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Mumias Sugar Co. Ltd Audited End Year Results 30 June 2016

Mumias Sugar FY16 loss per share widens for third straight year
Mumias Sugar has announced FY16 results posting a loss per share of KES 3.09 compared to a loss per share of KES 3.04 and KES 1.77 in FY15 and FY14 respectively. The 1.9%y/y widened loss was mainly attributed to a rise in gross loss (+5.7%y/y), finance costs (+21.8%y/y) as well as 59.6%y/y rise in impairment costs. Offering relief, distribution as well as admin expenses came down 73.2%y/y and 27.3%y/y respectively attributed to cost cutting initiatives. 
Despite an acute cane shortage in 4Q16 due to poaching, revenue was up 13.6%y/y on the back of higher sugar (+6%y/y) and ethanol sales volumes (+20%y/y) as well as 6% rise in net sugar price per tonne. Ethanol revenue, which rose 37%y/y, accounted for 16.8% of total revenue compared to 13.1% and 7.9% in FY15 and FY14 respectively. During the year, the company did not resume power exports to the national grid which management attributed to ongoing commercial re-negotiations with KPLC. This year, the company also discontinued its water bottling business and is set to lease it out due to stiff competition which has seen the unit make losses since its launch.
Going forward, the company is on course with its ongoing turnaround strategy mainly focused on debt restructuring and streamlining internal operations aimed at optimizing utilization and improving efficiency. With the COMESA safeguard extended and now set to expire in 2019, we like the company’s focus on operational efficiency given that other countries have lower cost of production. This coupled with the global and local rise in sugar prices offers the company opportunity to compete on price. Of concern continues to be the inadequate sugar supply with the farmers regularly reducing production (due to delayed payments) as well as cane poaching. (Company filing, Standard Investment Bank)
 

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