Listed coffee firms face profit hit on poor global prices
Listed agriculture firms dealing in coffee are facing a hit on profits following a fall in the price of the commodity in the international market and lower production due to drought last year.
Earnings dropped by Sh1.4 billion in seven months to April compared with the same period last year, on account of low prices for Kenya’s Arabica at the international market.
Market data from Nairobi Coffee Exchange (NCE) indicate the value of coffee dropped from Sh13.1 billion last year in April to Sh11.7 billion in the period under review, representing 10 per cent decline.
Agriculture firm Eaagads, which mainly produces coffee, has now issued a profit warning for the year ending March 2018 on account of their lower earnings. The company says it expects earnings will be at least 25 per cent lower than the Sh18.1 million made in net earnings in the year ending March 2017.
The other listed firm dealing in coffee is Sasini after Kakuzi discontinued the operations in favour of avocadoes and macademia.
“The main contributor to the reduction in the profits in the year, was due to lower coffee volumes offered at the auction owing to the lower production levels and lower quality beans which affected prices achieved,” said Eaagads in a statement this week.
NCE chief executive officer Daniel Mbithi said that benchmark process at the International Coffee Exchange in New York had fallen, hitting Kenya’s coffee whose prices are benchmarked on the US exchange.
The average price at the auction for a 50 kilogramme bag dropped to Sh23,000 in April from previous Sh24,300.