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Citizen Weekly

Sunday, 11 January 2015

Murang’a tea firm annual meet ends prematurely

Our Reporter

Njunu Tea Factory Company Limited witnessed a decline of over 570,000 kilogrammes of tea production last year, the company factory board chairman Geoffrey Gitonga told members during a prematurely ended AGM held at the factory in Gatanga of Murang’a county.
He said crop production for the year was lower than last year. 15,568,131 kilogrammes of green leaf were delivered for processing at the company’s factory.
Out of this 3,507,277 kilogrammes of tea were made. These throughput and output were lower than last year’s levels of 16,144,849 kilogrammes and 3,682,292 kilogrammes by 576,717 kilogrammes and 175,015 kilogrammes respectively.
This achievement was at a conversion factor of 22.53pc which is equivalent to per 4.44 kilogrammes of green leaf to make one kilogramme of made tea. Gitonga said there was a decrease in tea prices during the year.
The average price realised per kilogramme of made tea sold was Sh214.34. This compares un-favourably with the price of Sh282.97 in 20l3. The prices therefore decreased by Sh68.63 per kilogramme of sold tea. This year’s price of one kilogramme of made tea sold is equivalent to Sh43.29 per kg of green leaf while the manufacturing costs decreased during the year.
The chairman said the average manufacturing cost for the year was Sh173.87 for every kilogramme of made tea against the average manufacturing cost of Sh246.80 per kg for last year. There was a decrease in the manufacturing cost by Sh72.93 per every kilogramme. This manufacturing cost includes monthly green leaf payment at Sh 62.14 per kg of made tea for the year which is higher than Sh61.38 per kg for last year. This year’s manufacturing cost was equivalent to Sh39.7 per kilogramme of green leaf.
“The company was able to pay Sh520,825,590 for green leaf delivered against a total payment of Sh823, 362,712 realised the previous year,” said Gitonga.
“Board of the company did recommend 2.5pc payment of dividends to class ‘B’ shareholders appearing in the company’s register as at June 30, 2014,” he said.
The chairman said that the factory through its strategic plan has modernised and improved the plant. The improvements included among others the rehabilitation of two dryers to enhance the throughput and quality of made tea, installation and commissioning of the second CFU aimed at increasing the quality, throughput and reduction in labour costs, general replacement in plant and machinery, furniture and fittings and ICT equipments and the factory has also developed the acquired land at Naivasha by planting frees and the survival rate stands at 85pc.
The chairman said tea industry has been adversely affected by decline in tea prices by 24.25pc caused by increased supply of tea by major producing countries like China, India, Kenya, Sri Lanka and others, hence whenever production increases prices decline; reduction in demand of tea in key markets such as Egypt, Afghanistan, Sri Lanka due to political instability; introduction of 1pc tea board, levy which has led buyer’s to reduce the price paid for direct sales to cover costs of the levy (the levy goes to  Tea Board of Kenya); increase in operational costs by 5.43pc mainly attributable to increase in salaries and wages, Increase in price of diesel, electricity, spares etc,  reduction in interest earnings by 62.53pc due to Central Bank variation of the base lending rate and strengthening of the shilling vs the Dollar and Pound which are the industries trading currencies. The factors above have greatly contributed to a decline in total surplus by 49.4 1pc.