June 24, 2017

Mumias Sugar issues Profit Warning for 2015

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By Etaarifa Contributor

Mumias Sugar Company has warned that its profit for this year will be at least 25 percent less of what it posted in 2014.

The cash-strapped sugar miller cites sugarcane shortages and closure of the factory for two and a half months as the key challenges. Cash flow challenges faced within the year saw the company take a long wait to undergo maintenance at its plant thus affecting plant availability and efficiency.

In 2014, the company posted a loss of Ksh. 2.7 Billion with its loss per share of Ksh. 1.76 but with the profit warning this year, the loss per share will be at least Ksh. 2.22.

According to the Agriculture Fisheries and Food Authority (AFFA), the volume of sugar stocks in all the 11 factories stood at 3,678 tonnes in the previous week, which is below the 4,000 tonnes required daily output and 9,000 tonnes that the millers are expected to hold at any given time.

Recently, President Uhuru Kenyatta signed a deal which would allow the importation of cheaper Ugandan sugar with Kenya exporting beef to Uganda. Inefficiencies in the Kenyan sugar industry have seen Kenya’s sugar prices remain uncompetitive in the COMESA region. According to Kenya Sugar Directorate statistics, it costs USD 500 to produce a tonne of sugar in Kenya against; USD 180 in Uganda, USD 450 in Mauritius, USD 340 in Sudan, USD 250 in Egypt, USD 230 in Zambia and USD 200 in Malawi.

In the first six months of 2015, sugar prices in Kenya had already fallen by 9 per cent due to falling world sugar prices and pressure from cheap imports. Though Mumias is intending to restructure operations, enhance factory efficiency and streamline its marketing strategy, Mumias Sugar’s inability to compete on price as well as mobilize adequate raw material due to competition remain as key concerns for the company.

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