When Sasini bought the Mweiga Coffee Estate, many people thought it would make profits out of it. They didn’t. Actually, it recently sold part of the estate to a developer hoping to recoup some of the losses.
The experiments going on in the Mweiga Farm have not yet borne fruits for the listed company, associated with business tycoon Naushad Merali, and overall this year, it reported that the net profit for the year to September has dropped 41.2 per cent to Sh339.7 million on lower gains from divestitures.
The Kenyan company, listed at the Nairobi Securities Exchange (NSE), had also sold Savanna Coffee House in a transaction which boosted its income by Sh16.9 million in the period under review.
In 2016, Sasini had hoped to cut down the losses at Mweiga by installing its own biogas power plant. The Sh60 million plant supposed to generate 150kw of power, according to Managing director Moses Kiplagat.
The energy produced from cow dung of more than 300 cows was to be used in processing milk, lighting up the upcoming estate in the farm and pumping water to irrigate grass and coffee fields.
“This plant is a big relief to us, because we can now run our activities without the fears of paying high electricity bills every month,” Kiplagat said.
While the firm booked a gain of Sh422.7 million from divestments in the financial year to September 2016, helping the business close with a net profit of Sh576.98 million, the story is not the same this year after Sasini’s profit dropped despite the fact that its revenues during the period increased 17.7 per cent to Sh4.2 billion with management attributing this growth to stronger international tea prices.
The firm’s income was further positively impacted by a Sh81.7 million gain in fair valuation of its biological assets, compared to a loss of 117.9 million the previous year.
“Despite the effects of the severe weather conditions in the early part of the year, there was an improvement in tea production to 11.2 million kilogrammes against the production of 11.1 million kg the previous year,” the firm said.
“Coffee production was 861 tonnes compared to 944 tonnes the previous year,” adding that prices of this commodity reduced slightly and remained sluggish through the year due to large stocks held by the consuming markets.
The firm’s board of directors recommended the payment of a second interim dividend of 75 cents per share held, adding to the 25 cents per share already paid out in July 2017.
This proposed payment to shareholders, which is set to take place on or about February 21, will bring the total dividend payout for the year to Sh228 million.
Disposal of Sasini Coffee House marks the latest divestiture by the firm whose principal activities are growing and processing of tea and coffee.
Sasini in 2015 sold its building on Nairobi’s Loita Street, Sasini House, for more than Sh600 million. It recently raised Sh1 billion from sale of its land in agricultural operations it says are unprofitable, recording large capital gains from the properties it bought decades ago.
These include land in its two coffee estates in Nyeri — Mweiga and Wahenya — that it said had been running losses for six consecutive years.
History of Mweiga
Mweiga is a historic place and Sasini is holding onto a piece of estate with a good history.
The original Mweiga Estate, as it came to be called, was approximately 1,100 acres before the land ran out to the great ranching areas to the north. On its western boundary it marched with the Aberdare forest and consisted of about 300 acres of red soil suitable for planting coffee, which, however, in some areas was marginal and underlaid heavily with murram.
The farm was taken up shortly after the Great War in about 1919 by Billy Sheldrick and Tommy Atkins. William Ibbotson (later Sir William), a close friend of the great naturalist and writer Jim Corbett, was a sleeping partner, who subsequently sold the farm to Peter Marrian and his partners at the end of 1947.
Sheldrick and Atkins had come to Kenya from the Indian Army with two objects in mind – one was to plant and farm coffee and the second was to play polo. Over a period of years, 300 acres of coffee was planted under heavy shade consisting of grevilia and cordia holstein. Cultivation was by oxen with shallow ploughs and the main source of power for the pulping and the drying of the coffee was steam. To this end, steam engines were purchased and imported into the country, railed to Thika, which was the limit of the railway at that time, and hauled by oxen to their final resting place. Also imported were large rotary dryers for the drying of the coffee.
As there were no coffee mills at that time, machinery was also purchased for the hulling and grading of coffee. Equally there was no marketing organization, and coffee owners were at the mercy of agents in London, who sold the coffee on the planter’s behalf, the proceeds of sale being received months after dispatch. During many periods, especially those of the depression of the 30s, the sale prices were hardly sufficient to cover the cost of production and it must have been a heart-breaking business. At this time nothing else was done with the remaining land other than the introduction of a herd of extremely low grade humped cattle, which were able to do little other than suckle their young.
On the lighter side of life, an area within a mile of the farm was found to enable the construction of not one, but two polo grounds with scarce1y having to level an ant hill. Here polo took place regularly every Saturday afternoon and Sunday morning until the coming of Independence. Tragedy struck the partnership in the middle 1920s when Tommy Atkins, who as well as being a great polo player was a great hunter, was killed by a rhino.
Mweiga was a marginal rainfall area with an average of around 33 inches per annum, and the only water available was the Mweiga stream which flowed at best at around one third of a cusec. Sheldrick, in order to protect what water there was, purchased a farm of 350 acres known as Kiguru through a strip of forest to the west. He also took a furrow off the Rahuti river, which almost immediately joined the much larger Amboni, and dropped the water over a saddle into the Mweiga in order to increase its supply. At no time, however, did he attempt to use irrigation on the coffee, which suffered indubitably from the low rainfall and the competing of the shade trees for what little moisture there was.
No history of the early days of Mweiga Estate would be complete without its Treetops connection. It was actually Sheldrick himself who, walking in the forest, came across the original Mugumo tree and realised its potential as an observation post for watching animals. He himself built the first platform in the tree and subsequently this was taken over and made into a four roomed tree house by Sherbrooke Walker, the owner of the Outspan hotel. It was of course here that Princess Elizabeth became Queen of England during the night of 5/6th February 1952, a night recorded by Jim Corbett in his account entitled ‘A Princess becomes a Queen’.
Following the take-over of the farm by Peter Marrian and his partners on the 1st of January 1948, great changes took place. A quantity of the poorer quality coffee was uprooted and many different types of crops were grown with varying success: wheat, barley, oats, pyrethrum, maize and a large quantity of vegetables and, horticultural products. Opportunity was taken to purchase an adjoining area of land known as Farm 12, which increased the total acreage of the property to around 2,500. Some of the land close to the Aberdare forest was very suitable for coffee and 120 acres were planted and inter-planted during the early growing stage with pyrethrum, which proved extremely profitable. At the same time all the shade trees from the original coffee were progressively removed and from that moment on the yields started to improve. The water from the Rahuti was put to use under an irrigation project for the old coffee and with the acquisition of Farm 12, the property obtained a boundary on the Muringato river to the South, which provided a source for the irrigation of all the new coffee. Subsequently, this irrigation was extended to an adjoining Estate known as Wahenya, which was purchased after the takeover by Sasini, the total acreage: of coffee now being around 500 acres.
As well as the additional crops referred to above, a high grade dairy herd was started and for a time a retail milk round was run in Nyeri. There was also a beef herd and pedigree large white pigs were produced in profusion. As prices improved however, it was the coffee that made the significant contribution to the company and, at the time of its sale to Sasini, the main activity was coffee and cattle.
Whether Merali will make money here depends on how he utilises the land.