Mumias Sugar extended its net losses for the full year ended June 2016 by two per cent to Sh4.73 billion. This was attributed to “an acute shortage of quality cane particularly in the fourth quarter”.
This is an increase from a loss of Sh4.64 billion posted in 2015, the company reported in its audited financial statement on Monday. Following the rise in losses, the firm's directors did not recommend payment of dividends.
The listed miller, however, posted improved revenues which grew by 13.6 per cent to Sh6.28 billion, from Sh5.53 billion posted in 2015.
This, it said, was “due to higher sugar and ethanol sales volume, and realisation of higher net sugar prices and improved brand mix”.
During the period, the company processed 1.2 million metric tonnes of sugar, compared to 1.1 million metric tonnes in 2015 – a 9.4 per cent increase.
Sugar production increased by six per cent to 75,073 metric tonnes, compared to 70,891 metric tonnes in 2015.
“Total overhead costs (inclusive of asset impairment of Sh1.39 billion) decreased by nine per cent to Sh4.5 billion. Marketing, distribution and administration costs alone decreased by Sh1.1 billion, a reduction of 33 per cent compared to previous year,” the statement signed by director Elizabeth Kyengo reads.
She said the company revalued some of its non-current assets (mainly factory plant and equipment and leasehold land), resulting in a revaluation surplus of Sh9.2 billion.
The sugar market is currently experiencing a deficit due to declining sugar production in the main sugar producing countries, impacting positively on the global sugar price and the Comesa region.
Mumias Sugar has, however, had an unstable supply with its products missing on retail shops for months.
Kyengo said the price of sugar locally has increased and is forecast to remain stable. She said Kenya has negotiated a two-year extension of the Comesa safeguards due to expire in February 2019.
“The extension has given a lifeline to the local sugar industry,” Kyengo said.
The company is implementing a turnaround strategy, which includes debt restructuring, with support of its lenders and shareholders – particularly the government, its majority shareholder.
“The company is also streamlining its internal operations with a view to optimising resource utilization and improving efficiency. Key initiatives undertaken include rehabilitation of the factory, improved capacity utilization of the ethanol plant, staff restructuring for higher productivity, accelerated cane development and enhanced engagement with cane farmers,” Kyengo said.