Mumias to get new CEO, buy Nzoia sugar miller

Kenya’s Mumias Sugar is on the hunt for a new chief executive as the incumbent Evans Kidero resigns to run for political office.

Another development is the company’s bid to buy its debt ridden rival Nzoia Sugar Company through the planned privatisation of the sugar miller by the government.

Shareholders are hoping that the planned acquisition will prop up the miller’s share price, which has been down 52 per cent in trading over the past one year. The miller’s shares closed last week at Ksh4.95 ($0.05).

Mr Kidero — expected to quit office in the next few months — is said to be interested in running for the Nairobi governor’s seat, in the upcoming general elections.

Mr Kidero’s successor is expected to oversee the planned acquisition of Nzoia Sugar, a possible rights issue planned for early 2013 and expansion of the company into new business lines.

Company sources say the new CEO should be named by end of March.

Mumias plans to acquire Nzoia Sugar to access new sugar fields, which will boost its falling sugar production.

It has written to the Privatisation Commission seeking an approval. The company’s current sugar acreage only supports an annual production of 300,000 tonnes, a figure that matches the company’s current production levels. This means the company has to acquire new sugar fields if it is to raise its production levels.

The company needs to ensure increased reliability and predictability in cane delivery, especially since it is due to officially launch its ethanol production plant next month.

Mumias also needs to ensure there is a reliable supply of bagasse to its electricity production plant, which further fuels the need for new sugar fields.

The unpredictability in cane delivery has already had an impact on the company’s earnings, as it earned Ksh353 million ($4.1 million) from electricity sales in 2011 down from an initial forecast of Ksh600 million ($7.1 million). The company’s earnings for the first half of this year have also been affected.

“Earnings from the sale of electricity were at Ksh154 million ($1.4 million), which was four per cent lower than the Ksh161 million ($1.9 million) realised in the same period last year. This was due to inadequate fuel (bagasse) supply because of the lower amount of cane crushed,” the company published in its 2012 half year report.

Over the six-month period, the company crushed 800,000 tonnes of sugar cane, compared to one million tonnes in the same period last year. This resulted in a 42 per cent decline in the sugar produced, from 113,521 tonnes to 64,435 tonnes. Earnings, however, grew marginally by six per cent on the strength of higher sugar prices.

The fall in sugarcane delivery has also been blamed on declining farm yields resulting from increased land subdivision amongst family members.

Mumias in the 1970s