Limuru Tea PLC has issued an announcement projecting a declining trend in profit.
In compliance with the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002, the company has issued a profit warning for the financial year ended December 31, 2024.
The company anticipates a decline of over 25% in profit after tax compared to its performance for the year ending December 2023.
According to the board of directors, this projected drop in profitability is largely attributed to rising operational costs, which have been compounded by escalating labor expenses and difficult market conditions. These factors have exerted significant pressure on the company’s profitability and financial stability, mirroring broader challenges facing the agricultural sector in Kenya.
This marks the second consecutive year that the company has issued a profit warning, after it recorded a decline in net profit for 2023 as compared to 2022. This trend of declining profitability reflects deeper underlying issues in the agricultural sector.
The mounting operational challenges faced by Limuru Tea PLC, such as surging labor costs and intense market competition, are not unique to the company but reflective of the industry as a whole.
In the tea industry, where labor constitutes a significant expense, increasing wages and fluctuating global demand continue to influence profit margins. These factors, combined with other external challenges, demand innovative approaches from companies to maintain stability while navigating a tough operating environment.
As the company prepares for the release of its final audited financial statements come March 2025, shareholders and industry observers will be keen to see how it responds to these challenges.
As one of the largest tea producers in Kenya, this profit warning highlights the urgent need for companies in the tea sector to reevaluate their strategies and adapt to an increasingly competitive and unpredictable environment.
Maintaining efficiency, improving cost management, embracing sustainable farming practices, and diversifying revenue streams will be critical for long-term sustainability.
Kenya’s tea sector has been a cornerstone of the economy for decades, supporting livelihoods and contributing significantly to export earnings. However, economic pressures such as those highlighted by Limuru Tea PLC serve as a reminder of the challenges facing Kenya’s agricultural sector and demonstrate the need for continued investment, policy support, and innovation within the industry.
Stakeholders in the tea industry, including policymakers, investors, and producers, will need to collaborate to find long-term solutions to the persistent challenges of rising costs and volatile market dynamics.
