per kilo at the Mombasa auction last week, up 22.5 per cent from a year ago. 

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