Githunguri Dairy seeks to wind up Uchumi over debt

Kiambu-based milk processor Githunguri Dairy Farmers Co-operative Society has filed a petition seeking to wind up Uchumi Supermarkets #ticker:UCHUM in a move that is expected to increase financial pressure on the troubled retail chain.

The milk processor made its intention public with publication in local newspapers of a notice inviting any creditor who desires to support or oppose the winding up of Uchumi to join the case.

“Notice is hereby given that a petition for the winding up of the above mentioned company by the High Court was on the September 3, 2018 presented to the said court by Githunguri Dairy Farmers Co-operative Society…and any creditor or contributory of the said company desirous to support or oppose the making of an order on the said petition may appear at the time of hearing,” reads the notice in part.

Justice Mary Kasango will hear the petition on October 17, 2018.

Githunguri Dairy's move is being seen as signalling a deepening of the retail chain's troubles even as it struggles to raise new capital to fund its operations.

Uchumi has in recent months been forced to closure some of its branches besides experiencing frequent stock-outs and failing to pay staff on time.

Githunguri Dairy was among the firms that joined a 2016 petition by San Giorgio Limited to wind up Uchumi Supermarkets over the retail chain's failure to pay Sh53 million for the supply of counters, trolleys, baking and refrigeration equipment between 2011 and 2015.

In joining the petition, Githunguri Dairy Farmers Co-operative Society had revealed that Uchumi owed it Sh99 million. It was not possible to establish wether the latest dispute is linked to the old debt or is the product of a separate dispute.

The petition comes less than two months after household goods company Tropikal Brands Afrika sued Uchumi Supermarkets for Sh35 million in unpaid supplies.

Tropical Brands said in its petition that Uchumi had failed to settle the debts for up to five years, despite the credit period being fixed at 90 days from the date of supply.

Uchumi has been struggling under the weight of debts and a cash crunch that has affected its ability to pay staff salaries on time. The retail workers’ union has previously said that non-payment of salaries, which began last December, had affected 1,355 employees.

Uchumi, which has been struggling to recover since it first went into receivership in mid-2006, has posted losses in the past three years, weakening its position to pay suppliers and finance operations.

The retailer came out of receivership in January 2008, riding on a Sh675 million bailout loan from its principal shareholder, the government.

The retail chain, which owes suppliers over Sh3.6 billion, has been banking on the sale of land in Kasarani to turn around its fortunes but the money - estimated at Sh2.8 billion, has been slow in coming because of challenging approval processes.

The company's chief executive officer, Mohamed Mohamed, last month said that there are pending approvals but declined to offer more details, insisting that such discolsure would be in breach of rules governing public listed companies.

The partially State-owned retail chain has been seeking funds to restock its 12 branches that are now almost empty and to raise funds from other shareholders away from the Treasury.