Williamson Tea Kenya #ticker:WTK and its affiliate Kapchorua Tea #ticker:KAPC have sunk into half year losses for the period to September 2018 on depressed tea prices and high operating expenses.
Williamson posted a Sh85 million net loss, down from previous year’s profit of Sh43.4 million. Meanwhile, Kapchorua Tea’s after-tax loss widened more than five times to Sh76.5 million from last year’s loss of Sh14.5 million.
“The increased quantities of tea available for sale significantly depressed the prices leading to the first half of the year losses. Mombasa auction prices declined by 15 per cent to 20 per cent during the period under review,” said the two firms.
The losses by the Nairobi Securities Exchange-listed growers were booked despite increased tea production due to favourable weather conditions that lifted their turnovers.
Williamson’s turnover rose by 13.4 per cent to Sh1.97 billion while that of Kapchorua increased by 28.6 per cent to Sh724 million when compared to a similar half year period of last year.
Fair value of biological assets for Williamson, mainly made up of value of tea growing in the farm, dropped by Sh50.2 million reflecting depressed prices of the commodity. Last year, it had booked a Sh17.1 million gain.
The same fate was witnessed by Kapchorua as it booked a Sh57.9 million decline in fair value of biological assets, being a reverse from last year’s gain of Sh10.5 million.
While Williamson suffered Sh26.2 million as loss arising from changes in fair value of biological assets, Kapchorua’s loss was Sh40.56 million.
Finance costs for Williamson hit Sh43.2 million, reversing the Sh24 million booked last year as finance income. At the same time, it took a Sh43.2 million hit as share of loss from its associated companies. This was about six times larger than the Sh7.7 million loss from associates in the previous half year period.
The two firms have painted a grim picture going forward. They said in a commentary to their results that they see tea prices remaining depressed.
“The amount of tea on offer remains high and unless this situation alters and less supply materializes, we do not envisage much change to demand,” they said.
“The future therefore remains unpredictable with the advantage on the buying side as we approach the last quarter.”
In addition, they said that wage negotiations from the year 2016 are yet to be concluded and therefore adding uncertainty to its already high cost of doing business.