Mumias Sugar Announces Half-Year Results for Period Ended 31st December 2014

Mumias Sugar announced results for the half year ended 31st December 2014 with the following highlights:

Net revenue declined by 62.5 percent from KES 7.13bn to KES 2.67bn as a result of lower production and sales of sugar during the two and a half month factory closure as well as the 9.0 percent decline in sugar prices globally coupled by illegal sugar imports into the country.

Revenue from the sale of ethanol and energy revenue fell by 23.0 percent and 33.0 percent due to unavailability of raw materials, factory closure and the lower tariffs from KPLC.

Marketing and distribution costs fell by 28.9 percent from KES 385.96mn to KES 274.54mn whereas administration expenditure fell by 25.3 percent to KES 584.90mn from KES 782.61mn.

Finance costs increased by 20.2 percent from KES 315.20mn to KES 378.75mn whereas Finance Income decreased by 42.3 percent to KES 88.94mn

Total assets declined by 13.5 percent from KES 25.58bn as at December 2013 to KES 22.13bn as at December 2014. Total liabilities grew by 4.6 percent to KES 12.94bn from KES 12.37bn as at December 2013. Loss before tax and loss after tax went up by 409.9 percent respectively to KES 2.08bn and KES 1.45bn in 2014 from KES 407.35mn and KES 285.15mn respectively in 2013 translating to a 600.0 percent decline in EPS to KES -0.95.

Our view

Low productivity levels due to unavailability of raw materials for sugar processing and energy production remains a primary concern. This has great impact on the revenue potential of the firm going forward since sugar cane informs all of its marketable products.

Factory production costs remain high due to under-utilized factory capacity and the inability to take advantage of economies of scale efficiencies.

Cheap illegal imports and declining prices for sugar will continue to impact the company’s bottom-line.
Unfortunately this remains an issue beyond the sugar miller’s control.

The company faces high gearing ratios with relatively high debt to equity ratios and illiquidity illuminated by negative cash flows reported as at December 2014 raising concerns on its ability to meet its liabilities when they fall due.

Initiatives tailored to incur cost efficiencies and productivity savings, and improved liquidity as well as the government intervening to reduce its liability portfolio are key to improved performance in the future.