KENYA – Troubled sugar miller Mumias is set to announce a net loss of at least Sh2 billion for the year ended June, marking the second consecutive year of loss and worsening the dividend outlook.
“The company wishes to report that the projected loss for the year ended June will be more than 25 per cent compared to the loss reported for the same period in 2013,” the firm said in a profit warning notice.
This means that Mumias’ net loss for the period could top Sh2 billion based on the Sh1.6 billion loss reported last year when it failed to declare a dividend.
Mumias’ acting CEO Coutts Otolo attributed the worsening performance to a significant drop in sugar prices brought about by illegal imports of the commodity from cheaper producers.
He added that the company had its own operational challenges including reduced output due to inadequate cane supply.
Mumias cut its net losses 93 per cent to Sh73.4 million in the half-year ended December, with the full-year profit warning signaling that the company could have booked massive losses in the second half.
Another round of losses is set to hit its shareholders hard, amid a major erosion of their paper wealth at the Nairobi Securities Exchange.
The firm’s share price has dropped 37 per cent over the past 12 months, making it the second-worst performing stock after Uchumi Supermarkets that has lost 40 per cent.
Mumias’ mounting challenges has seen investors exit in droves, depressing the stock.
Billionaire entrepreneur Baloobhai Patel is among those who have sold their Mumias shares, trading 17 million units of the miller’s stock in the past few months.
Mumias has been beset by reduced sugar production, industrial strikes, and claims of insider fraud that the board says it is moving to address in an effort to protect shareholder wealth.
“The board has taken measures to safeguard shareholder value in responding to the challenges faced by the company and the industry, including a restructuring of the senior management team,” the firm said in the notice.
The company is among several in the local sugar industry that will face stiffer competition from March next year when their protection from cheaper imports from the Common Market for Eastern and Southern Africa ends.
Mumias accused some of its top executives of engaging in illegal sugar importation that the company says cost it more than Sh1 billion, with former CEO Peter Kebati being among those fired over the allegations.
The miller has responded to the challenges with a focus on cost-cutting in the near term.
Mr Otolo has announced plans to retrench up to 300 workers and to extend the tenor of its Sh5 billion loans to ease pressure on the sugar miller.