Mumias on brink of collapse, urgently needs Sh1bn bailout
Mumias Sugar Company managing director Coutts Otolo. PHOTO | SALATON NJAU
What you need to know:
Managing director Coutts Otolo told the Business Daily that the miller has been unable to buy some critical spare parts needed to enable it crush at least 7,000 tonnes of cane per day.
The firm expects to use the bailout cash on maintenance of production lines and paying farmers who it owes Sh500 million.
Mumias Sugar Company risks collapsing if the government does not release the Sh1 billion bailout cash it promised the firm.
Managing director Coutts Otolo told the Business Daily that the miller has been running on limited cash for the past two years.
Mr Otolo said the company has been unable to buy some critical spare parts needed to enable it crush at least 7,000 tonnes of cane per day.
“The problem with Mumias is historical, we inherited huge debts,” said Mr Otolo. “We have cash flow problems at the factory. We cannot pay vendors of key spare parts required to jump-start the sugar mill.”
The firm expects to use the bailout cash on maintenance of production lines and paying farmers who it owes Sh500 million. The miller’s employees are yet to be paid their May salaries. The company is also highly indebted to creditors and suppliers.
Mr Otolo said shareholders had agreed to buy stocks worth Sh3 billion. “We were on the verge of receivership about one year ago but this was negotiated after the government asked us to float shares for sale.”
He said that theft of ethanol had cost the firm millions of shillings, adding that the matter was being investigated.
Seven employees had been sacked and restructuring was underway to revitalise the ethanol production department which is the lifeline of the ailing firm, he said.
The miller stopped sugar production due to lack of critical spare parts and has difficulties meeting daily operational costs. A spot check by the Business Daily revealed low business with a handful of tractors delivering cane.
There were also fewer trucks ferrying ethanol, unlike in the past when the yard was characterised by long queues of trucks. The factory yard also looked unkempt.
The company crushes between 2,000 and 4,000 tonnes of cane daily to extract molasses. An ongoing strike by transporters over unpaid salaries has further paralysed activities. Competition from other millers is yet another challenge facing the firm.
