Eaagads Ltd., a coffee producer and exporter based in Kenya, reported a dismal performance for the six months ended September 2023, as the company suffered from low sales and high production costs.
“During the reporting period, significantly minimal coffee sales were made owing to the ongoing government-initiated coffee reforms, which have negatively impacted the company’s ability to do direct coffee sales as has been the practice.”
“The lack of sales has severely impacted the company’s cash flow, leaving a financial gap that necessitated borrowing a substantial sum of KES108 million. This borrowing has served as a means to cover operational costs, maintain business continuity, and manage existing financial obligations in the absence of revenue from sales,” said Eaagads in a statement.
“In the same period, the company produced 188 tonnes of clean coffee, compared to 232 tonnes in the same period last year. This was attributed to a severe drought experienced from October 2022 to March 2023 which was aggravated by restrictions in irrigation and followed by a total ban on any water abstraction from the rivers. The effect of this was poor crop formation, leading to small coffee beans and poor grade recoveries for the milled coffee, thereby resulting in the reduced volume.”
The company’s revenue plunged by 99.3% to KES 1.1 million, compared to KES 159.8 million in the same period last year.
Eaagads’ production costs also decreased by 81.9% to KES 19.6 million, but this was not enough to offset the revenue loss. The company incurred a gross loss of KES 16.9 million, a sharp contrast to the gross profit of KES 51.5 million in the previous year.
The company also recorded a loss before tax of KES 33.1 million, compared to a profit before tax of KES 37.2 million in 2022. The earnings per share (EPS) dropped from KES 1.16 to KES -1.03.
Despite the poor performance, the company’s total assets increased by 12.2% to KES 1.5 billion, mainly due to an increase in biological assets and inventories.
However, the company’s cash and cash equivalents decreased by 72.4% to KES 9.7 million, indicating a liquidity challenge.
The company did not declare any dividends for the period.
The company’s management expressed its optimism for the future, stating that it was implementing various strategies to improve its operations and profitability.
“The company is aiming for a late crop harvest of 132 tonnes and is on target to achieve this goal. The production potential for 2023–24 is good. The ongoing El Nino rains will have a positive impact on the early crop in 2024, unlike the period under review,” it says in its Unaudited Results for the Six Months Ended 30 September 2023.