Company revenues declined by 55 per cent in half-year to December 2017

Mumias Sugar Company Limited

Mumias Sugar has reduced its losses by half after cost cutting over the half year to December 2017.

The firm yesterday announced a Sh1 billion reduction in losses, which was despite revenues declining by more than half.

The sugar miller said its loss after tax dropped 33 per cent to Sh1.95 billion in the six months to December, compared to Sh2.92 billion over a similar half in 2016.

This was due to a 33 per cent decline in operating costs. The firm said it had continuously focused on cost management, which resulted “in operating costs drop to Sh1.45 billion from Sh2.34 billion, effectively slashing the loss after tax by 33 per cent to Sh1.95 billion.”

Revenues for the company declined 55 per cent to Sh680.5 million in the half-year to December 2017, compared to Sh1.53 billion over a similar period in 2016.

The firm attributed the drop in revenues to cheap sugar imports that flooded the market forcing local producers to reduce prices.

“Duty free sugar imported impacted the market prices for sugar, which steadily declined from Sh73,991 per tonne in October 2017 to Sh68,893 in December 2017 despite being a festive season associated with high prices (net price for December 2016 was Sh80,392),” said Mumias Sugar chairman Kennedy Ngumbau Mulwa in a statement.

The firm was also affected by declining sales from its other revenue streams. Mumias Sugar sells ethanol from its distillery and electricity to Kenya Power from its co-generation power plant.

During the half-year, production of ethanol dropped 59 per cent, which was attributed to improved milling equipment that saw the firm recover more sugar from cane and in turn less molasses for the distillery. Its ethanol market also shrunk as the local market increasingly preferred imported spirits as opposed to locally manufactured.

“The distillery produced 1.99 million litres of extra neutral ethanol, a 59.5 per cent reduction from 4.94 million litres made over a similar period last year. The lower volumes this year resulted from a combination of lower molasses consumed plus the effect of improved sugar recoveries which effectively starve off the distillery of good quality molasses,” said Dr Ngumbau.

HEAVILY FINED

“The route to market was the main challenge for the distillery segment with most of our key customers switching to import spirit,” he said.

Mumias did not export any power to the national grid owing to an unresolved dispute with Kenya Power, which has been running for three years.

Ngumbau said Mumias was holding talks with the power firm to resolve issues the miller considers punitive, especially after it was heavily fined for failure to supply power. The firm is optimistic of turning-around in the coming months.

“The company is optimistic that it will record better performance in the second half of the year through implementation of key strategic pillar aimed at turning-around the company fortunes,” Ngumbau said.