KENYA – The government has agreed to help revive Mumias Sugar on condition that the miller presents a clear reform strategy that will ensure financial stability in the long run.
Treasury Cabinet Secretary Henry Rotich said on Wednesday he had held meetings with the board and management to see how the troubled miller could be resuscitated.
Mumias has asked for a cash injection of about Sh2.3 billion from the government to meet urgent financial needs and resume full operations following completion of maintenance works that had forced it to temporarily halt processing.
Mr Rotich said the government recognised the importance of the miller to national economy and particularly to the western part of the country where it is one of the biggest employers.
CLEAR STABILISATION PLAN
“We have agreed to have a clear stabilisation plan that we will work with jointly to see how we can support the firm. But there has to be very clear stabilisation and reform plan which covers the short term, medium and long term. We can’t just blindly pump money into the miller,” Mr Rotich said in Nairobi on Wednesday.
It is estimated that the government has injected about Sh900 million into the miller over the past one and half years to mitigate financial challenges but the efforts have bore no fruit.
The company’s management, according to the minister, is currently working on a strategy which the two parties will thoroughly discuss before a decision is made.
“They must show what they are doing as a company to resolve the challenges that confronted them in the past and the problems facing them now. It is with that plan that we can think of how we can come into support,” Mr Rotich said.
Mumias Sugar has for the past two consecutive financial years posted negative results, with the management blaming them on a high-cost production regime, scarce raw materials and cheap sugar imports.
Corruption and unscrupulous dealings by some of the very people charged with running the firm have also been cited as key factors that contributed to its downfall.
Last year, the company’s board fired chief executive Peter Kebati alongside commercial director Paul Murgor after establishing their direct involvement in questionable importation of sugar.
In September, the listed miller posted a Sh2.7 billion loss for the year ended June 2014, blaming it on illegally imported sugar that depressed its ex-factory prices.
It had recorded a loss of Sh1.6 billion in 2013.
Following the dismal performance, Mumias share price at the Nairobi Securities Exchange has been in free-fall, and has since been expunged from the NSE 20 share index that measures blue-chip firms with superior profitability and dividend records. The stock closed Wednesday’s trading at Sh1.90.
January 8, 2014; http://www.nation.co.ke/business/Treasury-Mumias-Sugar-Bail-Out-Government/-/996/2581762/-/suom3x/-/index.html