Mumias directors, 300 staff to lose jobs in revival plan

What you need to know:

The turnaround to be overseen by audit firm KPMG will involve weeding out “sugar brokers” and retrenching about 300 staff.
The deal hammered out in a meeting chaired by Deputy President William Ruto will see more than 50 per cent of the board sent home.
The restructuring will see the issuance of a rights issue to inject Sh4 billion to the ailing factory.

The government on Friday proposed on a Sh5 billion deal to revive Mumias Sugar that will see the board and management of the company sent home.

The turnaround, to be paid for by shareholders and the government, will involve the retrenchment of about 300 staff and the weeding out “sugar brokers” who have made the prices of sugar from the company uncompetitive.

The deal hammered out with the company’s lenders in a meeting chaired by Deputy President William Ruto will see more than 50 per cent of the board sent home and changes in the firm's management.

Audit firm KPMG will be appointed to oversee the restructuring that will see issuance of a rights issue to inject Sh4 billion to the ailing factory.

It is unclear whether shareholders will have the stomach to pump more money into the firm.

Mr Ruto announced the measures after chairing a meeting attended by National Treasury Principal Secretary Kamau Thugge, Mumias Board chairman Dan Ameyo, Chief Executive Officer Coutts Otolo and representatives of creditors.

“We have to take these measures so that farmers in the region can be paid for delivery of sugarcane,” Mr Ruto said.

The restructuring starts in earnest with the board directed to notify shareholders of an Annual General Meeting and appointment of the audit firm.

Mr Ruto said the government would release Sh1 billion within a week when the audit firm is on the ground.

The funds will be used to pay farmers outstanding arrears and put the company back to its feet.

However, he requested members of the board to voluntarily resign for failing the company or they will be fired.

The decision was reached after month-long consultations among the lenders, the board, the management, and the government.

The decision came just a day after farmers held violent demonstrations in an attempt to evict the management, whom they accused of failing to pay them for cane deliveries.

Mr Ruto said the sugar company has to provide farm inputs at the right price and also sell its sugar at a competitive prices.

Mumias Sugar Company’s current status is attributed to mismanagement.

The announcement of the bailout came on a day that the sugar company said its loss widened to Sh2.08 billion from a restated Sh407.4 million loss last year.

The firm, whose sugar output accounts for about a third of Kenya’s annual sugar output, said net revenues for the period ending December fell 62 per cent to Sh2.67 billion.

The company said the loss was largely due to an unscheduled and out-of-crop maintenance.

“The revenues were impacted by the production time lost during the two and a half months maintenance shutdown as well as cane shortage and a lower average net cane price per tonne of sugar realised during the first quarter,” they said.

“Despite the challenges ... the company looks forward to better performance in the second half of the year following successful resumption of production,” it said in a statement.

Low sugar production, high production costs and low prices resulting from illegal sugar imports further compounded the company's half year loss, the firm said.