Mumias Sugar Company plunged further into the red after its losses increased by 122 per cent in the financial year ending June 2018.
The cash-strapped company suffered a net loss of Sh15.1 billion compared to Sh6.8 billion in the 2017 financial year.
A steep tax bill and decreased net value of its assets made a mockery of the strategies management had put in place to turn around the fortunes of the listed company.
Despite slashing its cost of sales to Sh3.9 billion in the period under review from Sh5.3 billion in 2017, increased liabilities - particularly tax expense and impairment charges - led the firm deeper into financial trouble.
“The steep rise in loss was driven by a 101 per cent increase in impairment charges to our plant and machinery of Sh4.9 billion from Sh2.6 billion charged last year,” said Mumias Sugar in a statement signed by board chairman Kennedy Ngumbau.
The Kenya Revenue Authority contributed to Mumias’ woes after it slapped them with a tax of Sh5 billion, an increase from Sh2.7 billion in the same period in 2017.
A shutdown of the miller’s plants in the first and fourth quarters resulted in low production of sugar in the financial year.
As a result, the firm’s turnover reduced to Sh1.37 billion compared to Sh2.1 billion in the previous period.
“The acute cane shortage significantly hindered the plant throughput, with cane delivered dropping by 32 per cent to 283,435 tonnes compared to 417,347 tonnes in the previous financial year,” said Dr Ngumbau.
Cane crushed recorded an eight per cent drop to 14,622 tonnes against 15,891 tonnes achieved in the previous financial year.
Mumias, however, is optimistic that the ongoing turn-around initiatives will bring the company to profitability.
“Our key stakeholders have continued supporting the company’s turnaround strategies,” said Ngumbau.
He said the Government has already settled over Sh700 million owed to farmers and which is expected to have a positive impact on future cane availability.
“In addition, the ongoing Government efforts to crack down on illegally imported sugar and ethanol and the push to resume cane zoning are all very encouraging initiatives that will greatly support (the firm’s) turnaround strategy and help revive the ailing sugar sector.”
Mumias Sugar should have filed its end of year results by September last year but requested and got an extension from the Capital Markets Authority, saying the audit had taken time to complete.
Ngumbau said discussions with lenders to restructure the debts and extend the “standstill” arrangements are ongoing.