Mumias Sugar profits to fall amid cane shortage

Kenya’s Mumias Sugar expects profit to fall by more than a quarter in its financial year to end-June due to a shortage of sugar cane and routine breakdowns at its plant, it said on Tuesday.

The heavily-indebted firm has been struggling with cash flow problems in recent years, forcing the government to step in with bailout funds and hired a new Chief Executive, Errol Johnston, to drive its turnaround.

“Sugar cane shortages necessitated closure of our factory for two and a half months from mid-October to December 2014,” the company said in a statement.

The shortages were partly caused by angry farmers who sold their cane to other producers due to non-payment by Mumias.

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The cash flow problems also caused the firm to forego annual maintenance of its production line for years, which broke down at times during the period and also suffered from leakages.

Mumias said its board was focused on rescuing the firm by hiring a competent management team and improving its operations.

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Mumias said in March its loss widened to 2.08 billion shillings ($20 million) in the six months to end-December from a restated loss of 407.4 million shilling loss a year earlier, blaming the poor performance on an unscheduled shutdown of its factory in western Kenya as well as poor prices.

Kenya’s struggling sugar industry has been protected against cheaper imports by trade barriers but has faced years of decline caused by mismanagement, outdated farming methods and corruption.

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