Limuru Tea Plc, a key player in the green-leaf tea industry and a major supplier to eKattera Tea Kenya PLC (eTK), has issued a profit warning for the financial year ending December 2023.
The company is currently grappling with margin pressures stemming from various cost factors impacting its operations.
The Board of Directors of Limuru Tea Plc attributes the anticipated decline in profitability to a notable increase in operational costs.
According to a notice to shareholders, the board identified rising industry wage rates as a significant contributor to heightened labor costs.
Additionally, the depreciation of the Kenyan shilling against the US dollar has led to increased expenses for imported fertilizers, further exacerbating financial strain for the company.
Furthermore, the company expects a valuation loss in its “biological assets,” likely referring to its tea plants.
This projection could also be linked to adverse weather conditions or diseases affecting the tea plants, adding to the complexities faced by the tea industry.
In contrast to the anticipated decline in 2023, Limuru Tea Plc experienced a remarkable turnaround in the previous year.
The company reported a 46 percent increase in total revenues and posted a pre-tax profit of Ksh.16.3 million, a significant improvement from a loss of Ksh.14.2 million in 2021.
This positive performance resulted in a recommended dividend of Ksh.2.50 per ordinary share for the year ending December 31, 2022.
As Limuru Tea Plc faces the headwinds of increased operational costs in the current fiscal year, stakeholders and industry observers will be closely watching the company’s strategic responses to maintain its financial resilience and sustain its positive trajectory in the highly competitive tea market.