Williamson Tea Kenya #ticker:WTK and its associate Kapchorua Tea Kenya #ticker:KAPC narrowed their losses in the half year ended September and issued pessimistic forecasts for the full year ending March 2020.
Williamson’s net loss in the review period stood at Sh65.8 million, dropping 22.5 percent from Sh85 million a year earlier. The company’s sales declined by a third to Sh1.3 billion from Sh1.9 billion, indicating that lower costs helped to reduce the loss.
The Nairobi Securities Exchange-listed firm did not disclose its cost structure.
Kapchorua on the other hand slashed its net loss 80.2 percent to Sh15 million from Sh76.4 million. Its sales dropped 46.3 percent to Sh388.2 million from Sh724 million, signalling that the company cut its costs aggressively to shrink the loss.
Both companies, which reported lower tea production and prices, are controlled by London-based institutional investor Ngong Tea Holdings.
Besides their output falling 15 percent, the companies also suffered from low selling prices as rival producers brought their surplus stocks to the market.
“If a buyer's job is to procure the maximum amount of tea at the cheapest possible price, it is not a challenge to achieve this in the current market,” the companies said in their distinctive straight-talking style.
“We do not envisage much change going forward and it is unlikely we will make up our crop deficits in the months to March 2020 or that prices will rise. A regrettably gloomy but unfortunately realistic picture.”
Both companies have been paying dividends despite their losses, tapping their retained earnings to make the distributions.