Tanganda profits rise 25% thanks to cost cuts

Tea producer Tanganda Tea Company Limited reported a 25% increase in profit after tax to US$1.97 million in the six months ended March 31, 2024 thanks to cost and expense reductions, despite a drop in revenue.

In the same period last year, profit was $1.38 million.

In the period under review, the company’s financial costs, other expenses and sales and distribution expenses totaled US$3.84 million, lower than the previous year’s figure of US$4.96 million.

During the reporting period, Tanganda abandoned the local currency and adopted the US dollar as its accounting currency, joining several other companies that took similar steps due to exchange rate volatility.

“Revenue for the half year of US$11.1 million was 6% lower than the prior year’s US$11.8 million,” Tanganda chairman Hebert Nkala said in a statement accompanying the company’s half-year financial results for the period ended March 31, 2024.

In its agricultural segment, Tanganda reported that late onset of rains resulted in an 8.96% decline in tea production to 5,082 tonnes in the reporting period from the previous year.

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Bulk tea exports declined 12% to 3,415 tonnes during the reporting period compared to last year.

Furthermore, the export sales price of bulk tea decreased to US$1.38 per kilogram (kg) in the period under review, compared to US$1.45 during the same period in 2023.

“Packaged tea volumes of 625 tonnes were 33% lower than the 929 tonnes achieved the previous year,” said Nkala.

“Despite a full consumer order book, a combination of customer management to reduce the risk of late payments and limitations in packaging supply were among the factors that resulted in a reduction in sales volumes.”

However, the firm recorded an increase in exports of packaged tea and coffee of 78% and 32% respectively.

Although Tanganda earns significant foreign exchange earnings from avocado and macadamia exports, the harvest season only started after the reporting period.

Nkala said sustainable market diversification will continue to be pursued to expand regional and international markets.

“The company is optimistic and believes it has put in place mitigation strategies to navigate this difficult terrain. The aim is to improve efficiency across the company by restructuring all processes and managing costs,” said Nkala.

In terms of liquidity, the company had US$1.58 for every dollar of short-term debt, showing that the company remained fairly capitalized over the near period.

Total assets were US$39.17 million at the end of the reporting period, compared to US$31.9 million as of September 30, 2023.

The increase was due to higher inventories and amounts owed to Tanganda by its customers and other parties.