State sugar millers report combined loss of Sh6.1bn

What you need to know:

Muhoroni posted the biggest loss at Sh3.9 billion followed by Sony (Sh1.06 billion), Nzoia (Sh1.05 billion) and Chemelil (Sh936 million).
The poor performance has been linked to mismanagement, heavy debt loads and lack of capital to fund an operational overhaul that would improve efficiency.
The firms have also been hit by inadequate cane supply that saw listed Mumias Sugar — in which Treasury has a 20 per cent stake — post a Sh1.67 billion loss for the year ended June compared to a profit of Sh2 billion in a similar period last year.

State-owned sugar millers posted a combined net loss of Sh6.1 billion in the year ended June, underlining the vulnerability of the firms to increased competition from regional producers.

Muhoroni posted the biggest loss at Sh3.9 billion followed by Sony (Sh1.06 billion), Nzoia (Sh1.05 billion) and Chemelil (Sh936 million).

The poor performance has been linked to mismanagement, heavy debt loads and lack of capital to fund an operational overhaul that would improve efficiency.

Poor show

The firms have also been hit by inadequate cane supply that saw listed Mumias Sugar — in which Treasury has a 20 per cent stake — post a Sh1.67 billion loss for the year ended June compared to a profit of Sh2 billion in a similar period last year.

READ: Cane poachers sink Mumias Sugar profit

“In total, sugar companies recorded losses amounting to Sh6.1 billion,” reads a report from the Treasury that reckons the firms in the agriculture sector posted a combined loss of Sh6.6 billion due to the poor show of the millers.

The massive losses look set to erode the valuation of the millers as the government prepares to sell them to strategic investors and the farmers.

The financial reports came despite the companies enjoying protection from cheaper duty-free sugar imports from the Common Market for Eastern and Southern Africa (Comesa).

The window that allows Kenya to bring in up to 350,000 metric tonnes of sugar in a year but the import quota expires in March, paving the way for unlimited entry of cheap sugar from the bloc.

Protectionist regime

Kenya Sugar Board estimates that on average, Kenya’s cost of sugar production stands at Sh82,650 per tonne compared to other regional markets like Malawi where the costs is as low as Sh30,450 per tonne.

The government has said it will seek another extension of the protectionist regime as the millers work on strategies to lower their cost of production.

Attracting strategic investors is seen as critical to turning around the struggling State-owned millers, with the Privatisation Commission saying the companies could be sold in less than a year.

The privatisation watchdog says a go-ahead from Parliament will see their sale in six to nine months since due diligence is almost complete. Miwani is closed while Muhoroni is under receivership.

Chemelil, Nzoia, and Sony are, however, running but their financial performance has been hit by massive debts.