Rea Vipingo ventures into horticulture farming to diversify income

Rea Vipingo has ventured into horticulture farming in a bid to diversify its sources of revenue.

The company — which announced a three-fold increase in turnover last year boosted by a weak shilling and a higher harvest — said it had leased a farm in Athi River for growing vegetables, in addition to the horticulture farming in Dwa Estate, Kibwezi.

“The vegetable project is progressing well but remains in a development phase,” said Neil Cuthbert, managing director of Rea Vipingo. “In addition, a 130-acre parcel of land in the Athi River has been leased for development as a satellite vegetable operation.

This project was brought into production in December 2011,” added Mr Cuthbert.

The listed firm, it ventured into horticulture last year to avoid depending mainly on sisal and diversify its streams of income.

“Whilst the sisal fibre price remains at a satisfactory level, the directors are mindful of the turmoil and volatility of the global economy into which the group sells its product,” he said.

Mr Cuthbert projected that the recent strengthening of the shilling against the US dollar and the massive increase in the cost of borrowing money would impact on this year’s performance.

Rea Vipingo announced an 593.6 per cent increase in revenues for the year ended September 2011, earning its shareholders the highest dividend payout in seven years.

The sisal grower realised a net profit of Sh467.1 million, compared to Sh67.3 million in 2010. “Sisal is traded in the US dollar currency and as a result, the group was able to take advantage of good dollar prices and a favourable exchange rate,” he said.

Adequate rainfall in Kenya and Tanzania also saw Rea Vipingo produce 19,540 tonnes of sisal fibre, a 15.6 per cent increase from the 16,920 tonnes produced during the previous year.

Its turnover rose by Sh674 million to reach Sh2.11 billion up from Sh1.44 the previous year. The firm is also weary of the increased operating costs, one of the factors — alongside drought — that saw them record a 50 per cent drop in profit in 2010.

The firm will pay a first and final dividend of Sh1.10, an increase from the Sh0.8 they paid out in 2010.