Kakuzi has issued a profit warning notice with anticipated lower full year earnings due to lower production and export of avocado fruits in 2021. The notice, which has been issued as per the Capital Markets regulatory requirements, confirms that the firm’s earnings will be at least 25% lower than that reported for the year ended 31st December, 2020.
Kakuzi Chairman Mr. Nicholas Ng’ang’a stated that the firm’s earnings have been affected by lower yields as the productive avocado orchards had entered their bi-annual production cycle. This resulted in lower volumes than in 2020, adding that Kakuzi’s order book from the international markets was far in excess of the farm yield volumes.
The firm’s Board, he said, had tasked the management team to accelerate the execution of a product and markets diversification strategy, including enhanced domestic sales. The strategy aims to mitigate the global market volatility and overreliance on the flagship export product.
Kakuzi’s other crops and revenue streams he added had performed as expected with an increasingly strong performance from the Macadamia business. This validates the investments made into diversification over the years. The bi-annual bearing in avocado production is expected, with an on year yield higher than an off year yield. After the 2020 bumper harvest, last year’s production was in an off-cycle.
Kakuzi has a thriving new immature avocado development area of about 373 hectares, with production expected in the coming seasons to further mitigate the yield risks. Land preparation for a new Avocado crop is also underway in a crop area previously under pineapple production. As part of the diversification strategy, Kakuzi has enhanced its forestry, blueberry and livestock production. The firm has also ramped up its legacy crops production with its avocado and macadamia production capacity with several recent investments valued at more than Ksh. 100 million.