Chairman’s Statement

94th Annual General Meeting

Given the situation, I feel it is important that I give you a brief summary on how the Company performed last year and is operating under the current circumstances.

For the benefit of all of us who do not have the opportunities to see our operations at first hand we continue to produce a great deal of online videos, reports and images which show the developments at Kakuzi and the many initiatives which the Company is undertaking.

We finished 2021 on a high note with the launch of our 2nd ESG report at the Nairobi Securities Exchange.  I cannot emphasize enough how important these topics are to us.  Our business and indeed our livelihoods are dependent upon the very natural resources which we strive to conserve and improve on a daily basis. 

Our environment and the climate have not only a direct bearing on our profitability but also on our long-term strategic goals.  Businesses are being asked more and more to play a greater role in the Climate change debate and your Company is at the head of this conversation.  It is a key part of our long-term sustainability as well as profitability and we are committed to making the necessary thought leadership contributions with other mutual interest partners.

As most of you are aware we are part of a global marketplace as the products we produce often face stiff competition from producers in other countries.  It is for this exact reason that your Board embarked on a very significant diversification program several years ago.  We continue this with further investments into the new opportunity to produce blueberries as well as value add opportunities which I will mention later.  The aim of this is to ensure that Kakuzi is not dependent on any one crop but all our products contribute significantly to the Company’s revenues and success.

The results of this revenue diversification strategy have played out in the 2021 financial year as we, along with the entire industry, experienced price challenges for avocados but a greater contribution to the company’s profitability from the macadamia revenue stream.

Over the next few years the areas of young macadamia orchards will yield more as they mature.  Our strategic plans indicate that by the end of this development the volumes produced will be over double where they are today.

Likewise, the avocado developments are nearing completion and by 2026 we will have 1,160 ha under cultivation, increasing from the current 980 ha.  The variety of cultivars planted will also give us a good spread of supply into our key and emerging markets.

I would like to commend the enormous efforts by the Kenyan authorities to gain market access for Kenyan avocados into China.  Whilst shipping has not commenced, we believe the preparations between the two Countries are in the final stages. 

Kakuzi has played a leading role in helping this process and continues to work closely with the Kenya Plant Health Inspectorate Services (KEPHIS) among other players. 

Working with the Government to expand the markets for Kenya’s products is critical going forward.  If we do not we will be left with limited market opportunities as other producing countries try and outcompete us.

Our Avocado extension program for small and medium sized farmers continue to provide technical training through both our online platform and our extension officers.

Despite the lower market prices, we were able to offer farmers a total payment for their fruit of Kshs 335 per carton exported which represented 87% of the net return.  This amount was 12% lower than the previous year.

Although blueberries look promising it is a crop which is new to us and the Country.  A steep learning curve is being walked by the team and we have achieved some encouraging results.  Expansion is highly dependent upon these early results materializing into meaningful business returns.  As a Country we appear to be well placed to grow, export and indeed supply an ever-increasing domestic demand for this superfood.

Whilst Kakuzi derives the majority of its revenue from exports this is not the only market for our products.  Increasingly the domestic and regional demand for quality, healthy and sustainable products is in greater demand.  We have responded to this and will continue to develop these opportunities as they present themselves.  We are currently working with key players in the local market who are consuming part of our macadamia production. We are also engaging retailers to provide a local platform for the sales of our Macadamia and Blueberries.

In all our core products we have the ability to value add and undertake other processes.  In avocados this could be oil or pulp.  In macadamia we have already launched our own retail pack and in blueberries we are currently selling the majority of our product in the domestic markets.  In forestry we have a very exciting opportunity to produce a high value furniture grade timber, again for the domestic market. 

As extensively reported on in the press our livestock operations are also venturing into goat meat. Our brand of quality goat meat will be available in the market soon and we are already engaging with sales partners locally on this venture.

During 2022 we hope to progress the implementation of these initiatives which I have just mentioned, if they have not already been started. 

We must however make sure that we undertake the correct investment appraisals to ensure your funds are used most efficiently and productively.   

Our traditional crop of tea also remains an important part of the Kakuzi portfolio although the challenges this crop is facing with poor market prices and rising input costs remains a concern.

Turning more to the markets in the year ahead, the COVID pandemic appears still to be having an impact on some parts of economic life and this coupled with the situation between Ukraine and Russia will undoubtedly have implications for our business.  We are seeing rising input costs such as fertilizer and fuel, but other challenges are just emerging and I’m sure there are a number which we are yet to experience.

We, as ever, are not a Company which just focuses on short term profits.  Our commitment to our surrounding communities is part and parcel of who we are and we have another year of important Corporate Social Investment programs which are planned or are already underway.  Many of these we highlight on our social media platforms of YouTube, Instagram and Facebook.  I would encourage all to spend a few moments perusing these very important collaborative works.

As a Board we are also recommending for the AGM to approve formalizing the use of electronic meeting protocols and increasing the maximum threshold of Directors from 8 to 9.

I would like to express our gratitude to you all for your continued belief in our Company and we hope that when we next meet it will be in a more social context.  I would also like to thank the management and staff as well as members of the Board for their diligence and commitment to the success of the company.

Nicholas Ng'ang'a, Board Chairman, Kakuzi Plc
17th May 2022