Williamson Tea Kenya has shifted its marketing to selling high-quality tea to Pakistani and Egyptian buyers through the Mombasa auction following regulatory changes that made the Kenyan coastal city the main place for trading the commodity.
The Nairobi Securities Exchange-listed firm previously sold its produce to global buyers directly based on contracts between the parties.
Williamson Tea, which was initially opposed to the auction, says it has benefited from selling high-grade tea there at a time when the dominant Kenya Tea Development Agency (KTDA) has helped lift prices by setting a minimum quote of $2.43 (Sh286) per kilogramme for its supplies.
“Our target markets have changed significantly in the past 12 months. The Mombasa auction is now a critical focus with two key players buying tea, Pakistan and Egypt capturing around 60 percent of all purchases. We have refocused our attention to selling main grades to them,” Williamson Tea says in its latest annual report.
The company added that its effort to sell high-quality tea has been aided by its recent purchase of special harvesters from Japan.
“Our introduction of propelled tea harvesters has proved a wise investment with the machines providing extremely good quality green leaf, as long as the relevant section is harvested on time,” the company said.
Williamson Tea says the KTDA, controlling at least 65 percent of total tea production, is able to obtain the minimum prices at the auction but other players have to compete on quality, among other factors, to sell their produce at higher prices. The company says it continues to search for new buyers at the auction.
“This is an entirely different dynamic and requires quality, consistency, marketing, and efficiency to achieve success. An auction system does not guarantee a sale,” the agricultural firm said.
Substantial quantities of tea remain unsold on most trading days at the auction as buyers and sellers fail to agree on acceptable prices.
Williamson Tea is set to pay a dividend of Sh20 per share for the year ended March — double the Sh10 per share distributed in the prior year.
The company’s share price has gained more than 20 percent since the announcement of the higher dividend to close at Sh152.7 on Tuesday.
The company made a net profit of Sh529.8 million in the review period, reversing a net loss of Sh146.1 million the year before on the back of reduced costs.