Pan paper strategise on profitability

July 15, 2008

, NAIROBI, July 15 – Kenya’s pulp and paper manufacturer, Pan African Paper Mills, has mapped out a two-year recovery plan targeting a return to profitability by the year 2010.

The firm\’s Chief Executive Niranjan Saha said proposals in the plan include sustainable supply of wood – the firm’s core raw material -, financial restructuring and insulating Panpaper against escalating fuel and energy costs.

Saha however said that the success of the short-term strategy will depend on the governments response to recommendations put forward early last month.

The paper mill’s management is also seeking a long-term tree felling plan, drastic reduction in royalties paid for harvesting trees from its forests, ceding of more of forests to the firm and the complete phasing out of fuel oil in favour of biomass.

Last week, the Industrialisation Minister Henry Kosgey toured the facility, which is buckling under a debt of more than Sh6.7 billion, and said that the government could chip in by providing land on which Panpaper could grow trees.

"There is some fallow land in Turbo and Lugari districts,” he had said. “I will liaise with the Forestry Ministry and other relevant departments to see whether some 18,000 hectares can be leased to the firm as per their request."

Panpaper’s Chief Executive said that the cost of energy had tripled over the last two years and this had adversely affected the company’s productivity.

Saha noted that by acquiring more land, the company would be able to plant more trees and jump-start its proposed bio-mass co-generation project, which will greatly reduce its dependence on fuel and electric power from the national grid.

“We want to use alternative energy sources such as biomass in a bid to cope with the high fuel and energy costs, which is threatening to cripple our operations,” he said.

Panpaper spends more than Sh180 million on electricity bills every month and has even been challenged by Kosgey to set up its own power plant to cut down on these costs.

Saha meanwhile also proposed that a license for harvesting trees from government-owned plantations should be extended from the current one month to at least five months before it is renewed, to enable them plan appropriately.

On Friday, Kosgey, who toured the firm in the company of the Permanent Secretary John Lonyangapuo and area MP Alfred Sambu, said they were on a fact finding mission to assess the degree of assistance the company urgently required.

Sambu said that the Sh15 billion plant was the business hub for the community and urged the State to assist it achieve profitability.

He said the firm had created jobs for 1,600 employees and more than 30,000 casual labourers, and contributed about Sh6.8 billion annually to the country\’s economy.

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