Limuru Tea of Kenya First-Half Profit Plunges as Output Drops on Drought

Limuru Tea Co., a Kenyan grower of the leaves, said first-half profit plunged 72 percent as production dropped amid poor rainfall and warned there may be no improvement in the second half unless prices remain high.

Net income dropped to 5.37 million shillings ($57,835) in the six months through June, from 23.1 million shillings a year earlier, the Nairobi-based company said in a statement e-mailed by the city’s stock exchange today. Sales fell 51 percent to 36.3 million shillings, it said.

“The second half of the year has not started well in terms of crop volumes due to poor rainfall,” it said. “However, if the fourth quarter crop forecast is achieved and tea prices remain favourable, the company’s profitability should improve in the second half.”

A drought in Kenya, the world’s biggest tea exporter, reduced production of the crop by 16 percent to 178.4 million kilograms (393.3 million pounds) in the first half of this year, according to Tea Board of Kenya. Exports from the East African nation fell 2.4 percent in the period, it said last month.

Limuru is the first of Kenya’s five publicly traded tea companies to report first-half earnings and to provide an outlook for the second half. Its stock fell 0.6 percent to 3.15 shillings at 2:50 p.m. in Nairobi, heading for the lowest close since July 28.

The results were “very disappointing,” Aly-Khan Satchu, chief executive officer of Rich Management, a Nairobi-based investment adviser to high-net-worth individuals, said in a phone interview today. “It has to get more innovative in creating value for shareholders like converting some land to real estate,” he said.

Average tea prices at the auction in Mombasa, the world’s biggest, have risen 7.9 percent so far this year to $2.74 per kilogram, according to Tea Brokers East Africa Ltd.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net.

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