Nairobi Securities Exchange listed agricultural firm, Limuru Tea Ltd has issued a profit warning saying that its Full year 2016 profits are expected to fall by more than 25 per cent compared to the previous year.
“The Board of the directors of the company hereby informs holders of securities issued by the company and the general public that based on a preliminary review of the financial statements of the company, the company is expected to record a decline of more than 25% in the net profits attributable to the shareholders of the company..” the company said.
The estimated decrease is mainly as a result of the Amendment of the IAS 41 and IAS 16; IAS 41 Agriculture currently requires all biological assets related to agricultural activity to be measured at fair value less costs to sell. This is based on the principle that the biological transformation that these assets undergo during their lifespan is best reflected by fair value measurement. The new accounting rules require that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing.
The company also noted that its profits were also impacted by the increase of cost of production.
Related; Unga Group Half Year Profits drops by half, issues Profit Warning!
In its Half Year period ended June 2016, Limuru Tea’s net profit rose by a fifth to Sh4.3 million, helped by increased output and higher prices of tea in the world market. The firm’s turnover jumped 40 per cent to Sh59.2 million, outpacing expenses whose details were not disclosed.
Limuru Tea Becomes the sixth Kenyan listed firm to declare a profit warning since September 2016. Others that have issued Profit Warnings since then include; the Nairobi Securities Exchange itself, Deacons, Sasini Ltd, Unga Group and CIC Insurance.
