17 February 2014

Kenya: Sugar Millers Raise Prices At Factories

Sugar millers have hiked their ex-factory prices by as much as Sh400 per a 50-kilogramme bag despite the apparent surplus stocks of the commodity in the country.

It has emerged that Chemelil, Muhuroni, Kabras, Sony, Mumias and Butali have raised their prices to Sh3,600 per bag from Sh3,200 from last week.

The 12.5 per cent increase is contrary to high expectations that prices would go down further since there is no shortage of the commodity. Retailers usually repackage the 50-kg bags in smaller quantities for re-sale to consumers.

The increase is set to impact on the retail prices if wholesalers pass on the costs down the chain of supply.

Provisional data from the Kenya Sugar Board shows cane deliveries in 2013 were highest in three years, rising to 6.67 million tonnes. Deliveries in 2011 and 2012 amounted to 5.34 million tonnes and 5.72 million tonnes respectively.

Improved cane supply is expected to lift millers' profitability as they have in the past blamed their losses on shortage.

Pamela Odhiambo, Sony Sugar Company's sales and marketing manager, and Butali Sugar Company's marketing manager Daniel Onyango confirmed the hike but declined to give reasons for the move.

"There is demand in the market," said Onyango, declining to offer further explanation.

Wholesalers of the commodity in Kericho county said the hike was unjustified, since millers have not incurred extra costs. They now want the government to intervene and force the companies to switch back to earlier prices.

"Government intervention would be the only solution to rein in on these companies, which despite hiking prices never consider raise for cane delivered by farmers," said Philip Mutai, a sugar wholesaler.

Sugar dealers allege the millers have colluded to review the prices upward to boost profitability as the commodity is now in plenty in the market.

Nairobi Securities Exchange-listed Mumias Sugar is expected to release its half-year financial statements, which will give a clear indicator on the state of the country's sugar industry.

Mumias Sugar is the country's largest miller and controls more than 40 per cent of total production. Its shareholders however missed out on dividends last year for the first time since the company listed at the NSE in 2001, after it posted a full-year loss of Sh1.67 billion.

The loss was occasioned by cane supply shortage and an influx of imported sugar, which resulted in low factory capacity utilisation. This affected its other plants - ethanol, electricity co-generation and mineral water - all which rely on by-products of cane crushed.

"We had a difficult first half and supply of cane was a challenge throughout the year due to declining yields, alternative land use and cane poaching by rival millers without cane catchments," managing director Peter Kebati said when he released the results in September.

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