• Managing director and chief executive officer Subodh Srivastav said the high costs of power had cut revenue from the sales of its products in highly competitive and declining internal markets.
• Srivastav said the company’s sales and market price trends show a steady decline from 2017 to the financial year 2020-2021.
Tata Chemicals Magadi Ltd has defended its recent restructuring caused by high costs of power and operational challenges.
Managing director and chief executive officer Subodh Srivastav said the high costs of power had cut revenue from the sales of its products in highly competitive and declining internal markets.
Kajiado Governor Joseph Lenku had opposed the restructuring and the laying off of workers, saying it was targeting the local Maasai.
Lenku warned it would not happen under his watch. Some 112 workers were retrenched.
Srivastav said the company’s sales and market price trends show a steady decline from 2017 to the financial year 2020-2021.
“The scale of the challenges to the business was further exacerbated by the Covid-19 pandemic requiring the company to make drastic changes including the reduction of its workforce directly affecting 20 per cent of our staff to survive the various economic shocks,” the CEO said.
Srivastav, in an interview with the Star on Tuesday night, said the restructuring has considered the optimum staff levels for the company’s operations under the current circumstances.
“Additionally, there are services that have always been outsourced to contractors and these will be maintained going forward,” said the soda ash company boss.
He said: “This is a difficult decision that has been arrived at and we carried out the process by adhering to the labour laws, and according to the necessary respect and dignity to each employee who was affected by the restructuring”.
Besides the mandatory requirements, the CEO said, the company has also engaged professional counsellors to offer consultation and guidance and welfare support to the affected staff throughout the transition period.
Srivastav said the company’s severance package goes beyond the legal requirements and has been largely appreciated by those affected.
The company, he said, is also looking at extending medical assistance in a few deserving cases among the retrenched staff.
The company extends its sincere gratitude for service to the affected staff for their diligent service over the years and wishes them the very best in future endeavours, he said.
The boss said the company’s operations have relied on huge loans which are substantially unpaid due to the muted performance of the company.
“The rising cost of energy resulted in the scaling down of the pure ash plant by 50 per cent, paralysing our ability to recover the fixed costs, which are now spread over a much smaller volume,” he said.
He said the company is undertaking several measures to improve its profitability.
These, he said, include investing in the upgrade of plant equipment, cost containment measures and exploring avenues for new market streams.
The company is also exploring the solar route for producing premium ash.
Challenges
Srivastav said the company has a lot of financial challenges, a situation brought about by a combination of both internal and external factors.
He named them as accumulated losses and outstanding loans arising from the pure ash plant that was mothballed in 2014.
The other, he said, is the delayed VAT refunds by the Kenya Revenue Authority and high siltation in Lake Magadi.
“The company is engaging multi-sectoral agencies including the national government to address this issue,” Srivastav said.
Sustaining Quality
The CEO also said natural stubborn impurities leading to lower quality in the natural soda ash segment is causing a headache to the company.
He said distance to market adds to the cost with no value addition.
TCML is burdened with the royalty in transportation as well as the growing population and the need to meet increased community expectations, the CEO said.
“The royalty rates for Lake Magadi products are currently very high and unsustainable to our business hence the company is engaging with the Ministry of Mining for a review,” he said.
The company, he said, is working to improve operational efficiencies to improve its production infrastructure and enhance the production capacity.
This will be realised through cost savings arising from the ongoing restructuring, he added.
Appeal
The company has engaged with the government and the regulators, making presentations for the review and reduction of energy costs.
These include exemptions that should also be granted for manufacturing companies on VAT on Heavy Furnace Oil (HFO) and oil lubricants used in the plants.
The government, the CEO said, should support the industrial investment with long term financing of alternative energy sources (solar, natural gas) for manufacturing companies through export promotion and incentive programs.
TCML is Africa's largest soda ash manufacturer and one of Kenya's leading exporters, since 1911.
“Our company continues to enjoy the partnership with the Government of Kenya and the local community,” the CEO said.
TCML has been a foreign exchange earner and taxpayer to the national government over the years,” Srivastav said.