Agricultural firm Sasini #ticker:SASN has fully mechanised its tea harvesting, a move that has seen it eliminate the costs it used to incur to pay seasonal tea pickers.
The farm automation was one of the key contributors to the company’s sharp profit jump in the year ended September, chief executive Martin Ochien’g said.
“The mechanising of the tea farms has really helped us (contain costs). A lot of the people who were picking tea for us were seasonal employees on contract,” he said.
“So we just managed their contracts well when their contracts ended we then were able to move the harvesting method from picking to mechanization.”
The Nairobi Securities Exchange-listed firm had attained 85 percent mechanisation by September last year and raised it to 100 percent the next month.
Mr Ochien’g declined to say how much the company will be saving annually from the elimination of manual tea harvesting.
Other agricultural firms are also at various stages of mechanising their operations in a quest to cut costs and enhance efficiencies.
The companies have been complaining of rising labour costs, driven partly by demands by the Kenya Plantation and Agricultural Workers Union (KPAWU) which negotiates the level of compensation and other employment terms for their members including gratuities.
The gratuity payments are typically triggered by retrenchment, ill-health, retirement, resignation and death in-service of an employee, among other circumstances.
The agricultural firms have made gratuity provisions running into tens of millions of shillings.
Courts have also previously ordered double-digit pay rises for farm workers.
The union has criticised the increased automation by the agricultural companies, citing loss of jobs.
Mechanisation of the tea farms contributed to the lower costs and higher earnings for Sasini in the year ended September, Mr Ochien’g said.
The company grew its net income 45.5 times to Sh573.2 million in the review period, helped by higher sales and cost containment measures that boosted margins.
The Nairobi Securities Exchange-listed firm had made a net profit of Sh12.6 million the year before.
The firm’s revenue increased by Sh1.1 billion to Sh5.2 billion in the review period when it also benefitted from reduced costs.
Sasini did not give a breakdown of its expenses but noted that mechanisation of tea harvesting is a key driver in the cost containment measures of the company and the return to profitability.