Kakuzi has issued a profit warning for the year ended December, citing reduced avocado production and lower prices of the commodity in European markets.
The company made a net income of Sh622 million the year before, indicating that it anticipates its net earnings to fall by at least 25 percent to Sh466.5 million in the review period.
Kakuzi had posted a net profit of Sh194.6 million in the half-year period ended June 2021 according to Business Daily.
“This profit warning notice arises from trading information, market forecasts, and the preliminary unaudited full-year financial results.
This is among other data sources currently at the board’s disposal,” Kakuzi said in a statement.
“We, therefore, wish to report that our net earnings for the year ended 31st December 2021 will potentially be at least 25 percent lower than that reported for the year ended 31st December 2020.”
Kakuzi did not say whether the expected fall in earnings will have a bearing on its dividend payout.
The company paid a record dividend of Sh18 per share for the year ended December 2020.
The company said its mass avocado production declined 18 percent in the review period compared to 2020.
It further added that this is in line with the phenomenon of a bountiful year followed by reduced output in the following year.
Lower market prices for the commodity also contributed to the weaker profit outlook.
Kakuzi blamed this on the oversupply of the fruit from Peru and Columbia which hurt selling prices during the same period when the company was also in the market.
“However, our other crops have performed as expected with an increasingly strong performance from the macadamia business, which validates the investments made into diversification over the years,” the company said.
“Continuing this product diversification strategy is of critical importance.
This strategy aims to mitigate the global market volatility and overreliance on any one product.”
Kakuzi is the first NSE-listed firm to issue a profit warning this year, with most other companies led by banks expected to announce strong earnings growth in the coming weeks.