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Nanyuki flower firm sells Sh430m stake to SA equity fund

February 12, 2014


South African private equity fund Agri-Vie has bought a Sh430 million ($5 million) stake in Kenyan flower firm Kariki Group, giving the local flower industry a boost amid news of reduced earnings in 2013 and the placing under receivership of major producer, Karuturi.

The Nanyuki-based flower company said it will use the cash injection to finance expansion into Japanese, Middle-Eastern and Australasian markets. The company is also seeking to expand its product range.

"We were attracted to making this investment in Kariki by its reputation as a high quality supplier, operational facilities and because it is an efficient and well-managed business," said Dave Douglas, investment advisor at Agri-Vie.

Agri-Vie also cited Kenya's favourable climatic and geographic position as a flower producer, with less energy costs generally incurred by local flower producers compared to their European competitors due to all-year availability of sunshine.

Growers in Europe have to utilise artificial lighting and heating to extend their growing period during the winter months, adding substantially to their costs.

The investment into the Kenyan flower firm comes in the wake of the release of earnings figures for the industry for 2013, which showed that that cut flower exports dropped by 13.9 per cent from Sh65 billion in 2012 to Sh56 billion.

Weaker demand resulting from the European economic crisis has hurt flower earnings from Europe.

READ: Horticulture export earnings drop again

Additionally, a relatively strong shilling performance versus the dollar last year exerted pressure on industry earnings, by narrowing the gap between expenses and revenues.

On Tuesday, the industry suffered a setback after one of Kenya's main flower firms Karuturi Ltd was placed under receivership over debts owed to lenders including CfC Stanbic.

The flower firm, which is associated with India's conglomerate Karuturi Global, owed the bank and other debtors over Sh400 million.

Flower firms also face an anxious wait alongside other horticulture producers to see whether new Economic Partnership Agreements will be agreed with the European Union.

Failure to strike a new deal could see the local horticulture products exported to the EU attract higher export tariffs, making them less competitive in the lucrative market.

The flower industry in Kenya has grown progressively from modest beginnings in the mid-1980s, to emerge as one of the world's leading flower sources with at least a 38 per cent market share of the European cut flower market.

The Kariki Group, founded in 2002 by brothers Richard and Andrew Fernandes, operates flower farms in Nanyuki, Molo, Thika and Naivasha.

According to Richard Fernandes, they will look to tap the South African firm's knowledge on regional business and the horticulture industry.

Agri-vie has invested in several agriculture firms in East and southern Africa, including South African vegetable processor Dew Crisp, Africa Juice of Ethiopia and Ugandan timber production firm New Forest.

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Source: Business Daily (Kenya)

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