Annual Report and Financial Statements 2024

KAKUZI PLC

ANNUAL REPORT AND AUDITED CONSOLIDATED

AND SEPARATE FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2024

Kakuzi Plc Company Information

COUNTRY OF INCORPORATION

The Company is incorporated in Kenya under the Kenyan Companies Act, 2015.

DIRECTORS

The Directors who held office during the year and at the date of this report were:- Mr. N Ng'ang'a Mr. C J Flowers* Mr. G H Mclean* Mr. K R Shah Mr. D M Ndonye Mr. S N Waruhiu Mr. A N Njoroge Dr. J K Kimani Mrs P Ager Chairman Managing Director

* British

Jadala Place, Ngong Lane, Ngong Road P O Box 73248

00200 NAIROBI Telephone (020) 2149923

ORDINARY SHARES

The Company's ordinary shares are listed on the Nairobi Securities Exchange and the London Stock Exchange.

Notice of Annual General Meeting

NOTICE is hereby given that the Ninety Seventh Annual General Meeting of the Members of the Company will be held in the Ballroom at Fairmont The Norfolk Hotel, Nairobi on Wednesday, 14th May 2025 at 12.00 Noon for the following purposes:-

• 1. To read the notice convening the meeting.

• 2. To table the proxies received and confirm the presence of a quorum.

• 3. To approve the minutes of the Ninety Sixth Annual General Meeting held on 14th May 2024.

• 4. To receive, consider and adopt the Audited Financial Statements for the year ended 31 December 2024 together with the reports of the Chairman, the Directors and the Independent Auditors thereon.

• 5. To declare a first and final dividend of Shs 8.00 per ordinary share (2023: Shs. 24.00) for the Financial Year ended 31 December 2024. The dividend shall be paid on or about 16 June 2025 to the shareholders on the members' register at the close of business on Friday, 31 May 2025.

• 6. To approve the Directors' Remuneration Report as detailed in the Annual Report for the Financial Year ended 31 December 2024.

• 7. To re-elect Directors:-

  • i) Mr Stephen Njoroge Waruhiu, a Director who has attained the age of seventy years, retires in accordance with the provisions of clause 2.5 of the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015. Special Notice having been received proposing for his re-election pursuant to Section 287 of the Companies Act, 2015, he offers himself for re-election.

  • ii) In accordance with Article 27 of the Company's Articles of Association and subject to approval by the shareholders pursuant to guideline 2.5 of the Code of Corporate Governance Practices for Issuers of Securities to the Public 2015, Daniel Mutisya Ndonye, a Director who is over seventy years old, retires by rotation and, being eligible in accordance with Article 28 of the Company's Articles of Association, offers himself for re-election.

  • iii) Mr. Graham Harold Mclean, a Director who retires by rotation in accordance with Article 27 of the Company's Articles of Association and, being eligible in accordance with Article 28 of the Company's Articles of Association, offers himself for re-election.

• 8. In accordance with provisions of Section 769 of the Kenyan Companies Act, 2015, the following Directors be appointed to serve as members of the Board Audit & Risk Committee :-

  • a) Mr. Daniel Mutisya Ndonye

  • b) Mr. Stephen Njoroge Waruhiu

  • c) Mr. Andrew Ndegwa Njoroge

  • d) Mrs. Pamella Ager

• 9. To re-appoint Messrs Deloitte & Touche LLP* as Auditors of the Company in accordance with the provisions of Section 721 (2) of the Kenyan Companies Act, 2015 and to authorise the Directors to fix the Auditors' remuneration for the ensuing Financial Year in accordance with the provisions of Section 724 (1) of the Kenyan Companies Act, 2015.

• 10.To transact any other business of an Annual General Meeting of which due notice has been received.

BY ORDER OF THE BOARD

J L G MAONGA

COMPANY SECRETARY 24 March 2025

Notes: A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote on his/her behalf and such proxy need not be a member of the Company.

* Messrs Deloitte & Touche LLP were first appointed as Auditors of the Company on 15th May 2017.

Chairman's Statement

Financial Performance

The Company recorded a pre-tax loss of Ksh 167 million for the year (2023: pre-tax profit of Ksh 664 million). This was primarily due to:

• 1. Adverse Weather Conditions: Excessive rainfall significantly reduced avocado production.

• 2. Currency Fluctuations: The Kenyan Shilling's strong revaluation against the Euro and US Dollar resulting in reduced income as well as incurring exchange losses on foreign currency holdings.

• 3. Geopolitical tensions: Conflicts in the Middle East disrupted export routes, extending transit times and impacting quality.

Avocado Profits: An exceptionally challenging year

Profit Decline: In 2024 avocado profits decreased to Ksh 361 million (2023: Ksh 1,373 million). Adverse weather led to a reduction in avocado exports to 2,222,244 cartons (2023: 3,074,105 cartons) which significantly impacted profitability.

Production Challenges: Excessive rainfall in the early part of the year caused waterlogging, hampering fruit production. Consequently, fruit volumes for both Hass and Pinkerton avocados decreased by 23% and 19%, respectively, compared to 2023. The wet weather also had an impact on fruit integrity which ultimately affected quality.

Additionally, the Shilling strengthened by 15% against the Euro during the avocado export season, resulting in lower Shilling revenues compared to the previous year. Avocado sales into Europe are conducted in Euros and, in 2024, the average Shilling exchange rate to the Euro during the export season was Ksh 140 (2023: Ksh 162 during the same period).

Market Conditions: The European market price for avocados remained stable and firm throughout the season, primarily due to reduced supply from Peru. However, we were unable to capitalize on this opportunity because our fruit shelf life, upon arrival in Europe, was negatively impacted by extended transit times. To avoid the Red Sea conflict zones, our shipping lines rerouted around the Cape of Good Hope, adding over two weeks to voyage times. This extended our average logistics time to 42 days, which is at the technical limits of delivering sound product. In 2024, we exported 446 containers (2023: 562 containers), achieving an average price of Euro 7.64 per carton (2023: Euro 7.54 per carton).

Cost Implications: The reduction in volume significantly impacted production costs. The majority of these costs are fixed, so when volumes are not achieved, the cost per production unit increases.

Your Board has tasked management with developing both short- and long-term mitigation strategies to overcome the longer transit times and reduce dependency on exports through the Suez Canal.

Macadamia Profits: A year of recovery

Profit Improvement. Reflecting the recovery of the macadamia industry, the pre-tax profit for the macadamia operations moved to a profit of Ksh 69 Million in 2024 (2023: a loss of Ksh 354 Million).

The macadamia industry continued to recover in 2024 and the fundamentals of the macadamia industry improved substantially from the previous year allowing us to sell all of the 2024 crop and the 364 tons of saleable kernel carried forward from 2023.

However, the strength of the Kenyan Shilling against the US Dollar negatively impacted the Shilling returns. The exchange rate changed dramatically by the end of the first quarter which resulted in us receiving less Shillings for each kilo sold, despite the Dollar sales price being in line with our forecasts. In 2024 the US Dollar average selling price was US$ 9.00 per kilo (2023: US$ 7.21 per kilo).

We continue to see a recovery in this market, both in terms of volume and price.

Forestry & Livestock: A good year of growth and profitability

Profit Improvement. Forestry profits increased to Ksh 288 Million (2023: Ksh 149 Million) and Livestock profits reached Ksh 31 Million (2023: a loss of Ksh 13 Million).

Forestry & Livestock: A good year of growth and profitability (continued)

The demand for sustainably grown wood products continues to increase and we have responded by increasing the land area under commercial forestry. We have also continued to diversify our product range, offering industrial pallets, garden furniture and our standard range of fencing and utility poles. Timber sales remain static but we believe this is still a profitable market for a limited range of plank sizes.

Our Livestock performance was assisted by the arable operations producing good quality feed for local farmers as well as our own herd. An improved herd valuation positively impacted on profits.

Tea: A good year for production but profits were squeezed by lower prices and a stronger Shilling against the US Dollar

Profit reduction. In 2024 Kaboswa profits reduced to Ksh 15 Million (2023: Ksh 71 Million) despite an increase in production to 2 million kilos (2023: 1.8 million kilos).

The continued over supply of tea in the market resulted in lower US dollar prices compared with last year. Kaboswa sells green leaf to Kepchomo Tea Factory, owned by Eastern Produce Kenya Ltd. The average price Kepchomo received for its tea in 2024 was US$ 1.99 (2023: US$ 2.18). In addition, the strong Shilling also impacted negatively on net returns which were 17% lower at Ksh 186 per kilo of made tea (2023: Ksh 225 per kilo).

We believe that the oversupply situation may begin to balance itself out next year which could result in improved profitability.

Blueberry: Exports met the target

Loss reduction: In 2024 blueberry production increased to 53,175 kilos (2023: 11,728 kilos) The increased production, in line with expectations, halved the operating loss to Ksh 19 Million (2023: a loss of Ksh 37 million).

The new varieties are performing well, and production was either sold domestically or exported into the Middle East. In 2024 prices were an average of US$ 11.54 per kilo (2023: US$ 9.45 per kilo).

Exchange Losses: The strengthening of the Kenyan Shilling impacting negatively on Foreign Exchange Earnings

The Kenya Shilling strengthened during the year which resulted in the Company incurring additional foreign exchange losses on our US Dollar holdings of Ksh 197 Million compared to foreign exchange gains of Ksh 118 Million in 2023.

Key Achievements

The Company continued its expansion programs in line with its strategic plan, completing the final plantings of macadamia orchards which now cover 1,410 hectares. Further expansions of our avocado orchards will occur in 2025 bringing our total area to 1,117 ha.

Our new blueberry varieties met our expectations for the year, with production reaching 53 tonnes up from 12 tonnes last year.

The recovery of the macadamia markets allowed us to increase our sales to 971 tonnes of edible kernel, up from 563 tonnes in 2023. Through our intensive marketing activities, we were able to sell our products across the globe to the USA, Japan and Europe. Prices averaged US$ 9.00 which is 25% greater than the US$ 7.21 achieved in 2023. These levels are still significantly lower than the pre-Covid markets, but we anticipate continued improvement through 2025.

I am pleased to report that our value addition strategy is progressing well. The Boran Barn restaurant is a very popular venue, demand for our macadamia edible oil range has increased significantly and there is a constant flow of customers through our farm market.

Key Achievements (continued)

We once again hosted shareholders at our Makuyu operations. This was an important event to showcase the growth of your Company over the last few years. We as a Board were exceptionally pleased with the large turnout and the positive feedback received both during and after the visit. We will continue to hold these events biannually. Our success continues to be based on our ability to take a long-term view and to have sufficient diversification to withstand geo-political shocks.

Our fifth ESG report was also published which I will detail later in this report. It is imperative that we continue our work on both environmental and social sustainability.

Our mantra of lifting others as we grow remains fundamental to our philosophy and to that end we continue to provide technical extension services to small scale farmers through our Kakuzi Academy.

Corporate Governance

The members have also been informed of the CMA inquiry that begun back in June 2021. The Board has taken active steps to protect the interests of the Company. The litigation is now pending at the High Court of Kenya from the decision of the CMA Tribunal that was delivered on 18th September 2024. The court rules do not allow litigants to make comments on pending cases suffice to state that the Board was dissatisfied with the findings of the Tribunal on matters touching on the constitutional rights of the Board members.

In 2022, the Company received an inquiry from the KRA on an allegation concerning the transfer pricing policy. We are happy to report that the KRA, after due investigation, found no breach of the transfer pricing rules.

Sustainability Initiatives

Our sustainability initiatives remain at the core of our operations. This year, we published our fifth ESG report, highlighting our efforts in various areas such as irrigation water conservation, measuring our carbon footprint, natural forest conservation, educational support, gender equality and embedding the UN Guiding principles on Business and Human Rights.

I am pleased to inform our stakeholders that we expanded our irrigation water conservation by adding a further one million cubic meters of water storage capacity to increase from twelve to thirteen million cubic meters. This key development further enhances our self-sufficiency in water, eliminating the need to use river water for our irrigation.

The impact of climate change on our operations cannot be ignored. In 2024 we experienced a significant reduction in avocado production due to the excess rainfall experienced in the early part of the year. Some of the orchards were simply inundated by the heavy rain with approximately 30 hectares being lost to flooding.

Our efforts to transform waste agricultural products into valuable resources continue. The production of biochar from macadamia shells provide a sustainable solution to waste management and also supports our commitment to environmental sustainability and agricultural innovation. If our trials prove successful, the biochar produced will be combined with our other organic compost to improve soil heath, sequester carbon and improve the soils water and nutrient holding capacity.

These initiatives demonstrate our commitment to integrating sustainable agricultural practices into our operations which we believe will be fundamental to our future success.

Collaborative conversations and open communication channels with a variety of stakeholders continues to foster sustainable relationships. These relationships assist in shaping our Company-Community Partnerships and contribute towards creating a sustainable society.

Sustainability Initiatives (continued)

In support of local communities, Kakuzi has consistently invested in high-impact programs guided by the UN Sustainable Development Goals (SDGs). These include Good Health and Well-being (SDG 3), Quality Education (SDG 4), Gender Equality (SDG 5), Clean Water and Sanitation (SDG 6), Decent Work and Economic Growth (SDG 8), and Climate Action (SDG 13). These initiatives are designed to build capacity, resilience, and independence within surrounding communities and are all detailed in our ESG report which can be seen at our web site.

Future Plans

Implementing the strategic plan for the Company remains our key focus which is based on five key pillars:

•  expanding our production of avocado and macadamia superfoods,

•  diversification into new superfoods,

•  diversification into new markets,

•  value addition through our Kakuzi Farm Market

•  the further developments of our sustainability and social performance initiatives.

The need for a fourth commercial, large-scale crop for Kakuzi remains a key priority as we evaluate the business case for blueberries. Not only is this a crop which has the potential to generate large revenue streams, but it also diversifies our market footprint into significantly different geographical markets.

We have appraised the business model for Blueberries and its performance in 2024 gives us confidence that a commercial scale is viable. We shall be able to confirm our position as we move through 2025 as production is set to double.

Macadamia value addition has proven to be an enormous success and we will continue to explore the possibilities of increasing the variety and value of this range.

Maximizing yields through the use of Agricultural Technology is a fundamental part of our future. We are witnessing technology changing at a rapid rate with many international agricultural sectors now embracing AI and the use of autonomous agricultural vehicles, such as drones, in a major way. If we as a Company and country are to remain competitive we need to also follow a similar route.

Market Trends & Outlooks

Demand for avocados continues to grow in Europe at around 5% per annum. Demand in China and India is also growing but volumes remain small. The Middle East does have a significant demand but at relatively low sales prices.

The arrival quality into European markets of East African avocados has been negatively impacted by the effective closure of the Red Sea shipping routes. The only alternative route around the Cape adds a further two weeks onto the shipping times which significantly impacted quality of East African fruit.

Mitigation strategies to reduce this impact have been put in place as we adapt to the longer logistics. Whilst we hope that the geopolitical tension in the Middle East will ease, we must plan to continue with the rerouted logistics in 2025. Consequently, your Board is doing all it can to focus on delivering quality products to the Company's customers.

To reduce our dependency on European markets, 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. The North America region, as the largest consumer of avocados globally, must be considered a future target for Kenya's exports. In 2024 the USA consumed 1.3 million metric tonnes of avocados, compared to 0.9 million metric tonnes in Europe, with over 80% of its avocados sourced from Mexico. The North American market presents a significant opportunity for Kenya.

As Kenyan avocado production continues to grow, it is critical for commercial companies to collaborate with Kenyan Government agencies to gain access to this lucrative market. A common strategy, focusing on compliance with regulations, market research, and strategic partnerships, will pave the way for successful market entry.

Market Trends & Outlooks (continued)

By working together, stakeholders can ensure that Kenyan avocados reach new heights in the global market.

The macadamia markets are showing a positive trend with both demand and price rebounding after the last four disappointing years. Prices are still much lower than they were in 2020 (pre COVID) however we witnessed a strong positive movement in 2024 and we anticipate further strengthening as we move into 2025.

Kenya is the fourth largest producer of macadamias globally. It has great opportunities for growth, however the strategies to increase market demand for Kenyan macadamia nuts must be carefully considered. On one hand the sales of unprocessed nuts in their shell have assisted some farmers to obtain reasonable prices but such sales do little to promote Kenya as a producer of good quality kernel.

Global demand for macadamias is also steadily increasing, driven by their health benefits and versatility in the food and cosmetic range, which we have also witnessed in the Kenyan market through substantial demand for our edible oil.

The new crop of blueberry's was predominantly marketed into the Middle East. Demand for quality berries continues to grow in our key international and domestic markets.

The markets for our forestry and livestock products have also improved in the year. The Boran Barn Nyama Choma spot and our butchery is now the primary outlet for our meat products. The demand for meat with proper 'field to fork' credentials is increasing with many of our loyal customers driving a distance to access our butchery shop.

Sustainable wood products were sold to customers across the country, and we continue to expand our operations to meet the growing demand for good quality fencing posts.

The tea markets continued to be depressed by the large volumes of tea in the marketplace. We anticipate that prices will only recover once the supply demand equation is rebalanced.

Dividend

Your Board recommends a first and final dividend of Kshs 8 per share.

Acknowledgements

As we reflect on the past year, we note with immense gratitude the dedication and unwavering support that our staff have shown throughout 2024. Their commitment and efforts have been instrumental in driving our initiatives and contributing to the sustainable development of our Company and community.

To our stakeholders, including trade union officials, community leaders and government officials, we extend our heartfelt thanks. Your collaboration and engagement have been crucial in shaping our strategies and ensuring the successful execution of our projects.

We also express our deep appreciation to the local communities who have partnered with us. Your trust and participation have been fundamental in driving our initiatives and creating lasting change. We are committed to continuing our work together to build a brighter and more sustainable future.

As we look forward to the coming year, we remain dedicated to our mission of making a positive impact. Thank you once again for your exceptional efforts and unwavering support.

NICHOLAS NG'ANG'A

CHAIRMAN

24th March 2025

Corporate Social Investment and Sustainability Report For the year ended 31 December 2024

Kakuzi dedication to focus on community relations remains unwavering to help build and sustain trust, credibility, and loyalty with the local community for prosperity of both the company and the surrounding communities.

Collaborative conversations and open communication channels with employees, trade union officials, community leaders, community liaison officers, farmers' organizations, National and County government officials as well as local and international civil society organizations continues to promote sustainable relationships based on trust that will shape effective Company Community Partnerships and contribute towards creation of a sustainable society.

In support of the local communities, Kakuzi has continued to invest in high impact programs and interventions guided by the UN Sustainable Development Goals (SDGs): Good health and Well-being (SDG 3); Quality Education (SDG 4); Gender Equality (SDG 5); Clean water and Sanitation (SDG 6); Decent Work and Economic growth (SDG 8); and Climate Action (SDG 13) designed to build capacity, resilience and independence for surrounding communities.

Kakuzi recognizes the importance of community engagement and consultation in forming meaningful and sustainable partnerships, spearheaded by the Community Relations Manager, Community Liaison Officers, supported by other relevant Company Mangers. As well as an Independent Human Rights Mechanism (SIKIKA 2) which is in place to address grievances and concerns from the Community.

In 2024, Kakuzi invested in high impact initiatives implemented to address challenges identified through needs assessment and requests documented to the Company.

Good health and Well-being (SDG 3)

Kakuzi identifies that good health is one of the most important things in a person's life, it affects physical, mental, and emotional well-being of an individual. Consequently, Kakuzi in collaboration with the Ministry of Health organized free Medical camps in three locations; Gikono, Kinyangi and Makuyu areas to enhance access to primary healthcare for the local communities. Over 600 individuals benefited from the range of services offered which included; Health Education, Voluntary HIV Counselling and testing, Nutritional assessment, Prostate cancer and Cervical cancer screening among others.

The Company continues to invest and create awareness on matters affecting health and wellbeing of individuals and the society at large. Kakuzi supported commemoration of National world TB day through provision of 200 branded t-shirts and partnered with Mbagathi referral hospital, through donation of medication for a two-day medical camp aimed at providing much needed medical services to the underprivileged population in the area. The camp offered free medical checkups, treatment, optical services and treatment for neglected diseases among women, benefitting over 1000 women who attended the camp.

Kakuzi works closely with the local Government health facilities to improve service delivery to the community. In line with this, the Company constructed a 10,000L rainwater harvesting system at Gituamba health facility and 4 door ablution blocks at Mwania Mbogo dispensary to enhance access to clean water and sanitation for over 400 community members who seek services from these facilities on a daily basis.

Kakuzi dedication towards menstrual health sensitization is unwavering. Over 3000 employees were issued with absorbents and an additional over 2200 learners from Gatanga, Kiambaa, Percy Davis, Thaara primary and Thaara Secondary schools received 2616 sanitary towels and 1248 bar soaps during sessions conducted in these institutions.

Quality Education (SDG 4)

Education drives the achievement of all the millennium development goals because it equips people with knowledge and skills to break the cycle of poverty and shape their future life chances.

The company awarded scholarships to seven deserving students from the local community in different levels of education, attending various extra county and county schools to enhance retention and transition from primary to secondary school in addition Kakuzi has developed strategies that promote the wholesome development of these individuals and over 600 learners in 3 schools within the farm.

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