Mumias has an ethanol plant with the capacity of 120,000 litres that requires about 300 metric tonnes of molasses a day to operate optimally.
This has compelled the Sugar Directorate to more than double imports to meet domestic demand.
The company resorted to imports in order to accumulate enough raw material for its lucrative ethanol plant as shortage of local sugar cane bit.
Mumias Sugar Company #ticker:MSC income is set to drop further this year after it suspended manufacturing of ethanol, citing high cost of molasses from neighbouring countries.
Until the processing of ethanol, used in manufacturing alcoholic spirits, was suspended early last month, the troubled Kakamega-based miller had been relying on imports of molasses from Uganda and Tanzania for making the product, its second largest income earner after sugar.
The NSE-listed firm’s chief executive Nashon Aseka told the Business Daily that it had become unviable to import as supply also tightens in the region.
“We thought we would run the distillery by importing molasses from Tanzania and Uganda. However, we realised that it has become expensive to do so,” he said.
Mr Aseka added that for ethanol business to be profitable a tonne should be imported at about Sh6,000 as opposed to the current average Sh14,000.
“It became difficult for us to make profit by buying molasses at over Sh6,000 per tonne,” he said.
According to the miller’s financial statement, ethanol is the only product that registered growth in revenue in the six months to December 2016, rising four per cent to Sh453 million compared with Sh435 million in a similar period last year.
The company resorted to imports in order to accumulate enough raw material for its lucrative ethanol plant as shortage of local sugar cane bit.
Mumias has an ethanol plant with the capacity of 120,000 litres that requires about 300 metric tonnes of molasses a day to operate optimally.
Last November, former Mumias chairman Dan Ameyo defended the move to import molasses, noting that it was viable and no losses were incurred in the process.
“With adequate molasses that we are importing, our calculations have indicated that we are breaking even on cost,” said Mr Ameyo.
The miller has been struggling financially in the recent years and its miseries have been worsened by an acute shortage of raw material that has seen nearly all sugar factories operate below capacity.
This has compelled the Sugar Directorate to more than double imports to meet domestic demand.
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