Sasini PLC Group Managing Director Martin Ochieng' with chairman Dr James McFie during the investor briefing at the Nairobi Serena Hotel on January 26, 2023.
Supply chain disruption and inflated production costs have driven agricultural firm Sasini to issue a profit warning for the year ending September 30, 2024, indicating that it will post a maximum net income of Sh406.9 million in the period.
The grower has observed disruptions in its route to export markets even as it is hit at home by higher than expected production costs.
“We’ve faced a higher than expected cost of production for all of our crops, depressed commodity prices especially in our tea business, closure of the Suez Canal which has grossly disrupted logistics for our products and especially the fruit business into European markets,” noted Sasini Chairman Dr James McFie.
The grower had highlighted similar headwinds last year as its full year profit to September 2023 fell by more than half to Sh542.5 million from Sh1.16 billion prior.
Sasini revenues dipped to Sh5.7 billion in the period from Sh7.3 billion while its administrative and establishment expenses climbed to Sh1 billion from Sh997.7 million a year prior.
The firm was hit by multiple shocks in the year with some of its business units being more adversely affected than others.
Sasini’s tea, avocado and coffee trading units were for instance profitable while coffee estates and the macadamia units performed dismally.
“The macadamia nuts business operating in EPZ experienced a very lukewarm season characterised by very low market demand that negatively impacted the performance of the unit. The unit shipped six containers of kernels at an average price of Sh1,349 per kilo compared to 27 containers previously at Sh1,720 per kilogramme,” Sasini notes in its latest annual report.
In six months through March 31, 2024, the grower plunged to a net loss of Sh37.6 million compared to a profit of Sh122.1 million previously as cost of sales hit Sh2.3 billion from Sh1.5 billion in six months, offsetting a 31.7 percent growth in revenue to Sh2.99 billion.
Sasini deemed the performance as below expectation with the global economic situation and geopolitical disruptions adversely affecting the business.
The tough operating environment for the grower is projected to only last in the short-term as Sasini sees a steady recovery over the medium term leading to an expected return to stronger results from 2025.
Despite the deterioration in profitability in the last two years, Sasini paid an interim and final dividend to shareholders totalling Sh1.50 for the year to September 2023.
The firm however failed to declare an interim dividend in six months of operations to March 31 as the market headwinds continued to eat into the company’s profitability.
