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Economy

Struggling Sony Sugar pegs hope on govt bailout

Sony Sugar
Sony Sugar managing director Bernard Otieno speaks on Wednesday ahead of preparations for maintenance on the company's machinery. PHOTO | VIVERE NANDIEMO | NMG 

South Nyanza Sugar Company says it will await financial bailout from the National Treasury to steady its ship even as it prepares to undergo another maintenance routine in a bid to improve its output.

The company often known as Sony Sugar has been fraught with challenges that have seen its production go down.

One of the factors that has been blamed for the low output is use of dilapidated machines.

Mr Bernard Otieno, the company's managing director, told reporters on Wednesday that the company will shut down most of its operations for maintenance beginning March.

The maintenance, which will take a month, will help enhance the efficiency of the miller in a bid to turn around its fortunes, he said

"We are soon rolling out a maintenance exercise that will help the company increase its out put this year," said Mr Otieno

Litigation costs

The MD also revealed that it is looking to reducing litigation costs, which run into billions of shillings.

"The company has also resorted to engage public administrators and farmers in meetings to help resolve 4,269 pending court cases out of the courts. The case have pending claims that may see the miller lose Sh2.2 billion. This has aggravated the company's financial challenges," added Mr Otieno.

According to data from the company’s legal department, Sony has saved Sh335.2 million from withdrawn cases after plaintiffs agreed with the company on amicable ways of solving the cases out of court.

According to Mr Otieno, the company paid Sh370.1 million for 1,567 concluded cases in 2018 while 467 cases were altogether dismissed by courts.

But Mr Otieno hopes that the government's move to pay farmers' pending dues will also go a long way in resolving the company's woes.

The government has said it will disburse up to Sh2.7 billion to farmers who supplied cane to State-owned millers but whose pay had been pending for years.

Heavy burden

The actual date for those payments has yet to be declared although the National Treasury indicated they will be paid directly into their accounts.

"We are glad that the government will lift for us a heavy burden of paying farmers. The money that would have been used to pay them will be pumped into running the company,"

For Sony, these and sugar cane poaching are persistent challenges.

"Every year, the company loses over Sh230 million worth of sugarcane that is poached by rival companies. This has led to the shortage of cane to crush leading to low output," Mr Otieno explained.

He added: "Sugarcane business brings low-margin profit, which calls for bulk processing of the raw material that takes at least two years and maximum five years to mature."

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