NAIROBI, Kenya, Feb 23 – Mumias Sugar Company has posted a net loss of Sh1.5 billion in the first half ended December 31, 2015, a 9 percent increase in losses from the Sh1.4 billion net loss recorded in the previous year.
This is despite a Sh1 billion bailout by the government in June 2015.
The firm attributes the losses to a high interest rates regime, depreciating shilling as well as huge operating and administrative costs.
Cost of sales remained unchanged at Sh3.4 billion as other operating income and finance income declined 51.3 percent and 89.5 percent respectively.
Marketing and distribution costs were down 61.4 percent while administrative expenses rose 22.1 percent. Finance costs jumped 93.4 percent on the back of high interest rates within the period.
Net revenue however increased by 11 percent to Sh2.97 billion up from Sh2.6 billion compared to the same period last year.
Sugarcane crushed totalled to 581, 541 tons compared to 443,425 tons over the same period last year representing a 31 percent increase while sugar produced 36,510 which was 18 percent higher than 30,897 tons produced over similar period last year.
“Cash flow challenges over the years saw the factory suffer long delays before undergoing annual maintenance,” management said.
Revenue from its ethanol unit grew 16 percent to Sh435 million compared to Sh376 million generated over the same period last year. Its water unit saw sales decrease by 37 percent to Sh8.6 million compared to Sh13.78 million following a three month production stoppage.
The firm had earlier sought to close the plant following stiff competition which has seen the unit make losses since its launch.
Going forward, the company is expecting a better second half with the current dry spell expected to give access to low lands which have mature cane and higher sucrose content.
Management however expects the depressed sugar prices to extend into the second half of 2016 due to influx of cheap illegal imports.
The ethanol market is expected to continue facing challenges arising from government’s decision to suspend lifting of export spirits.
In order to turn around the company’s performance, management intends to; restructure existing loans, acquire additional funding of Sh2billion from government, control cost of production, administration and marketing as well as engage farmers to boost farmer loyalty and enhance supply of raw materials.