Eaagads Limited, a Kenyan coffee company listed on the Nairobi Securities Exchange (NSE), has announced that its “earnings for the current financial year will be lower by at least 25 percent from the earnings reported for the same period in 2017.”
The company is basing the announcement on unaudited financial statements for the year ended 31 March 2018.
The Profit Warning
Eaagads recorded an after-tax loss of Sh46.7 million compared to the Sh18.1 million profit recorded in the same period last year.
The bourse-listed firm has attributed the decrease in profits to reduced coffee volumes caused by drought experienced in the country in late 2016 and early 2017. As a result, the quality of the beans and production levels dropped thereby affecting the prices at the auction.
Additionally, coffee prices were affected by the New York Coffee Exchange market price which primarily determines coffee prices. Eaagads sold over 76 percent of its coffee via auction during the financial year. Therefore, the company recorded a drop in sales revenue of Sh56.5 million.
The company’s loss was worsened by an increase in the cost of coffee production caused by a 29 percent surge in labour costs and other upkeep costs that rose by Sh45.5 million. This was amid administration cost savings that fell by Sh12.2 million.
Eaagads’ announcement has been made in accordance with the Capital Markets Act, Chapter 485a, of the Laws of Kenya and the Capital Markets (Securities ) (Public Offers, Listing and Disclosures ) Regulations, 2002. In addition, the NSE’s regulations require listed companies to issue profit warnings for the sake of investors and the general public.
Centum and ARM Cement also recently issued profit warning statements due to “decrease in revaluation gains and delay in recognizing realized gains on disposal of investments for transactions signed during the year” and difficult market conditions respectively.
