TEA producer, Tanganda Tea Company Limited recorded an 8% decline in profit after tax to US$1,2 million in the nine months ended June 30, 2024 owing to lower tea volumes and weak exports.
The El Nino drought that is wreaking havoc has significantly lowered crop output across the agriculture sector and for Tanganda, an agro-based firm, it has hurt its bottom line.
In a trading update for its third quarter ended June 30, 2024, Tanganda said its revenue for the quarter under review was US$3,4 million which was in line with the comparative period last year.
“Revenue for the nine months ended 30 June 2024 of US$14,5 million registered a 5% decline against US$15,3 million achieved prior year.
“Profit after tax declined by 8% to USD1,2 million from US$1,3 million achieved in the previous year,” Tanganda said.
“Bulk tea production yield of 7 293 tonnes, affected by the late onset of the rains in the first quarter of the year, recovered and was in line with prior year production.
“Export volumes declined by 9% to 4 504 tonnes from 4 959 tonnes achieved prior year due to timing of sales as production was more concentrated in the third quarter.”
The firm added that packed tea volumes of 1 303 tonnes were 11% below 1 459 tonnes achieved in the previous year.
“Cumulative variance against prior year narrowed in the third quarter due to a combination of packaging supply constraints and working capital management.
“Sustained market diversification to increase exports registered 50% growth on packed tea export volumes into the region,” Tanganda said.
“Macadamia production volumes grew by 61% to 1 487 tonnes from prior year volume of 921 tonnes as yield per hectare improves with plantations maturity profile.
“The 33% decline in nut in shell exports from 735 tonnes achieved prior year to 494 tonnes is due to delayed start of the marketing season.”
Macadamia and avocado are Tanganda’s top exported products to mostly Europe and provide a substantial amount of foreign currency.
Locally, Tanganda generates most of its earnings from tea sales.
“The operating environment for the period under review was underpinned by exchange rate stability following the introduction of the Zimbabwe Gold (ZiG) currency on 5 April 2024.
“The tight liquidity in the market also reduced the occurrence of speculative transactions that would likely cause fluctuations in the exchange rates,” Tanganda said.
“The effects of the El Nino impacted the agricultural sector and this comes at a time when international commodity prices are subdued.
“Persistent power cuts due to low water levels at Kariba continued to be experienced.
“To mitigate power challenges, the company generates a portion of its power requirements through the installed solar systems at three of the five estates.”
The firm said the grid tie and net metering would be pursued to leverage on excess power generated from solar plants.
“The operating environment is expected to remain complex due to both policy changes and the effects of the El Nino induced drought,” Tanganda said.
“The impact of the introduced ZiG currency and fiscal and monetary measures are expected to sustain macro-economic stability in the short term and the medium to long term impact can be ascertained after policy refinements.”
The company said it was optimistic that it had put in place mitigatory strategies that enhanced processed efficiencies and managed costs to improve performance.
“Yields of avocado and macadamia continue to increase with enhanced plantation maturity profile,” Tanganda said.
“The demand for our packed tea products remains firm both on the local and regional markets and focus is on sustained diversification of the market.”