• The listed firm said their wage bill has been increasing since 2016 due to a large workforce.
Kapchorua Tea has hinted on plans to lay off part of its workforce in efforts to reduce operation cost.
In a public notice published in the dailies, the listed firm said their wage bill has been increasing since 2016 due to a large workforce.
“With high employee numbers, our anticipated wage and other benefits increases dating back to 2016 require huge financial provisions which if repeated will be unsustainable,” the firm’s chairman Ezekiel Wanjama said.
He said that the board of directors and management will take appropriate measures on cost-cutting wherever possible.
In the notice, the firm issued a profit warning for the financial year ending March 31 saying that net earnings could be at least 25 per cent lower than those of a similar period last year.
This means the company expects a profit of Sh124.80 million or less.
In the financial year ending March 2018, the listed company returned to profitability with a record of Sh166.40 million compared to Sh51 million loss in the same period last year.
In addition to rising labour costs, the company also attributed expected profit reduction to uneven and unpredictable weather patterns.
This also coupled by lower prices fetched during the period as a result of the market forces of supply and demand.
In February, tea prices fell within a week trading at Sh206 per kilogram during Mombasa auction sale from Sh208. This was 28.2 per cent decline from Sh287 sold similar period last year.
The average price of tea as provided by Kenya Tea Development Authority in the six months to December 2018 dropped to Sh271 a kilo compared to Sh327 same period in 2017 due to high volumes.
The price was the lowest to have been witnessed by the agency in the last five years.
KTDA said indications pointed to continued weakening of prices, which will significantly affect farmers’ earnings at the end of the financial year.