ZIMBABWE Stock Exchange-listed Tanganda Tea Estates achieved a total revenue of US$19,2 million for the financial year ended September 30, 2025, which was 26% below the prior year.
Weather-related production shocks impacted the production of tea, coffee, and avocados. In addition, a global surplus in tea pulled export prices lower, and local exchange rate-related inefficiencies in formal retail constrained beverage sales. Direct and indirect cost pressures more than halved gross profits and resulted in an operating loss. Finance costs almost doubled, worsening the bottom line which turned to a loss of US$4,2 million.
Debt servicing drive negative cash position
Total assets declined by 5% and liabilities increased by 21% after payables doubled and receivables halved; this contributed to the 18% decline in shareholders’ equity to US$19,0 million. The group’s cash position remained negative, mainly because of principal and interest payments on loans which overshadowed positive operating cashflows. No final dividend was declared.
Forecasts
We anticipate weaker export prices for coffee and tea for Tanganda in financial year 2026 (FY26), which will likely dull the impact of an expected increase in production. The shift in preferences from nut-in-shell to shelled macadamia has negatively affected Tanganda’s sales and margins.
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We anticipate a positive outturn after a successful capital raise aimed at value-add capabilities in macadamia, but only as early as FY28. The recovery in local sales in the second half of FY25 will likely be undone by new Value-Added Tax (VAT) changes, which are envisaged to push retail activity back into the shadow economy. We also note that bottled water sales will likely continue to fall as competition intensifies.
Investment thesis
International prices of several beverage commodities have come under pressure because of increasing supply, according to the World Bank’s Beverage Price Index. The index is expected to decline by 7% in 2026 and a further 5% in 2027 due to increased supply in coffee and tea, particularly in markets benefiting from La Niña.
We anticipate this will result in weaker export prices for coffee and tea for Tanganda in FY26, likely dulling the impact of an expected rebound in production. The shift in preferences from nut-in-shell to shelled macadamia has kept export prices for the crop depressed, with ripple effects on Tanganda’s sales and margins.
We anticipate a positive outturn after a successful capital raise aimed at value-add capabilities in macadamia. That said, we expect this to materialise only as early as FY28. We welcome the recovery in local sales in the second half of FY25 following the liberalisation of exchange rates, but this will likely be undone by new VAT changes, which are envisaged to push retail activity back into the shadow economy. We also note that bottled water sales will likely continue to fall as competition intensifies.
Valuation
We estimate a FY26 price target of US1,26c, based on a discounted cash flow valuation given expected losses at the operating level in FY26 and FY27 that limit the use of relative valuation models. This is also largely due to weak export prices and persistent challenges in the local market. Key assumptions include a successful capital raise, a 10-year compound annual growth rate of 11% in total revenue, and a terminal growth rate of 2,5%. A weighted average cost of capital of 24,5% was based on a target debt ratio of 20%, a market risk premium of 16,89%, a beta of 1,2, and an interest rate of 11%. Our target price indicates significant downside risk, and we update our recommendation from HOLD to SELL.
- This article was written by Morgan & Co, a securities firm for a new era, whose local knowledge and expertise is twinned with international experience to grow the Zimbabwean capital markets.