Limuru Tea

Limuru Tea Reports Poor 2007 Earnings, Improved Cash Flow

Limuru Tea recently reported its financial results for the twelve-month period ended December 31st, 2007. Limuru Tea’s FY2007 net profit dropped by 71% to KES 1.4 million compared to their 2006 net profit of KES 4.8 million. The company’s Free Cash flow position improved by 117% in the same period. Net profit attributable to equity shareholders for the period was KES 1.4 million or 2.34 per share.

Click Here to access Limuru Tea’s Financial Statements

INCOME STATEMENT ANALYSIS:
Total revenue for full year 2007 was KES 54 million, 6.52% higher than the KES 51 million reported for the same period in FY2006. Profit before Income Tax for the year was KES 2.4 million, 65% lower than profit before income tax reported for the year-ago period. Income tax expense decreased by 51%%, from KES 2 million in 2006 to KES 1 million in 2007. EPS dropped by 71% to KES 2.34 per share from 8.06 per share a year-ago.

BALANCE SHEET ANALYSIS:
Non-current assets decreased by approx. 3.93% while Current assets decreased by 8.02%. As at December 31st, 2007 Limuru Tea’s total non-current liabilities grew by 4.10% to KES 14 million from KES 13.9 million as at 31st December, 2006.

CASH FLOW ANALYSIS
Limuru Tea generated KES9.4 million from its operating activities, which represents a 118 per cent increase, when compare to cash generated from its operating activities for the same period in 2006. In the same period Limuru Tea did not invested any money in their business, compared to KES 19,000 they invested in the same period a year-ago. Net cash used in financing activities was KES 6 million.

Limuru Tea’s Free Cash Flows:
Free Cash Flows are a way of measuring cash that is available to a company for discretionary use. Free Cash Flows can be defined as cash flows from operating activities less cash outlays necessary for the replacement of operating capacity (capital expenditures). It is a measure of cash that is available for discretionary use by the company. As such, the calculation of free cash flows is somewhat arbitrary since it assumes a certain level of reinvestment to replace existing capacity. Generally it is defined as cash flows from operations less capital expenditures to maintain the company’s current operating capacity. Therefore, free cash flows are those cash flows available to grow the company, pay back debt, pay dividends, or repurchase stock.

In the twelve month period ending December 31st, 2007, Limuru Tea reported a positive free cash flow position. Limuru Tea had KES9 million in free cash, a 117% increase compared to the free cash flow position of KES 4 million reported in 2006.

Click Here to access Limuru Tea’s Financial Statements

MANAGEMENT’S COMMENTARY:
The company’s annual crop production at 846 tonnes was 28% higher that 2006 and was significantly better that the national crop increase of 19%. The combinations of lower US$ tea prices and a strong Kenya Shilling reduced sales prices of made tea by KES. 23 per Kilogram or 17% in 2007. Despite these lower prices, total revenues increased from KES. 51 million in 2008 to KES. 54.3 million in 2007, a rise of 6.5%. Costs per unit of production decreased by 10% due to increased efficiency on higher production volumes. The Company posted a pre-tax profit of KES. 2.4 million Compared to KES. 6.9 million in 2006.
Dividend
The Directors recommended a first and final dividend of KES. 5.00 per share. The dividend will be paid, subject to approval by, members at the AGM, to those on the register at the close of business on 21st May 2008, and for those purposes, the members’ register will remain closed from 21st t0 23rd May 2008.The cash amount paid is KES 3 million.

Prospects
Crop volumes in the first quarter of 2008 have been significantly lower that 2007 due to the poor short rains in the fourth quarter of 2007.US$ tea prices are higher than same period last year but the ongoing strength of the Kenya Shilling and higher wage costs continue to cause concern.
Company Secretary

About Limuru Tea:
Limuru tea is a Kenyan company that engages in the cultivation and manufacture of green leaf tea. Limuru tea is wholly owned by Unilever Tea

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