Chairman’s Statement

92nd ANNUAL GENERAL MEETING

OPENING STATEMENT

Ladies and Gentlemen - Given the Covid 19 situation - I feel it is important that before we begin the formalities of this AGM that I provide you with a short brief on how the Company is operating under the current difficult circumstances.

As many would have seen or heard on the local radio, television and on the Company’s social media pages, Kakuzi has injected significant resources into the Community and County Government facilities to support the efforts to tackle this pandemic.

From donating critical hospital equipment to the provision of community hand washing facilities as well as supporting educational initiatives and food donations to vulnerable community members, Kakuzi has been able to reach many hundreds of people with support.

We have been working closely with both the County Government and the Office of the Deputy County Commissioner to provide these initiatives and as a Board of Directors we would like to acknowledge the incredible efforts that all of these offices are bringing to this common goal.

Our own members of staff have dedicated themselves to both the protection of our employees and the assistance to our surrounding community. Again, on behalf of the Board I wish to appreciate these efforts and to recognize that these clearly demonstrate the quality and calibre of all the members of the Kakuzi team.

Our operations have continued with limited disruptions and so far, we have exported 22% of our avocado production which is generally in line with our original plans.

This would not have been possible without the dedicated service of critical National Government bodies and to just mention a few: We must pay tribute to the officers at the Horticultural Development Authority, the Kenya Revenue Authority and the Kenyan Ports Authority who have found ways to literally keep imports and exports going during these times.

We must also acknowledge the important roles that our social partners have played in our ability to operate. Our union, the Kenya Plantation and Agricultural Workers Union, has helped us sensitize our employees on social distancing and the importance of public hygiene as well as many other key roles.

We have also been able to conclude the Collective Bargaining Agreement, despite not being able to physically meet.

As a consequence of this Kakuzi has been able to honour its commitment to increase workers’ salaries by 10% for the year.

KEY HIGHLIGHTS FROM THE 2019 CHAIRMAN’S STATEMENT

The Company achieved a record profit for the year and for the first time in its history broke the Billion Shilling profit barrier!

The Dividend is also the highest on record with a 56% increase on last year.

Kakuzi’s commitment to its custodial philosophy and developing its agricultural strategy were key areas of focus with the expansion of both the avocado and macadamia operations.

Our sustainability and the well-being of our employees form the very foundation of the Company’s daily activities along with supporting local communities through economic empowerment.

In this regard our avocado smallholder empowerment programme paid out Ksh 93 million (85% of the net returns) to individual farmers and smallholder groups who supplied their fruit to us.

In contrast to this year - 2019 was a dry year with avocado volumes down 45% on 2018 but our export market remained strong with excellent prices paid.

Macadamia volumes were well up with firm pricing leading to excellent returns from our two core crops.

Livestock and forestry performed in line with expectation, but our tea operations experienced a very tough year with weak prices due to high volumes in the market.

Our many CSR initiatives continued with focus on Sustainable Development Goals relating to good health and wellbeing, quality education; gender equality, clean water and sanitation, decent work and on Climate action.

We became a signatory to the United Nations Global Compact and look to join the United Nations Women in support of the principles of Women Empowerment. We have also extended our SHARP program to include the local community.

Development of our community Avocado project continued with agricultural extension services, Social media-based training programmes as well as training programmes with farmers on good agricultural practices with the aim of eventually meeting international standards and maximising returns.

Finally, our strategy and development plans continued through the year with the steadfast and unwavering support of our employees, management and your Board.

My thanks - as always - to ALL for their commitment and hard work throughout the year.

OUTLOOK OF THE COMPANY FOR 2020

Like other parts of the Country we have experienced very wet conditions in the first 5 months of the year. Whilst this has not caused the damage seen in other parts of the Country it has hampered some agricultural operations but thankfully this has not been too significant.

The impact of COVID-19 on the operations and markets for our products is as yet unknown as our main sales revenue is predominantly realized in the second half of the year.

Avocado markets were initially badly impacted as a result of the closure of European restaurants and wholesale markets however, this is a fast-changing picture as Europe reopens.

At the same time Peru, our main competitors in the market, have been exporting very significant volumes into Europe which will have a negative impact on prices. We anticipate lower returns from avocados than in 2019.

Logistics for avocados are currently running well given the circumstances and as mentioned in my opening remarks we are grateful to the authorities and our service providers for their extraordinary efforts in this regard.

The macadamia market has been significantly impacted by reduced sales volumes due to lower demand in some key Asian and US markets - but it is too early to predict what the medium term looks like as markets are rebuilding themselves albeit slowly.

Locally, sales volumes of beef and forestry have reduced but we are hoping that sales will pick up as and when the Government eases the movement restrictions.

Tea prices continue to be depressed by record Kenyan production. Production shortfalls in India and Sri Lanka may mitigate this to some extent but if world-wide production continues to rise without a corresponding increase in demand we may see low prices for some time to come.

We have already experienced a minor locust invasion in February of this year and at this stage we are aware that larger swarms may return.

We remain vigilant and ready with our teams to manage this.

I urge all Members to take care and be safe during this COVID-19 pandemic.

G H MCLEAN
9th June 2020