Rivatex pushed to the edge as cumulative losses hit Sh3bn

Workers make garments at Rivatex East Africa Limited in Eldoret town, Uasin Gishu. 

Photo credit: File | Nation Media Group

Eldoret-based textile manufacturer Rivatex posted a Sh347.6 million loss in the financial year ended June 2023, a new audit shows, pushing its cumulative losses to Sh3 billion, leaving it on the edge even as it operates below factory capacity.

Auditor-General Nancy Gathungu said the State-owned agency is grappling with numerous challenges and has failed to pay suppliers.

“The statement of profit or loss and other comprehensive income reflects a net loss of Sh347,592,549 and the statement of financial position reflects accumulated loss balance of Sh3,041,471,831 as of 30 June 2023,” she said.

“The management attributes the poor performance to constant lack of raw materials such as cotton, high cost of inputs such as labour, electricity and water, fuel, spares and consumables, repairs and maintenance that had hindered the company’s ability to produce and supply its products on time.”

The report notes that by the end of June last year, Rivatex had failed to pay its suppliers Sh56.9 million and was failing to honour obligations such as remitting employees’ pensions and Sacco deductions.

“The trade and other payables ageing analysis provided for audit review revealed that payables for goods, services rendered, and works done amounting to Sh10,851,170 have been outstanding for more than 18 months. No plausible explanation was provided for non-payment,” said Ms Gathungu.

Failure to pay suppliers sets the textile firm at risk of running out of favour with businesses, which may starve it of much-needed raw materials and other operational necessities.

The company says it has entered into a plan to see it remit the pension it has deducted from workers but failed to hand it over, though the plan can only be successful should the manufacturer start making profits.

Rivatex is unable to pay its creditors even as it proves unable to collect debts owed to it, the Auditor-General points out, noting that by the end of June 2023, it was owed more than Sh111 million.

“A review of the debtors ageing analysis reveals that out of the total debtors’ balance of Sh111,355,826, Sh29,143,198 were more than one year old. This implies that the company is unable to collect its debts as and when they fall due,” the audit says.

The audit notes that at the moment, the firm cannot operate without “goodwill and support from the government, bankers, and creditors.”

The wear and tear of Rivatex is being witnessed just five years after it underwent an ambitious Sh6 billion upgrade to replace its obsolete machines, targeting the African market by growing its production capacity from 10,000 bales per day to 100,000.

But despite a heavy revamp of its production processes, cotton production in the country has remained low amid rising cotton seed prices which hit a five-year high of Sh5,993 per 100kgs last year.

“Cotton seed prices increased by 6.4 percent, from Sh5,630 to Sh5,993 per 100 kilogrammes in 2023 due to stakeholder upgrades,” the Kenya National Bureau of Statistics (KNBS) stated in the 2024 Economic Survey.

Last year, farmers delivered 3,900 tonnes of cotton to factories, a slight increase from the 3,800 tonnes delivered in 2022.

The Auditor-General, however, notes that despite its struggles with capacity and losses, Rivatex also faces major problems in its human resources, with 580 of its 738 workers being from one community, contrary to the law.

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