Cane theft hurting Mumias profit margins

September 3, 2012
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Mumias Sugar Company has 45 percent market share of the sugar market in the country/ FILE PHOTO

, NAIROBI, Kenya, Sep 3 – Cane poaching is proving to be a major threat to Mumias Sugar Company which recently reported a 34 percent drop in its full year pre-tax profit.

The company’s Managing Director Peter Kebati says during the financial year that ended 30 June 2012, Mumias lost an estimated 2,400 hectares worth of cane – equivalent to 150,000 tonnes – to competitors involved in cane poaching.

“It’s a major menace because Mumias has invested about Sh2.4 billion in land preparation, seed cane, fertilizer and when that investment is at risk that poses quite a problem,” he said.

As one of the strategies in the coming financial year, the firm plans to set up additional sugar cane buying centres in its cane zone to enable easier collection from the fields, minimize in -transit losses and reduce poaching of cane by its competitors.

Kebati added that the company that has 45 percent market share of the sugar market in the country, was negatively hit by a decline in the amount of sugarcane processed during the period, which went down by 15 percent to1.9 million tonnes of cane from 2.2 million tonnes in 2011.

He however says the diversification into ethanol and water production should see Mumias garner significant net sales in the coming financial year, boosted by the emerging Sh38 billion integrated sugar project in the coast’s Tana River District.

“Tana is a large scale irrigated greenfield project and will be a different model like what is found in Malawi and South Africa. It will be on 20,000 hectares producing about 200,000 tonnes of sugar, ethanol and co-generation,” he said.

The project will be operational in the next three years after construction of dams and irrigation systems.

Mumias ethanol plant that produces potable and fuel ethanol was opened in June this year and recorded Sh1.5 million in sales during the financial year, producing 100,000 litres.

“This year we got a tax credit due to our investment in the ethanol plant. The tax credit brought our earnings up by four percent. We got a consortium loan from Ecobank and Commercial Bank of Africa of about $20 million for the plant,” Kebati said.

The company is putting a lot emphasis on cane development with cane areas increasing from 57,000 hectares to 65,000 and the number of farmers up from 95,000 to 124,000 in the last financial year as well as investment levels up to Sh2.4 billion.

As far as sugar prices, Mumias expects to them to remain stable in the next financial year especially as world sugar prices have been on the decline now in the region of Sh50,610-Sh54,827 ($600-$650) per tonne, a trend Mumias expects to result in lower prices in the domestic market.

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