11 June 2018

Kenya: Mumias Sugar Stock Hits New Low of 70 Cents

Mumias Sugar share has sunk to its all-time low of 70 cents at the Nairobi Securities Exchange (NSE), valuing the troubled miller at just Sh1 billion in the market.

The troubled company was a week ago beset by more governance issues, with the board suspending chief executive officer Nashon Aseka over what they termed doubtful dealings at the miller which in its heyday was Kenya's largest.

Investors have taken a dim view of the stock as doubts over its long-term health persist, although there is some demand from short-term speculators looking for a bargain.

By matching its lowest ever price of 70 cents -- a level it briefly touched intra-day in May 2017 -- the stock has become the cheapest at the NSE in nominal terms. It has fallen by 36.4 per cent since the beginning of the year, with most of the erosion being recorded last month when it shed 17.6 per cent value.

Mumias market prospects have also been dimmed by the losses on its books, with the miller recording an after-tax loss of Sh1.95 billion in the six months to December 2017.

Aggressive cost management helped the firm to lower this loss by 33 per cent compared to the similar period in 2016, although lower sales cut the firm's revenue by more than half to Sh680.5 million compared to Sh1.52 billion in the same period in 2016.

The miller has remained in loss-making territory even after receiving government bailouts worth nearly Sh3 billion since 2015, which have been insufficient to cover the firm's debt load.

The company currently owes farmers Sh600 million. It needs close to Sh20 billion to pay cane producers, banks, employees and the Kenya Revenue Authority (KRA).

The government, which owns 20 per cent of the firm, has pegged additional bailouts on the miller presenting a concrete proposal on cutting its workforce, which stands at 1,400 to 600.

Investors holding stock bought in a second offer in 2006 at Sh49.50 have been the worst hit in the past few years by Mumias' share price erosion, counting capital losses running into billions of shillings.

Their losses were, however, softened by a bonus of two shares for one issued in 2007.

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