Corporate News
A tractor offloads sugarcane at Mumias Sugar factory in Kakamega County
after the firm re-opened earlier in the year under new management.
PHOTO | ISAAC WALE
By JOHN GACHIRI, jgachiri@ke.nationmedia.com
In Summary
- The NSE-listed sugar company has been in financial difficulty due to mismanagement, shortage of sugarcane and cash flow constraints.
- Analysts say that even if Mumias gets its act right it is still financially susceptible to imported sugar, which is cheaper.
Mumias Sugar Company
nearly doubled its loss to Sh4.6 billion in the financial year ended
June 2015, while its sales more than halved in the same period.
The listed sugar miller on Tuesday reported a 70 per cent
increase in its after-tax loss compared to the Sh2.6 billion posted in
the corresponding period a year earlier.
Turnover reduced to Sh5.5 billion, less than half
the Sh13 billion that was generated by the troubled miller in the period
to June 2014.
The NSE-listed sugar company has been in financial
difficulty due to mismanagement, shortage of sugarcane and cash flow
constraints.
A forensic audit that was carried out by financial
consultancy KPMG earlier in the year found that there was massive misuse
of funds, pilferage and tender manipulation that cost the miller Sh1.1
billion in illegal sugar imports.
The company’s board subsequently sacked chief
executive Peter Kebati and also suspended four top managers in April
from its marketing department for diverting ethanol meant for export
into the local market, causing tax revenue losses worth millions of
shillings.
The miller got a reprieve with the advance of a Sh1
billion loan from the Treasury in June. The Treasury has a 20 per cent
stake in the company.
The funds were to go towards clearing farmer debts and fixing its machinery.
The funds were to go towards clearing farmer debts and fixing its machinery.
The board also hired Eroll Johnston as the new
chief executive. Mr Johnson was the chief executive of the firm between
1988 and 2001.
Analysts however say that even if Mumias gets its
act right it is still financially susceptible to imported sugar, which
is cheaper.
“Though the miller is intending to restructure
operations, enhance factory efficiency and streamline its marketing
strategy, Mumias Sugar’s inability to compete on price as well as
mobilise adequate raw material due to competition remain as key concerns
for the company,” said analysts at Standard Investment Bank.
Mumias resumed milling in late August after shutting down for maintenance for a two-month period.
The loss could mean that the company’s shareholders will have to go for another year without receiving a dividend payment.
Besides the illegal sugar imports that forced down
the commodity’s price, Mumias is also facing a raw material supply
problem due to cane poaching by rivals.
In February it suspended 52 employees in connection
with the loss of an estimated Sh400 million following termination of
cane supply contracts with farmers.
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