Mr Naushad Merali. Sasini land sale is the latest sell-off seen among companies in which he has significant interests. PHOTO | FILE
What you need to know:
Sasini sold the leasehold land in its two coffee estates in Nyeri –Mweiga (266.7 acres) and Wahenya (247 acres)— that it says had been running losses for six consecutive years.
The company booked a gain of about Sh1 billion in the transactions, having carried the assets in its books at a highly conservative Sh1.39 million.
The land sale compensated for weaker performance in Sasini’s agricultural operations where sales remained flat at Sh2.7 billion in the review period.
Agricultural firm Sasini has sold 513.7 acres of its leasehold land in Nyeri for Sh1 billion in a transaction that boosted its net profit to Sh1.1 billion in the year ended September.
The company declared a dividend of Sh0.25 per share in the period, same as the payout for the previous year when its net profit stood at Sh45.4 million.
Sasini sold the leasehold land in its two coffee estates in Nyeri –Mweiga (266.7 acres) and Wahenya (247 acres)— that it says had been running losses for six consecutive years. “This sale was part of management strategy to unlock these funds for investment in more productive divisions of the company,” the Nairobi Securities Exchange-listed firm said in a statement. “Successful disposal of these assets in the second half yielded considerable contribution to the bottom line.”
The company booked a gain of about Sh1 billion in the transactions, having carried the assets in its books at a highly conservative Sh1.39 million.
The land sale compensated for weaker performance in Sasini’s agricultural operations where sales remained flat at Sh2.7 billion in the review period, blamed on low production and subdued coffee prices.
The firm produced 8,578 tonnes of tea in the period, down from 11,564 tonnes the year before. Coffee output also declined to 993 tonnes from 1,153 tonnes, with the average price of the commodity falling to $4.55 (Sh464) per kilogramme from $4.82 (Sh492) per kilogramme.
“The year was characterised by a biting drought that severely affected the operations of the company … the production volumes in both tea and coffee divisions dropped considerably,” the company said in a statement.
Sasini did not publish a breakdown of its operating expenses. The firm’s share price has gained 62 per cent over the past one year to the current range of Sh20.7 apiece, ranking as the second best performing agricultural stock after Kakuzi that has jumped 67 per cent to trade at Sh350.
Sasini’s land sale is the latest sell-off seen among companies in which businessman Naushad Merali has significant or controlling interests, signalling a reorganisation of his business empire.
Mr Merali has recently earned billions of shillings from sale of all or part of his interests in several firms including Equatorial Commercial Bank (ECB), Airtel Kenya, Swift Global, and Kenya Data Networks (KDN).
Sasini’s land sale comes at a time when the company’s margins have suffered from high operating costs and flat sales.
The net profit of Sh45.4 million in the year ended September 2014 is half of what it posted the year before.
The company’s net profit last peaked at Sh993.7 million in 2010 when its turnover stood at at a lower level of Sh2.2 billion, underlining the falling margins over the years.
Sasini is betting on cost-cutting and value addition to its products to grow earnings in the coming years. The company’s chairman James Mcfie has said that the company will going forward ensure that most of its commodities are sold as value added products.
Besides coffee and tea, the company also dabbles in breeding of dairy cattle and leasing of land, plant and machinery.
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