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Williamson and Kapchorua Tea Ltd Unaudited Half Year Results 30 September 2016

Williamson Tea and Kapchorua Tea record 1H17 losses
Williamson Tea and Kapchorua Tea recorded 1H17 losses following depressed tea prices within the period owing to high volumes.

Williamson Tea posted a loss per share of KES 13.21 compared to an EPS of KES 18.42 in 1H16. Turnover was up 13.2%y/y on the back of higher volumes within the period. The higher volumes however led to depressed prices in the market with tea prices hitting lowest levels since 2014. Management also noted increasing costs of production continue to be a challenge to the firm. Williamson Tea recorded an operating loss of KES 96m compared to an operating profit of KES 208m in 1H16. According to management, the industrial court awarded a 50% wage and benefit increase to workers for 2014 and 2015. The award was however challenged by the tea industry and the outcome of this case remains a key concern for the next 6 months. Fair value losses from biological assets was KES 200m compared to fair value gains of KES 159m recorded in 1H16. Finance income was down to a loss position of KES 28m from a profit position of KES 120m recorded in 1H16. Overall, with rainfall expected to be normal, volumes are expected to remain high and prices remain low.
 
Kapchorua Tea, an associate of Williamson Tea recorded a loss per share of KES 11.46 compared to an EPS of KES 25.67 in 1H16. The company recorded a 28.5%y/y improvement in turnover also on higher tea volumes. The company recorded an operating loss of KES 61m compared to an operating profit of KES 44m in 1H16. Fair value losses from biological assets was KES 62m compared to fair value gains of KES 51m in 1H16. Overall, similar to Williamson Tea, decision on workers’ wages as well as expected high volumes are the key risks identified by management for 2H16. (Company filings, Standard Investment Bank)

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