Mumias Sugar (MSC) reported fiscal year 2016, or FY16, results showing revenue rose by double-digit percentage. But profitability remained elusive for the sugar producer as it posted a wider loss for the latest fiscal year compared to last year.
Mumias said FY16 revenue increased 13.6% to Ks6.3 billion. Strong demand for sugar and rising sugar prices supported the topline gain. The company said sugar sales rose 10% in the year as its sugar production also surged 6%. Mumias also produces ethanol, whose sales increased 37%. The company produced 20% more ethanol in FY16 than in FY15.
The management said revenue growth would have been stronger in FY16 had it not been that the company suffered sugarcane supply shortage. The sugarcane shortage has been blamed on farmers ditching the crop because of low returns. There have been efforts to encourage farmers in western Kenya to return to sugarcane growing to ensure steady supply of raw m aterials to domestic millers.
Cash-burn cools at Mumias
The chart above shows Mumias’ annual revenue for the last five fiscal years.
Mumias burnt less cash in FY16 than it did in the earlier year. Operating costs decreased 9%, with administrative costs falling 27.6%. However, the cost curtailment at Mumias wasn’t enough to hold the bottom-line as the company reported a wider loss. EPS (earnings per share) loss of Ks3.09 increased from EPS loss of Ks3.04 last year. The company’s fiscal year end on June 30.
As part of cost-cutting measures, Mumias has exited bottled water business as the management said the operation was no longer viable. But it is not clear how much Mumias expects to save by ditching the water business.
Reorganization at Mumias
Mumias is in a restructuring mode and the closing of water bottling business is only part of the on-going reorganization. The government has pumped ~Ks3 billion into the company as part of a bailout programme, which requires headcount pruning among other operations adjustments.
Mumias has a market cap of about Ks1.7 billion and 1.5 billion shares outstanding.
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