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Cane poaching cuts back sugar firm’s revenues

PHOTO/FILE

A tractor transporting canes to a factory. Mumias Sugar Company says cane poaching by competitors was to blame for the decline in cane delivery and by extension quantity of sugar processed.

Cut-throat competition and rampant poaching of cane are negatively impacting on Mumias Sugar Company financial outlook.

The sugar miller says cane poaching by Butali Sugar Company and West Kenya, both in Kakamega County, was largely to blame for the decline in cane delivery and by extension quantity of sugar processed.

Cane crushed declined by 27 per cent in the six months to December 31, 2011 with the sugar produced tumbling by 43 per cent.

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“Our operations were affected by stiff competition and poaching of cane producers by our competitors. We have however invested Sh2.5 million in cane development,” Mumias Sugar finance director, Mr Peter Kebati, said during a press briefing on the company’s financial performance in Nairobi on Monday.

Mr Kebati said the company has started rolling out new cane seed introduced by the Kenya sugar research foundation to its over 104,000 sugar cane contractors.

The Nairobi Securities Exchange listed company, reported Sh866.6 million in net profit last year, which represents a 4.53 per cent increase from the previous year.

The firm benefited from a drop in marketing and distribution costs which declined by more than half to Sh224.1 million from Sh463.7 million in the previous year.

Mr Kebati said the reduction was largely due to the sugar shortage during the period, a development that prompted buyers and distributors to source for the commodity directly from the factory premises cutting on distribution costs.

However, its net revenues declined by Sh400 million to Sh6.9 billion in the period to December 31, 2011, a factor the company ascribes to unfavourable economic conditions then.

The company expects to break ground for its Tana region project later in the year upon receiving certification on environmental impact from the National Environment Management Authority.