Mumias pre-tax profit drops 17 per cent

Leading sugar miller Mumias Sugar Company, posted a pre-tax profit of Sh1.6 billion, representing a 17 per cent drop compared to the same period last year.

Speaking during the company’s annual general meeting held in Kisumu on Friday, the management said a combination of the post-poll violence and global financial crisis led to high costs of production.

“Whereas the country’s economic growth at about seven per cent in the first-half of our financial year (from October) was impressive despite the challenges of an election year, the growth was quickly dampened by the ensuing post-election crisis that saw inflation skyrocketing,” the board chairman, John Boss, told the shareholders at the Tom Mboya Labour college.

Mr Boss said the company lost up to 14,000 tonnes of sugar during the post-election violence period that interfered with farmers and company operations.

Managing director Dr Evans Kidero also blamed the drop in profits to competition from transit sugar being diverted into the local market at cheaper rates, and under declaration of quantity and value of imported and illegal imports through Kismayu, Liboi and the Old Port of Mombasa.

A strike by transport drivers in the month of March this year also resulted into a week’s loss, added Dr Kidero.

Cat strike

“During the financial period, we also suffered another wild cat strike by transport drivers in October, slowed down factory operations to suit cane deliveries following a slow down in cane cutting operations in November and had extended holidays in the month of December because of elections that affected our performance,” he said.

Despite the drop in profits, gross turnover rose 11 per cent to Sh14 billion from the Sh12.9 billion registered last year.

The company processed 2.4 million tonnes of cane translating to a 14 per cent growth owing to what the management termed improved cane husbandry.

During the same year, Mumias recorded a 22 per cent jump to 265,263 tonnes of sugar produced.

“Whereas we did not achieve our targeted profitability, all the other performance indicators reflect a healthy business that is confident of facing the challenges of the future,” said the board chair.

The miller has now set its eyes on diversifying to electricity generation, ethanol production and Greenfield Operations, guided by a revised 2008-2012 strategic plan.

Mr Boss said investment in power generation was meant to increase its profit margins and allow it to remain competitive, as the close of the Comesa safeguards draw near.

Already, the miller is in its final stage of increasing its power generation from the current 12 megawatts to 38 megawatts at a cost of Sh4.3 billion.

The project is expected to be complete by the close of this year, Mr Boss said.

Power generation

The Energy Regulatory Commission has granted Mumias a license for the power generation, Dr Kidero added.

The company in collaboration with Tana and Athi River Development Authority (TARDA) has also completed a feasibility study for an integrated sugar project in the Tana River delta for its Greenfield Operations project.

Mumias is targeting the ethanol production business from the molasses currently produced by the company as a by-product.

“The company can produce up to 40 million litres of ethanol annually,” he said.

The shareholders approved a dividend of Sh0.40 cents per share during the AGM.