June 15, 2015 / 9:02 AM / 4 years ago

Kenyan tea firms slide to annual loss on supply glut

A woman picks tea leaves at a plantation in Nandi Hills, in Kenya's highlands region west of capital Nairobi, November 5, 2014. REUTERS/Noor Khamis

NAIROBI (Reuters) - Kenya’s Williamson Tea and Kapchorua Tea both reported a loss for the year to March 2015, blaming weak prices caused by a glut in supplies globally and in Kenya but forecast a recovery on lower output.

Tea earnings, one of Kenya’s main sources of foreign exchange, have slumped this year owing to a global glut, hurting earnings for both big companies and smallholder farmers.

Williamson reported a full-year loss 227.6 million shillings ($2 million) compared with a 740.7 million profit a year earlier. Kapchorua had a 22.8 million shilling loss from a 126.0 million shilling profit the previous year.

“Prices have been weak through the year as large unsold tea stocks from other producers within Kenya have provided buyers with the unwelcome luxury of too much tea,” the firms, which share directors, said in a statement.

“We expect to see better prices as we enter the new financial year due to less tea available in the market as result of lower crop production.”

However, both companies secured an operational profit.

Williamson reported a profit from operations before tax of 193.9 million shillings from 614.6 million shillings a year earlier. Kapchorua said profit from operations before tax was 76.8 million shillings compared with 108.0 million shillings.

The operating profit resulted from forward purchased of their tea output from long-standing buyers, the firms said.

The Williamson board recommended a final dividend payment of 40 shillings per share funded by reserves, while Kapchorua’s board recommended a 5 shillings dividend.

$1 = 97.2500 Kenyan shillings

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