- Kenyan avocado exporter Kakuzi PLC suffered $1M net loss in 2024 due to the Red Sea shipping crisis, a stronger Kenyan shilling and climate-related production cuts.
- While avocado exports to Europe plummeted by 72% due to shipping delays and lower yields, the company’s diversified operations—macadamia, forestry, and livestock—posted profits.
- Kakuzi is pivoting to new markets (like North America), investing in agri-tech (AI and drones), and maintaining shareholder confidence with a $0.062 dividend.
The ripple effects of Middle East conflict reached deep into Kenya’s agricultural heartland in 2024, as listed agribusiness firm Kakuzi PLC reported a $1 million (KES131 million) net loss. The avocado fruit exporter recorded $3.5 million (KES451 million) profit in the previous year.
The company’s latest financial results reveal how geopolitical tensions, currency fluctuations, and climate challenges converged to create a perfect storm for one of Kenya’s most established agricultural exporters.
At the center of Kakuzi’s troubles was the escalating crisis in the Red Sea that has seen warring parties including the Houthis in Yemen, Israeli army, and Hamas fighters engage in a brutal conflict for over a year now.
What began as regional tensions became an operational nightmare for Kakuzi PLC’s export division. With traditional shipping routes effectively closed, Kakuzi’s avocado shipments were forced to take the much longer route around South Africa’s Cape of Good Hope.
“Whilst we hope that the geopolitical tension in the Middle East will ease, we must plan to continue with the rerouted logistics in 2025, and Kakuzi is doing all it can to focus on delivering quality products to the Company’s customers,” Kakuzi PLC Managing Director Chris Flowers stated.
He added that this detour in shipment added two critical weeks to transit times, with devastating consequences for fruit quality upon arrival in European markets. Managing Director Chris Flowers added that the impact was devastating with avocado export profits plummeting by 72 percent to $2.8 million (KES361 million) from $10.6 million (KES1.37 billion) in 2023, while export volumes dropped by 28 percent to 2.2 million cartons.
Kakuzi PLC sustains forex losses on strong Kenyan Shilling
Compounding these logistical headaches, the Kenyan shilling’s unexpected strength against major currencies including the euro and the US dollar turned what should have been positive economic news into a financial setback. The shilling’s 15 per cent appreciation against the euro meant every avocado sold in Europe translated into fewer earnings for the company.
“The Kenya Shilling also strengthened by 15 percent against the Euro, which averaged KES140 during the avocado export season, resulting in lower Shilling revenues compared to the previous year when the Euro averaged KES162,” explained Mr. Flowers.
This currency squeeze resulted in forex losses totaling $1.5 million (KES197 million) – a stark contrast to the $912,606 (KES118 million) gain recorded in 2023.
Excessive rainfall related to climate change impact avocado output
Nature delivered the third blow with excessive rainfall during critical growing periods during the period under review. The Managing Director noted that waterlogged fields led to a 23 per cent contraction in hass avocado yields and a 19 percent drop in pinkerton variety production.
“Excessive rainfall experienced in early 2024, which caused waterlogging, hampering fruit production.”
These climate challenges disrupted harvest timing and fruit development, exacerbating the quality issues caused by extended shipping times.
Yet amid these challenges, glimmers of resilience emerged from Kakuzi’s diversified operations. The company’s macadamia division staged a remarkable turnaround, posting a $533,642 (KES69 million) profit compared to a $2.7 million (KES354 million) loss in 2023.
Additionally, Kakuzi’s forestry unit saw profits nearly double to $2.2 million (KES288 million), while the livestock division returned to profitability with $239,752 (KES31 million) in earnings. These results validated the company’s strategic decision to maintain multiple agricultural verticals.
Kakuzi PLC sets radar on U.S. avocado market
Looking ahead, Kakuzi is pursuing several mitigation strategies to shore up trade. The company is actively exploring new markets, with North America presenting particularly attractive potential given its massive avocado consumption. Kakuzi PLC Board Chairman Nicholas Ng’ang’a noted that while China and India show promise, the U.S. market represents a crucial frontier for Kenyan exports.
“It is essential for both public and private stakeholders in Kenya’s avocado sector to explore high-value new markets. While China and India hold potential, their current demand is still relatively low compared to Europe’s. As the largest consumer of avocados globally, the North American region must be considered a future target for Kenya’s exports.”
He added, “In 2024, the USA consumed 1.3 million metric tonnes of avocados, compared to 0.9 million metric tonnes in Europe, with over 80 per cent of its avocados sourced from Mexico. The North American market presents a significant opportunity for Kenya.”
Technology adoption forms another pillar of the recovery strategy, with the company investing in AI and drone technology to boost yields and mitigate climate risks.
Despite the challenging year, Kakuzi’s board maintained shareholder confidence by recommending a dividend of $0.062 (KES8) per share – the same as the previous year. This decision reflects both the company’s current financial capacity and its long-term outlook.
Read sea: New threat in 2024: Red Sea shipping disruptions by Houthi rebels ripple through global trade
