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Debt-ridden sugar firms eye windfall

By Dalton Nyabundi | Published Thu, September 13th 2018 at 00:00, Updated September 12th 2018 at 23:38 GMT +3

Muhoroni sugar company which has been closed indefinitely and reposesed by Kenya Revenue Authority (KRA). [Photo: Collins Oduor, Standard]

Debt-ridden State-owned Chemelil and Muhoroni sugar companies are back in operation and hope to take advantage of a spike in sugar prices to stay afloat.

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Chemelil resumed operations in July after a mini-maintenance on credit at a cost of Sh150 million and has been crushing 1,000 tonnes of cane every day to churn out 15,000 bags of sugar.

This means crushing efficiency has improved from 20 tonnes of cane to produce one tonne of sugar in January to an optimal ratio of 13 to 1.

The company currently sells 50kg bags of sugar at Sh6,400, nearly double the Sh3,400 of late last year. This means it sells a kilo to distributors at Sh128.

Muhoroni resumed operations on Tuesday after a Government-sponsored restructuring that saw it get new receiver managers.

Sources said the company resumed operations after striking a deal with workers and farmers as it awaits a Government bail-out.

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Sugar prices across the country have nearly doubled in the wake of a biting shortage occasioned by the seizure of nearly one million tonnes of imported sugar over quality queries.

Sugar costs

A kilo of sugar costs between Sh155 and Sh165 in supermarkets around the country.

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But Chemelil could be facing a raw material crunch. The miller has also stepped up payments to farmers for cane delivered in efforts to outsmart neighbouring Kibos Sugar.

It has also settled part of its workers' arrears to regain the labour and run the factory 24 hours a day.

“We are riding on a good tide right now. Although a few components are still worn out and occasionally break down, our efficiency has really shot up and we are enjoying a fairly good supply of cane from across the sugar belt,” said Samuel Agwet, a workers' representative at the factory.

Chemelil Managing Director Gabriel Nyangweso yesterday said once the company was back to efficient crushing, it would be able to comfortably settle its dues, including millions owed in taxes.

Convincing farmers

Debt-riddled Chemelil shot back to production after convincing farmers to supply it with cane on credit.

The firm, which was closed for five months due to worn-out machines, debt and lack of cane, is expecting a Sh100 million Government bail-out to help improve operations.

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The MD expressed concern that if the money did not come soon, the firm risked accumulating debts since some of its operational costs had been met through proceeds of committed sugar.

Committing sugar involves millers getting advance payment from bulk buyers.


 

 


 

 


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