Kakuzi sees red in first half but keeps hope alive

CREDIT| Kakuzi

Kakuzi (KUKZ) last week (Thursday) reported a decline in its profit for the first half of 2019 compared to a similar period last year. But the management is keeping hope alive because of the widening international market for Kakuzi products. Weakness in the company’s tea business and rising costs weighed down results in the latest first half period.

Kakuzi made a profit of Ksh245.6 million in the first half of 2019. That compared with a profit of Ksh270.5 million in the first half of 2018. Kakuzi’s total revenue for the first half of 2019 came at Ksh619.5 million, up from revenue of Ksh613.1 million in the same period last year. Revenue from Kakuzi’s tea business fell to Ksh88.8 million in the first half of 2019, down from Ksh163.5 million in the first half of 2018.

In the past, tea business contributed the bulk of Kakuzi’s total revenue, but the company has diversified into other businesses with avocado now contributing majority of its revenue.

More international markets opening up for Kakuzi
The future looks bright for Kakuzi’s avocado business as the Kenyan government is trying to open more international markets for local avocado producers. In April this year, President Uhuru Kenyatta secured a deal that opened the Chinese market to Kenya’s avocado producers. China is a huge market for avocados.

In addition to China, South Africa also last year reopened its market to Kenya’s avocados. The reopening of the South African market ended a more than 10-year ban on Kenya’s avocado exports to the country over quality concerns. For Kakuzi and other Kenyan avocado producers, the developments in South Africa and China have greatly expand international market opportunities.

Kakuzi is also into macadamia business. The company said it enjoyed strong macadamia prices in the first half of 2019.

Kakuzi stock is currently trading at Ksh340 per share.