Company News

Nairobi, September 22, 2015 – Kenya’s leading tea producer, the Kenya Tea Development Agency Holdings Limited (KTDA), has announced Ksh 63.6 billion in farmers’ earnings for the 2014-2015 financial year, which represents a 21% jump from the Ksh 52.6 billion earned in the 2013 – 2014 financial year.  Of the Kshs 63.6 billion, Ksh 43.25 billion will be paid out to smallholder tea farmers as bonuses.

Ksh 14.55 billion has already been paid out monthly to farmers as Initial Payment, based on monthly green leaf deliveries to factories, at the rate of Kshs 14 per kilo of green leaf. The balance will now be released as Second Payment, commonly referred to as ‘bonus’, and will be paid out in October.

The ‘bonus’ will be paid at an average rate of Ksh 27.61per kg of green leaf, representing a 56.8 % increase over the 2013-2014 average rate of Ksh 17.61 per kg of green leaf.

Announcing the results at a Nairobi Hotel, KTDA Group CEO, Mr. Lerionka Tiampati, said the improved earnings are as a result of lower tea supply in the second half of the financial year as well as improved tea prices and favourable exchange rates.
The reduction in supply especially in the first half of 2015 was caused by a prolonged drought earlier in the year, where production dropped by 6%, pushing up auction prices. However, from the start of this calendar year to date, production has gone down by 30%.

Price of tea at the auction averaged USD 2.60 in the 2014/15 financial year, up from an average of USD 2.43 in the 2013/14 year, a 7% increase. Tea prices have reached highs of over USD 4 per kg of made tea for some primary grades at recent auctions during the current financial year.

The weakening of the Kenyan shilling against the dollar has also boosted farmers’ earnings because tea exports are paid in dollars. Kenya exports as more than 95% of its made tea. The average exchange rate of the dollar so far this year has been Ksh91 against Ksh87 same time last year, a 4.6% improvement.

A total of 240 million kilograms of made tea was made from 1.039 billion kilograms of green leaf delivered to the factories during the financial year under consideration, compared to a total of 256 million kilograms of made tea from 1.124 billion kilograms of green leaf delivered to the factories during the 2013/14 financial year. This represents a 6.3% drop in made tea production. It takes on average 4 kgs of green leaf to make 1 kg of made tea.

There was marginal improvement in sales volumes occasioned by large stock carry over from last year.

“Overall, factories are paying an average 71% of total earnings to the farmers compared to 67% per cent last year,” said Mr. Tiampati. The average net income to the farmer has been rising over the years, reflecting an overall improvement in efficiency and cost management at the factory level, the MD said.

Commenting on the reduced earnings in the previous year, Mr Tiampati noted that huge production was a key factor that caused prices at the auctions to drop last year.

In spite of the improved performance, the Agency still faces challenges in producing and marketing Kenyan tea.

“Cost of production has continued to rise due to high energy, labour, financing and transport costs. Energy is still the single largest contributor to the cost of production. To manage these challenges, KTDA has focused on cost management and efficiency enhancement. We are leveraging on economies of scale in order to negotiate cheaper input purchases for smallholder farmers,” he added.

In particular, the Agency has invested in a number of small hydro-power stations that are expected to lower energy costs in a number of KTDA-managed factories.

“Our new 230,000-square foot warehouse being built in Mombasa will offer centralized and cheaper storage facilities to KTDA-managed factories, which will significantly lower costs for our factories. We expect the warehouses to be commissioned early 2016,” noted Tiampati.

Recently, KTDA procured 77,050 metric tonnes of fertilizer for farmers at competitive rates, marking yet another milestone this year.

About KTDA

The Kenya Tea Development Agency Limited (KTDA) was incorporated on 15th June 2000 as a private company under (CAP 486) of the laws of Kenya, becoming one of the largest private tea management agencies. The Agency currently manages 66 factories in the small-scale tea sub-sector in Kenya.
The Agency is mandated with promoting and fostering the growth and development of tea growing among the indigenous tea farmers. Its mandate is to oversee and enhance the end-to-end processes from the cultivation of tea, to the marketing of the same to local and international markets.

For more information:

Egadwa Mudoga, Ag Corporate Affairs Manager, KTDA
0723 221964
322 7948
emudoga@ktdateas.com
www.ktdateas.com

Ivy Namdiero, Associate Consultant, africapractice
0725017527
inamdiero@africapractice.com

Visit our website, www.ktdateas.com for a copy of this release, as well as other resources related to this.

Or post queries on our social media handles for faster responses:
Facebook: Kenya Tea Development Agency Ltd
Twitter: @KTDATea

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