Tanganda Tea invests in El Nino effects mitigation measures

Massive investments in dams, reservoirs and high-technology precision irrigation will mitigate the impact of the predicted El Nino-induced drought to the operations of Tanganda Tea Company, one of the country’s biggest beverage makers.

Financials for the year ended September 30, 2023 for the company, showed that demand for Tanganda products remains relatively strong despite the impact of complex macro-economic factors on the local and regional markets.

“The predicted El Nino is not expected to significantly impact avocado and macadamia yields as the company is invested in dams, reservoirs, and high-technology precision irrigation to mitigate the impact of a drought.

“Yields of avocado and macadamia are expected to increase with enhanced maturity profiling of plantations over the next three to five years,” said Herbert Nkala, the group’s chairman.

He said the growth strategy is to diversify the regional market further as part of efforts to improve profitability and efficiency.

“The confidence from our customers and their support, including the value addition projects in the pipeline for our plantation crops, will increase profitability mainly as management focuses on efficiency in managing costs,” the chairman said.

For the period under review, group revenue grew 42 percent to $128,99 billion from the prior year of $90,77 billion, while in historical cost terms, a 678 percent growth from $7,35 billion to $57,24 billion was achieved.

Nkala said the company suffered an inflation-adjusted loss after tax of $17.05 billion compared with a profit after tax of $4,33 billion in the previous year.

He said in historical cost terms, the profit after tax grew 270 percent to $15,45 billion over $4,17 billion in the previous year.

In terms of operations, the late onset of the rain and its relatively uneven distribution led to a decline in bulk tea production, as the volume of 7 894 metric tons was 9 percent below the 8 670 metric tons produced in the prior season.

“In turn, following the production trend, bulk tea exports of 6 238 metric tons were 12 percent below the previous year’s 7 125 metric tons.

“The export average selling price increased slightly to US$1,44 per kg from the prior season’s average selling price of US$1,42 per kg,” said Mr Nkala.

As a result of the biennial bearing phenomenon coupled with the impact of the extensive pruning carried out on 55 hectares of mature trees to rejuvenate them, avocado exports of 2 148 metric tons were 50 percent below the prior year of 4 321 metric tons.

Nkala said the average export price remained at 44 US cents per kg, as achieved in the prior year.

“Forty-four additional hectares of avocado plantations were established during the financial year, bringing the total hectarage under avocado to 541 hectares,” he said.

During the year under review, the company exported 1,551 metric tons of macadamia (nut-in-shell) compared to 621 metric tons sold in the prior year, and the unsold balance of 350 metric tons from the preceding year’s stocks was exported during the financial year.

“The impact of the shift in market preference from nut-in-shell to kernel was evident as the prices realized declined by 41 percent to US$1,93 from US$3,26 per kg realized in September 2022.

“The company strategy is to invest in value-added options to mitigate primary produce price fluctuations and to diversify markets into Europe and America,” said Nkala.

Coffee production of 87 metric tons was 28 percent above the 68 metric tons achieved in the prior season, and the current year’s crop will be sold in the ensuing financial year.

In the beverage industry, the decline in packed tea sales volumes of 6 percent from 1 994 metric tons achieved in the prior year to 1 873 metric tons sold in this financial year was mainly due to logistical and global challenges in sourcing inputs.

Nkala said plans are in place to clear unfulfilled orders, which will see volumes of brands grow as we go into the coming year.

“In response to discernible consumer appetites for healthy lifestyles, the company continues to supply herbal infusions to support our customers’ expressed demand. Research is ongoing to broaden this range of products by bringing in flavored herbal infusions,” he said.

To hedge against local currency inflationary pressures and devaluation, the percentage of domestic sales made in United States dollars has been pushed up to 70 percent from less than 2 percent in the previous year.

Nkala noted that the company remains committed to its sustainability agenda with increased activities in environmental stewardship, optimal resource utilization, out-grower scheme oversight, and community involvement.-ebusinessweekly