Business

Kakuzi issues profit warning due to lower prices in key markets

Friday, January 7th, 2022 03:00 | By
Kakuzi issues profit warning,

Horticultural produce exporter Kakuzi has issued a profit warning due to a sharp drop in avocado production and lower fruit prices in Europe.

The Nairobi Securities Exchange (NSE) listed firm warned its current investors, potential investors and the general public of a 25 per cent dip in earnings.

“This profit warning notice arises from trading information, market forecasts and preliminary unaudited financial results that our net earnings for the year ended December 31, 2021 will be at least 25 per cent lower than the one reported the previous year,” Kakuzi said.

The firm said the dip in earnings is a result of a seasonal drop in Avocado output by up to 18 per cent coupled with a reduction in prices of fruits in the European markets.

“This is due to oversupply of fruits from Peru and Colombia which impacted the prices at the same period that our fruits were also in the market,” said Kakzui in a statement to investors.

Diversification

Kakuzi’s performance and agribusiness in general has always been unstable due to its exposure to seasonal markets.

The company said it continues to invest in product diversification to mitigate global market volatility that has been its weakness over the years.

“Looking back, the signs were there in the first half report. Things got worse in the second half of 2021, it seems,” said Eric Mokaya, Swiss based analyst at Klarna.

In the first half of the year, Kakuzi reported a significant drop in avocados production and expected downward pressure in avocado prices.

Blueberry sales were doing well but tea production returns haven’t improved and timber products were also strong.

The company has diversified into multiple crops including macadamia to shield its earnings from cyclical price swings.

It also exports timber, beef, animal feed and could add more products in its portfolio.

The counter was trading at Sh420 a share yesterday having gone 9 percent the previous day due to speculative trading.

Last year, Kakuzi suffered a blow  following reports that it was mistreating its workers at the firm, the story carried in a British daily raised eyebrows risking boycott of Kakuzi’s exports.

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