Listed coffee grower Eaagads has issued a profit warning for the financial year ending March 2024, citing a reduction in the volume of coffee offered to the market.
In a public notice on Thursday, Eaagads said the earnings for the period are projected to be lower by at least a quarter of the net income reported for a similar period last year, meaning the firm’s profit for the ending year will not surpass the Sh10.8 million booked last year.
“Eaagads Limited hereby announces that the earnings for the current financial year will be lower by at least 25 percent from the earnings reported for the same period in 2023. This announcement is based on the unaudited financial statements for the 11 months ended February 2024,” wrote the firm in the notice.
“The reduction in profits has been caused by a decrease in the volume of coffee offered in the market. In the current financial year to date, Eaagads sold 276 metric tonnes of coffee compared to 348 metric tonnes sold in the same period in the previous year.”
As of September last year, six months into the financial year, the coffee grower announced an over 99 percent dip in sales revenue after it stood at Sh1.1 million down from the Sh158.9 million it had recorded in a similar period the previous year.
The shocking disclosure came against the backdrop of heightened government-led reforms in the coffee sub-sector steered by Deputy President Rigathi Gachagua.
At the time, the company attributed the deteriorated performance to the reforms, which it said were negatively impacting its ability to do direct coffee sales as had been the traditional practice.
“The lack of sales has severely impacted the company’s cash flow, leaving a financial gap that necessitated borrowing a substantial sum of Sh108 million. This borrowing has served as a means to cover operational costs, maintain business continuity, and manage existing financial obligations in the absence of revenue from sales,” said Eaagads in a statement published last November.
The coffee grower also heaped blame on the severe drought experienced between October 2022 and March last year, saying it led to poor crop formation, which in turn gave rise to small coffee beans and poor grade recoveries for the milled coffee, ultimately resulting in reduced volumes.
In January last year, President William Ruto, through Executive Order Number 1 of 2023, moved the coffee reforms to his deputy’s office, placing the latter right at the centre of the sensitive docket.
Among the proposed reforms included the introduction of a direct settlement system, while the policy documents lined up to revive the sector comprised the Draft Sessional Paper Number 1 of 2023 on sustainable quality coffee production for food security and wealth creation, the Coffee Bill 2023, the draft Co-operatives Bill 2023, and the Sessional Paper No. 1 of 2020 on the National Co-operative Policy.
