THE government will inject Sh500 million to bail out cash-strapped Mumias Sugar, Felix Koskei the Agriculture Cabinet Secretary has said.
The cash is meant to help turn around struggling Mumias, which accounts for close to a third of Kenya’s annual sugar production, Koskei said in a statement late on Thursday.
The amount offered by the state is nearly a fifth of what the sugar miller had requested from the government to sustain its operations and meet its financial obligations. It had sought Sh2.4 billion bailout from the government which has a 20 per cent stake in the firm. Mumias Sugar’s loss for the financial year ending June 2014 widened to Sh2.7 billion from Sh1.6 billion recorded in 2013.
The loss was attributed to cane poaching, fewer deliveries to the factory by farmers who blamed the firm for this, adding that it did not provide them with inputs to support production.
The sugar miller has also been plagued by fraud perpetrated by some of its former executives who were involved in illegal sugar importation that cost it Sh1 billion further worsening its financial position.
In the bailout fund request, the Mumias is seeking cash for factory maintenance, Sh315 million to pay farmers arrears, and over Sh1 billion to settle supplier debts among other financial obligations it considers urgent.
The bailout plans triggered a rally for the Mumias stock which has gained 48 per cent in January and closed at Sh2.90 Friday.