Limuru Tea has issued a profit warning to shareholders and the public amid a tough economic environment denting the fortunes of many businesses.
In a statement, the company announced that it expects to record a decline in its profit before tax for the financial year 2023.
Through the notice seen by The Kenya Times, the company noted that the expected drop is based on a preliminary review of the financial statements.
“The Company is expected to record a decline of more than 25% in profit before tax attributable to the shareholders of the Company for the financial year ending 31st December 2023,” read part of the statement.
Limuru Tea board of directors further revealed that the expected 25% profit slump is in comparison to the same period ending 31 December 2022.
In the financial year 2022, the company recorded Ksh11.34 million in profits, bouncing back from consecutive losses in 2020 and 2021 financial years.
Also, the board noted that the estimated decrease is due to several factors which attributed to increased costs of doing business.
Limuru Tea blames cost of doing business
Among the factors listed were increased cost of labor driven by higher industry wage rates.
The company further listed a projected loss in the valuation of its tea plants for the financial year 2023 as one of the main factors.
Additionally, Limuru Tea attributed the projected profit loss to the high costs incurred while importing fertilizer.
“The estimated decrease due to increased operational costs attributed to the importation cost of fertilizer which was adversely impacted by the depreciation of the Kenya Shilling against the US Dollar,” the statement noted.
However, the company noted that the information is only based on the information currently available to the Board.
The statement also pointed out that the preliminary evaluation of the financial statements of the Company fare being audited and being reviewed by the Company’s auditors.
“Details of the company’s financial information will be disclosed in the announcement of final results of the Company for the financial year ending 31st December 2023 which is expected to be published by end of March 2024,” read the statement in part.
Limuru Tea is a Public Company listed in the Nairobi Securities Exchange (NSE) owning about 282 hectares of tea plantations in Limuru area, Kiambu County.
Furthermore, the Company is an out grower to ekaterra Tea Kenya PLC (eTK) which provides management services in manufacturing, selling and marketing of its tea.
Private companies record losses
Several listed companies recorded losses towards the end of 2023, including CIC Insurance, the Standard Group, Nation Media Group, and Kakuzi.
According to the Stanbic Bank Kenya’s Purchasing Managers Index (PMI) released on December 5, 2023, private companies recorded a huge drop in sales as the demand for goods and services declined.
Respondents in the survey further indicated that all key economic sectors including agriculture, manufacturing, construction, wholesale and retail, services, and mining registered job cuts in November 2023.
As a result, the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) fell to 45.8 last in November from 46.2 in October.