Kakuzi issues profit warning following drop in avocado production last year »Capital News

NAIROBI, Kenya January 6 – Listed agribusiness company Kakuzi Plc has issued a procedural profit warning notice with expected profits declining for the full year due to lower production and exports of avocados.

The notice, which was issued in accordance with capital markets regulatory requirements, confirms that the company’s profits will be at least 25% lower than reported for the year ended December 31, 2020.

According to Kakuzi Plc Chairman Nicholas Ng’ang’a, the company’s profits were affected by lower yields as productive avocado orchards entered their half-yearly production cycle, resulting in lower than expected volumes. of 2020. Kakuzi’s backlog in international markets, he revealed far exceeded the farm’s yield volumes.

The company’s board of directors, he said, tasked the management team with accelerating the execution of a strategy of product and market diversification, including improving domestic sales. The strategy aims to mitigate the volatility of the global market and overdependence on the flagship export product.

He added that declining avocado yields had also suffered from lower market prices in key European markets due to significantly higher fruit supply from Peru and Colombia amid low consumption due to the Covid pandemic.

Kakuzi’s other crops and sources of income, which he added, performed as expected with an increasingly strong performance from the Macadamia business, validating the investments made in diversification over the years.

“As a responsible listed entity, we take this early opportunity to publish the earnings warning notice, which is also consistent with the half-year earnings report and commentary published in August of last year,” Ng’ang’a said.

He added that “while we expect a recovery, the board is stepping up efforts to execute our product diversification strategy, which is of critical importance. This strategy aims to mitigate global market volatility and overdependence on a single product. “

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The half-yearly turnover in avocado production is expected, with an annual yield greater than an annual yield. After the bumper harvest of 2020, last year’s production was “out of cycle”. From a field operations perspective, the challenges of the ON and OFF years in Kakuzi are under active management through effective canopy management strategies on the cultivation of ripe avocado trees. Such canopy management strategies help to mitigate this natural phenomenon of semi-annual turnover as much as possible.

Kakuzi has a new flourishing immature avocado development area (around 373 hectares), with production expected in the coming seasons to further mitigate yield risks. Land preparation for a new avocado harvest is also underway in a growing area previously devoted to pineapple production.

As part of the diversification strategy, Kakuzi has improved its forestry, blueberry and livestock production. The company has also increased its production of traditional crops with its avocado and macadamia production capacity with several recent investments valued at over KShs 100 million.

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