Mumias Sugar sinks deeper into trouble, posts Sh6.3 billion loss

Mumias Sugar has sunk deeper in the red after reporting a record Sh6.3 billion in pretax losses, following a difficult year in which its plant was shut for nearly three months.

Lack of finances meant the firm could not rehabilitate its ageing machinery to restore operations to normal in a period its lenders’ confidence was at its lowest.

Mumias blamed the performance on a number of factors, including illegal sugar imports that forced down the commodity’s price as well as cane poaching by rivals, and shutdown of its plant.

High Wastage

“The company operations especially the production process suffered heavily during the year, recording very high wastage levels due to intermittent operations caused by frequent breakdowns, insufficient and poor quality cane supplies as well as inadequate power supply,” Mumias said in a statement yesterday. It added: “These (operational challenges) grew progressively worse during the second half of the year.”

The firm used up a tax credit worth of Sh1.6 billion to deflate the losses, which are 71 per cent worse compared to last year. All performance indicators were down as the miller reported its worst performance yet, to sustain a downward spiral since 2012. The poor performance came as cost of sales rose 17.6 per cent to Sh12.2 billion, surpassing a 9.3 per cent growth in sales to Sh13 billion.

Administrative costs also increased 16.5 per cent to Sh3.2 billion, to eat into the company’s margins.

Sales fell by 58 per cent to Sh5.5 billion, the firm that dominated the local sugar market now reports. Difficulties that have dragged the company down are specific to Mumias, as market prices were stable during the year.

Sugar-cane deliveries remained outstanding, prompting farmers to terminate supplies and effectively drying up the raw materials used in the manufacture of sugar. Private millers who could pay for sugar-cane supplies in cash emerged as the main beneficiaries in the cash crunch that befell Mumias.

Farmers including some who had been funded and contracted by Mumias cut sugar-cane supplies, ensuring the firm milled only 1.1 million tonnes of sugar – down 42 per cent from last year which was already a difficult year.

The State handed the sugar miller a lifeline after releasing Sh1 billion in a bailout that was used to pay mounting debts and rehabilitating the machinery.

Company chairman Dan Ameyo anticipates that the bailout would enable the miller to turn a corner in the current year, supported by the new chief executive, Australian Errol Johnston and other top managers who will be recruited in the coming days.