Thursday, May 22, 2008

Kakuzi 2008 AGM

some excerpts

This small company meeting at the Norfolk shows the importance of having a Chairman (Dr. T R Fowkes) who can knows the company well and can interact well with the shareholders. It also shows the pitfalls of having an enlightened shareholding, who can ask some uncomfortable questions of the board, when they don't receive dividends.

Auditors were a hot button issue today as shareholders questioned the level of disclosure in the financial statements, level of segment reporting e.g. on sale of timber pole to KPLC. The Kakuzi FC said they were sold at about Kshs. 12,000 per pole (and the Chairman said that operating segments reporting will be come a requirement from 2009 – IFRS 8 as will other rules, while the auditor from Pricewaterhousecoppers said it was up to the board to choose which rules to apply before the deadline). The independence of valuations (Siret Tea assets were valued by the Board) was also challenged, and the auditor basically explained that the board was responsible for the accounts (washed his hands, as one shareholder put it), while the Chairman assured shareholders that everything material was in the accounts presented, and that the auditors had seen all the detailed accounts.

Dividends: No dividends for yet another year. The Chairman explained that the company had a largely paper profit (from the revaluation of biological assets), not an operational so the company could not afford dividends. The board was focused on reducing the company debt and payment of dividends was just not possible – essentially they’d have to borrow money to pay dividends. They could also try and sell more assets (but the sale of Siret Tea Estates last year generated a lot of controversy).

Crops: Kakuzi have uprooted all their coffee to be replaced with macadamia. They are likely to uproot citrus. Meanwhile avocado sales to France are doing well though there are no direct shipping routes.

Del Monte joint venture: The board has signed a new deal with Del Monte and will increase acreage of pineapples. They previously had a long running lucrative deal but which Del Monte tore up. After protracted negotiations, the joint venture has resumed, but with terms not as super for Kakuzi.

Land one shareholder asked about the safety of company land if the government chooses to resettle people. Chairman said most of their land had 999 year leases from the beginning of the last Century.

Outlook for 2008 the Chairman said that this would be determined by four things which were being the company’s control:
- World tea prices. They were good earlier in the year, but company could not take advantage owing to post-election violence
- Rainfall in Nandi. There was a drought period in Q1 with production at only 61% but rains have been good in April/May.
- Avocado prices in Europe.
- The exchange rate. The Chairman believes the shilling is artificially strong and this may wipe out any gains from world tea prices.

Goodies most unique so far; a Kakuzi produce carton [with a Siret tea pack? and a pineapple], also soda and bitings.


adam cartwright said...

pineapple? musta been hard carting all that stuff away, especially if u took the bus... sentiment was that siret was sold of to company directors. banks what about this inflation thing... most unit trusts did badly last year, plus increased inflation this year. so where do i hide my cash?

Anonymous said...

I thought unit trust are protected against inflation since they fluctuate with nominal interest rates and not real interest rates. I am in the US and thought, since the dollar is weak and the shilling is artificially strong, i could make some gain by cashing on Kenyan inflation through Unit trusts. Plz educate me on this?

Selerines said...

Hi friend... I am from India. Your blog looks pretty cool and nice. I am interested to share my link with you. Are you interested my friend? Please visit my blog frequently and keep in touch there!!!! I hope you will accept my request. If you are interested, then please comment in my blog. Thank you!!!!

just what? said...

thanks for rare info which would never make it to the dailies' front pages.

about the artificially strong shilling, just what is holding it up? the coalition govt agrees that it will have to borrow to meet its obligations, tourism dollars are not coming in, same with agro-export dollars. so where's the shillings support coming from? how far will it fall (if it does) and when?

adam cartwright said...

well banks in april u asked what had become of presidential limousines...
there is the old mercedes s 600 classic that moi posed with outside kicc,(you must remember, it wasa classic image) anyway that machine has just under 15,000 kilometres on the clock. it currently resides under a tarpaulin in kabarak and is very well looked after. apparently the old man has a personal attachment to the car and ensured it went with him. as for kenyatta machinery, no one seems to even know where it wet. i think that piece of heritage was sold off, but some of the older landrovers that he rode in can still be seen once a year a when a family member decides to go the adventurous route and do the rhino charge. kibaki usually chages between three mercedes limo's one with the crown of arms and two others that alternate between 'kaw' number plates and gk plates depnding on whether the sun is out.

Maishinski said...

Sorry dude, but with the current economic conditions, I wouldnt expect any real returns on unit trusts any time soon.

Stagflation - (inflation + economic slowdown + rising unemployment), thats what you should be worried about...

Stagflation is an investor's worst nightmare.

2008/9 is definitlely a stagflation year in Kenya. CBK must step up QUICKLY take tough (sometimes unpopular) measures to control the situation - e.g. they must raise interest rates to curb the double digit inflation.

There will be some repercussions - e.g. on availability of capital for SMEs...

In addition to controlling excess liquidity, Treasury must come up with Parallel incentives to stimulate recovery and growth.

Repairing our image of Political stability is paramount if investor confidence is to return to 2007 levels. Long term investors will most likely hold back until after 2012 - hence a long term Political Stability Plan MUST be made to ensure 2008 never happens again irrespective of who is in the opposition.

Repairing our image means that the 40thieves must (at least temporarily) stop bickering about 2012 while memory of 2008 violence and destruction is still fresh in investor's minds!

It costs less to maintain an image than to repair it. The money now being used to market kenya abroad and to compensate IDPs would have been paying for poor people's essential services like School fees, medical services, medicine etc.

If we ask for tax cuts - what will plug the budget hole created by this new (but essential) marketing expenditure?

In short: We are all in deep sh!t. Thanks to our fanatic love of short sighted primitive leaders.

What's interesting is that those who will be hardest hit are the poor ignorant people who were cheated and misused by politicians to create all this mess.

Good luck to you all.

bankelele said...

Adam Cartwright: pineapple was in a nice carton, so easy to carry. There was no talk about inflation but I guess all companies are equally affected.
- Thanks for the info on the mercs. Some of those should be taken to the museum or national archives – that will bring in the kids – like the aircraft and dinosaurs do at the Smithsonian. And did you say rhino charge??

Selerines: keep reading, will check yours out later

Just what? and Maishinski:
- Last year there was a lot of coverage of Kakuzi because of the Siret sale, this year, nada
- I see a lot of insurance companies and I assume unit trusts lightened their NSE portfolios last year, could they make a comeback after Safaricom?
- Stagflation is a likely reality, but its happening the world over isn't it?
- I have often wondered about the CBK’s ability to control the economy especially in light of the $1 billion + annual remittances and the fact that IPO loans and Equity Bank have shown that people will borrow at any rate, given our low savings culture

Anonymous said...

Yo Bazzanks,

Generally, Frontier economies have low correlation with developed economies.

Kenya was set for an economic boom in 2008.

We cannot conrol the action of others (e.g. corrupt actions by ECK officials) but we can contol our reaction to their actions (e.g. we can choose whether to react like mindless animals or respond like intelligent human beings).


Related Posts with Thumbnails