1 December 2012

Kenya: Kakuzi Warns Full Year Profit May Fall By 25 Percent

AGRICULTURE firm Kakuzi has warned that earnings for the financial year ending December 31 may fall by at least 25 per cent compared to last year's as Europe's recession and a strong shilling hit its exports.

The listed firm, which mainly exports tea and avocado, said it anticipates the drop since its nine-month financial results already indicate slowed profit growth.

"This profit warning announcement is based on the performance indicated by the unaudited results to 30th September 2012 with reference to information currently available," it said in a press notice.

Its net profit for 2011 full-year was 65.8 per cent up to Sh644.3 million from Sh388.6 million in 2010. This may now fall to below Sh483.2 million for 2012.

The directors did not declare a dividend for the first half of 2012, swaying from a trend that has seen its dividend payout on the rise. A dividend of Sh3.75 per share was paid out for 2011 and Sh2.5 for 2010.

Kakuzi said Europe's recessionary trends exerted a downward pricing pressure on its exports. The Kenya Shilling on the other hand strengthened against the Euro, exchanging at around 108 in 2012 from an average of 134 in the second half of 2011.

Its earnings have also been affected by "an exceptional release of a provision amounting to Sh109 million" after withdrawal of a Delmonte Kenya Ltd claim in 2011.

Completion of sale of Siret Tea Company, one of its subsidiaries, in August also meant only eight months of trading will be consolidated in 2012.

Kakuzi's six-month profit to June 30 dropped 22 per cent to Sh103 million from Sh132 million in a similar period last year. The firm said in August that world demand for tea still outstrips supply and it was satisfied by the price for its produce. Its other interests include fresh pineapple, macadamia, cattle and forestry. But despite increased uptake of exports, the firm said it was still facing logistical challenges in timely shipping of produce to Europe.

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