NAIROBI, Kenya, Dec 18 – South Nyanza Sugar Company (SONY) has announced that it requires close to Sh6 billion for a turnaround, in readiness for the expiry of the COMESA safeguard measures in 2012.
Sony’s Head of Finance John Imbogo told reporters on Thursday that part of the money would be generated internally and it would go towards implementing projects such as ethanol and commercial electricity generation in the next five years.
“We are going to have to change the way we do business. As currently structured, our balance sheet is weak, we have assets that don’t perform but we are thinking of the best way that we can utilise them,” he admitted.
The end of the COMESA moratorium in the next fours years will see an influx of cheap duty free sugar into the market which might present a huge challenge for uncompetitive local sugar.
Mr Imbogo however said the company was also engaging the government and several financial institutions to help them in looking for an equity partner who could inject the much needed capital into the factory.
Sony Sugar has been laden with financial problems and has not recorded any profits in the last two years. The situation has been compounded by the more than Sh2.5 billion debts which it owes the government and other suppliers.
“We are proactively engaged with the government to either write off our debt or convert it into equity so that we have a healthy balance sheet that we can present to a potential investor,” the director said adding that the funding would contribute to the growth of their business.
Mr Imbogo said they were also in talks with the Kenya Power and Lighting Company on how they could start injecting about 10 Megawatts of electricity to the national grid through Gogo Power Plant.
This, he explained would be another revenue stream for the miller and together with the outsourcing of some services such as transportation, they would manage to cut the high cost of production.
His comments come a few days after the Cabinet approved a Privatisation Programme of sugar companies which is expected to enhance competitiveness and efficiency in the sugar sector.
Sony’s Managing Director Paul Odola disclosed they would also be upgrading their factory which would see the crushing capacity increase to about 3,000 tonnes of cane per day.
The mismanagement of the factory has meant that the (crushing) capacity has gone down to 2,700 to 2,800 tonnes per day.
“We want to invest in the factory and other support systems to ensure that it can effectively handle such as capacity,” Mr Odola said while expressing confidence that the company would be able to weather the storm and accomplish its objectives.
The two spoke after launching the miller’s brown sugar which is part of their initiative to increase their market share.
The officers disclosed that the company had committed Sh50 million to be used in a ‘product-specific’ factory line that would ensure an efficient processing system.