Limuru Tea PLC which is listed on the Nairobi Securities Exchange (NSE) on Thursday, January 11, announced a profit warning to shareholders and the general public.
In a statement, the multimillion-shilling company informed holders of securities and the public that due to the weakening of the shilling and a hostile business environment, it had recorded a significant profit decline.
“Based on a preliminary review of the financial statements, the company is expected to record a decline of more than 25 per cent in profit before tax attributable to the shareholders of the Company for the financial year ending December 31, 2023, as compared to the same period ending December 31, 2022.
In explanation, the company noted that due to the depreciation of the Kenyan shilling against the dollar, the importation cost of fertilizer had risen exorbitantly.
This in turn reduced their profit margins for the year ending December 31, 2023.
In 2023, the Kenyan shilling was the third most-hit currency in the African continent after the Nigerian Naira and Angolan Kwanza.
On January 1, 2023, the Kenyan Shilling was trading at Ksh139 against the dollar and had depreciated to Ksh157 by December 31, 2023.
The weakening of the Shilling meant that companies relying on imported raw materials incurred extra costs which dented profit margins.
Additionally, Limuru Tea PLC remarked that the increased cost of labour driven by higher industry wage rates played a part in the 25 per cent profit decline.
Other operational costs that contributed to the dip were a projected loss in biological asset valuation for the year 2023.
The profit warning from Limuru Tea PLC was made a month after Unga Holdings issued a similar statement.
Unga Holdings at the time noted that due to the increased cost of doing business, it would lay off some workers.
The company also blamed the weakening of the Kenyan Shilling stating that it had led to margin erosion, high forex losses and increased interest expenses.
