Kenya Orchards share rises 2,000pc, to make spices

Corporate News

Njoro Canning Factory managing director Sudheer Vaidya. The company will provide packaging services for Kenya Orchards products. PHOTO | FILE | NATION MEDIA GROUP 

By DAVID HERBLING

In Summary

• The Nakuru-based firm said it has set up a manufacturing plant with a capacity to churn out 12 tonnes of spices per day.

Food processing company Kenya Orchards Ltd (KOL) has ventured into the production of spices and seasonings, opening a new revenue line for the NSE-listed firm whose share price has surged more than 20-fold this year.

The company hopes to boost its bottom line with diversification from its core activity of fruit and vegetable processing and canning.

Kenya Orchards, which is listed on the Alternative Investment Market Segment (Aims) of the bourse, has captured the imagination of market analysts this year with the surge of its share price by nearly 2,000 per cent to close at Sh62 on Friday.

“The spices, herbs and seasoning products will be available in the market next month,” said chairman of the company Thakarshi Patel in an interview.

The food processor’s half-year net profit more than doubled to Sh1.4 million from Sh685,241 reported in June 2013 – attributed to increased revenue and cost-cutting measures. Its sales increased by a quarter to Sh27.7 million in the six months to June, from Sh22.6 million a year earlier.

The Nakuru-based firm said it has set up a manufacturing plant with a capacity to churn out 12 tonnes of spices per day. Kenya Orchard’s stock opened at Sh3 per share in January but increased demand on the counter has spiced up the value of the company 20 times or 1,967 per cent based on last week’s closing price.

The bullish run has seen its market capitalisation soar to Sh797.8 million from Sh38.6 million in January, which ranks it ahead of firms such as Eveready (Sh588 million), Kapchorua Tea (Sh520 million), and Marshalls at Sh142.4 million.

Kenya Orchards has, however, not paid dividends to ordinary shareholders for nearly a decade. Instead, preference shareholders who own 50,000 preference stocks have been receiving annual dividends at Sh1.10 per share.

The manufacturer currently produces food products such as fruit jams, tomato paste, tomato sauce, maple syrup, mayonnaise, custard powder, white vinegar used as meat tenderiser, corn starch and canned foods such as baked beans, matoke, and mushrooms.

“We have a contract deal with Njoro Canning Factory who will provide packaging services,” said Mr Patel.The company has lined up a range of seasonings, spices and herbs such as beef and chicken masala, pudding spice, dhana jeera, cinnamon and parsley, among others.

The entry of Kenya Orchards into the spices and seasonings market puts the listed firm in a head-to-head battle with established players such as Deepak Industries, Kenafric Industries, Unilever, Promasidor, Kraft Foods and Nestle.

Deepak is the maker of Tropical Heat spices; Unilever has brands such as Aromat, Knorr and Royco; Kenafric manufactures Oyo Mchuzi Mix while Promasidor makes Onga Mchuzi Mix.

The management reckons that Kenya’s growing middle class and rising income levels has changed consumer food habits resulting in increased spending on seasonings, herbs and spices. Mr Patel said Kenyans are “increasingly conscious” on how they prepare meals as many turn to herbs and spices for both flavour and health benefits.