NAIROBI, KENYA, MAR 24— Kenya’s reputation as an origin for quality fruit has been undermined by the export of immature fruit by unscrupulous exporters, agricultural firm Kakuzi (Plc) has warned.
This, the firm says continues to be an ongoing problem which is still to be addressed by the authorities, and could affect exports to key markets mainly the European Union.
“This may eventually have a long term adverse impact on Kenya’s export potential for this product,” the Nairobi Securities Exchange listed firm said as it released its financial results for the year ended December 31 on Friday.
The firm posted a 5.2 per cent jump in net profit for the year to $5.86 million (Ksh591.6 million) from $5.57 million (Ksh562.4 million) the previous year.
During the period under review, the Makuyu based company recorded a 6.4 per cent rise in sales which closed at $27.9 million (Ksh2.82 billion), up from $26.3 million (Ksh2.65 billion) in 2016.
“The increase in profit is as a result of continued market demand for Avocado and Macadamia throughout the year. Market demand in EU countries continued at unprecedented levels with excellent prices being achieved,” Chairman Graham Mclean said in a statement.
He however noted that profitability within the tea operations “continued to reflect difficult trading conditions and significant inflationary pressure on labour and other production costs.”
The firm managed to cut its distribution costs during the period by 3.7 per cent, spending $5.93 million (Ksh597.9 million) compared to $6.15 million (Ksh620.6 million) a year earlier.
Kakuzi’s business is anchored on growing, packing and selling of avocados, growing, cracking and selling of macadamia nuts, cultivation of tea, forestry development, livestock farming and growing and selling of pineapples.
The directors have recommended the payment of a fist and final dividend of Ksh7.00 per ordinary share, up from Ksh6.00 paid last year.
The management said it continues to develop its core crop strategy in line with the Company’s long-term objectives.
“Kakuzi’s operations continue to function and perform well in Kenya’s current business climate. Despite global political uncertainty, climate change and volatile commodity markets, Kakuzi is fully committed to developing its core agricultural strategy, the diversification of our income stream and the continued expansion of our avocado and macadamia footprints,” the management affirmed.
Europe remains a top destination for Kenya’s fruits, cut-flower and assorted horticultural exports.
Last year, the total value of fresh horticultural products exported to foreign markets was $238.8 million (Ksh24.1 billion), up from $231.9 million (Ksh23.4 billion) the previous year.
The value of vegetable exports increased from $18.8 million (Ksh1.9 billion) in November 2017 to $26.8 million (Ksh2.7 billion) in December 2017, the Kenya National Bureau of Statistics data shows.
Kenyans top EU markets include the UK, Netherlands,Germany and France.
Kakuzi on Friday affirmed that its international markets remain firm. However, supply and demand dynamics are unclear for 2018 making future projections uncertain.
“The dry conditions experienced at the beginning of the year affected Kakuzi’s avocado and macadamia crops resulting in a decline in yield. However, market prices for these crops and, to a lesser extent, tea were favourable in the world markets which led to improved results overall,” it said.
Avocado export production was down 11 per cent on 2016 due to the dry conditions with a total of 1.59 million cartons being shipped.
Macadamia production was up on 2016 levels by nearly 30 per cent although this was lower than expected, the company said, largely attributable to the dry conditions experienced during the year.
“Our product performed well in the market with our national and international food safety standards (FSSC 22000) providing a solid base from which to market our product more widely,” Mclean said.
Market prices firmed to new record levels fuelled by continuing deficits in volume from Southern Africa as well as the impact of the drought in East Africa.
Tea prices were up on 2016 as a result of lower national production. However, increased production costs had an impact on the margins of green leaf sales.
The firm, which is also listed on the London Stock Exchange, is discontinuing fresh pineapple operation in favour of Pinkerton avocado. Sales of pineapple will eventually be phased out in 2018.