Limuru Tea Plc, a publicly listed company specializing in growing green-leaf tea, has issued a profit warning for the financial year ending December 2023.
The board of directors attributed the expected decline in profitability to a rise in operational costs.
“The Board of Directors is of the view that the estimated decrease in the results for the period is due to increased operational costs,” it said in a notice to shareholders.
Cost Factors Squeezing Margins
- Labour Costs: The company, which supplies tea leaves to ekaterra Tea Kenya PLC (eTK), highlighted increased industry wage rates as a key driver of higher labour costs.
- Fertilizer Imports: The depreciation of the Kenyan shilling against the US dollar has pushed up the cost of imported fertilizers, further impacting margins.
- Biological Asset Valuation Loss: Limuru Tea Plc also expects a projected loss in the valuation of its “biological assets,” which likely refers to its tea plants and could be related to factors like adverse weather conditions or disease.
In contrast to the anticipated 2023 decline, the previous year saw a remarkable turnaround for Limuru Tea Plc. The company achieved a 46% increase in total revenues and posted a pre-tax profit of Ksh 16.3 million, compared to a loss of Ksh 14.2 million in 2021.
This resulted in a recommended dividend of Ksh 2.50 per ordinary share for the year ending December 31st, 2022.
