Loss-making miller Mumias Sugar is pushing for an additional Sh2 billion bailout from the National Treasury after its half-year loss widened.
The NSE-listed miller has sunk deeper into losses, posting a Sh2.26 billion loss before tax for the six months period to December 31, 2015. The loss is a 9 per cent increase from the Sh2.08 billion loss posted in a similar period the previous year. It is this sustained dismal performance for the third year running that has prompted the miller to seek a Sh2.2 billion bailout to undertake what management calls a 'restructuring exercise'.
Further, firm said it is restructuring long-term loans in its books for payments to be made within seven years. The latest financial results and the plea for more funding come less than seven months after the company received Sh1 billion from Treasury. The company posted a Sh6.3 billion loss for the 2014/2015 financial year.
The miller's finance costs for six months nearly doubled from Sh378.7 million in 2014 to Sh732.6 million.
However, the firm realised 11 per cent increase in the quantity of sugar sold. During the six months, it sold 36,333 tonnes, compared to the previous year's 32,658. Its net revenue also improved by a similar margin to close at Sh2.97 billion, but sales from its Sprinkles water plummeted by 30 per cent to Sh8.6 million.
Company Chairman Dan Ameyo blamed the miller's losses on factory inefficiencies, high costs of production and low sugar prices. "During the six-month period, high interest rates coupled with a depreciated Kenya shilling adversely affected the company in terms of high cost of finance and foreign exchange losses," said Ameyo.
The announcement sent shares of the miller plummeting by three per cent to close trading at Sh1.55, the lowest in five weeks. The once blue-chip counter has lost 48 per cent of its market value over the last one year.
The continued fall in the company's share price, which once traded at an introductory price of Sh49.50 during its second Initial Public Offer in 2007, further makes the bailout packages less attractive.
Audit firm KPMG is currently working on a deal that will see the issuance of Sh4 billion rights issue to save the miller from grinding to a halt.
According to Standard Bank Investment Analyst Faith Waitherero, the miller will struggle to raise the funds needed for full recovery. "It will be hard. Investors are not assured of a return on investment. Going by the current results, the miller's losses have increased, indicating that the turnaround strategy is not working," said Ms Waitherero.
She added that even if it raised the money and also got the Sh2 billion from Treasury, its woes may not end soon. The board revealed that it is still streamlining the organisation to remain with a lean and efficient workforce.
