some excerpts

This small company meeting at the Norfolk shows the importance of having a Chairman (Dr. T R Fowkes) who 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 the 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 become a requirement from 2009 – IFRS 8 as will other rules, while the auditor from Pricewaterhousecoopers 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 has uprooted all their coffee to be replaced with macadamia. They are also 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 the 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 the 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.