Mumias Sugar
Mumias Sugar: 2006 Full Year Financial Results
Mumias Sugar Company is the largest sugar processor in Kenya with an installed annual capacity of 520,000 tonnes. In the year ending June 2006, the company crushed 2.45 million tonnes of cane to produce 265,819 tonnes of sugar. Most of the output is sold locally, though it exports some of the produce under regional trading agreements like the EU quota, which has lately not been very profitable.
| MUMIAS SUGAR - FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 | ||
| INCOME STATEMENT | ||
| 30 June 2006 | 30 June 2005 | |
| Shs’ 000 | Shs’ 000 | |
| GROSS SALES | 14,255,499.00 | 12,511,512.00 |
| LESS.TAXES AND LEVIES | ||
| VALUE ADDED TAX | -1,843,318.00 | -1,725,726.00 |
| SUGAR DEVELOPMENT LEVY | -754,641.00 | -705,612.00 |
| NET SALES | 11,657,540.00 | 10,080,174.00 |
| OPERATING PROFIT | 2,058,530.00 | 1,798,326.00 |
| FINANCE INCOME-NET | 161,359.00 | 45,055.00 |
| PROFIT BEFORE TAXATION | 2,219,889.00 | 1,843,381.00 |
| TAXATION CHARGE | -693,274.00 | -553,451.00 |
| NET PROFIT FOR THE YEAR | 1,526,615.00 | 1,289,930.00 |
| EARNING PER SHARE-BASIC & DILUTED | Shs 2.99 | Shs 2.53 |
| DIVIDEND PER SHARE-Interim paid | Shs 0.75 | Shs 0.60 |
| -Final Proposed | Shs 1.00 | Shs 0.90 |
| CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006 | ||
| 30 June, 2006 | 30 June2005 | |
| Shs’ 000 | Shs’000 | |
| Balance at 1 July | 854,298.00 | 509,980.00 |
| Net Cash generated from operating activities | 2,233,303.00 | 1,627,315.00 |
| Net Cash used in investing activities | -715,962.00 | -701,382.00 |
| Net Cash in financing activities | -472,847.00 | -581,615.00 |
| Balance at 30 June | 1,898,792.00 | 854,298.00 |
| BALANCE SHEET AS AT 30 JUNE 2006 | ||
| Shs’ 000 | Shs’ 000 | |
| ASSETS | ||
| Non current assets | ||
| Property,plant & equipment | 7,324,879.00 | 5,756,058.00 |
| Non-current receivables | 101,204.00 | 95,852.00 |
| & intangible assets | ||
| 7,426,083.00 | 5,851,910.00 | |
| Working Capital | ||
| Current assets | 4,445,423.00 | 3,645,664.00 |
| Current liabilities | -2,007,043.00 | -1,608,685.00 |
| Net working capital | 2,438,380.00 | 2,036,979.00 |
| TOTAL NET ASSETS | 9,864,463.00 | 7,888,889.00 |
| Capital and reserves | ||
| Share capital | 1,020,000.00 | 1,020,000.00 |
| Revaluation surplus | 2,135,554.00 | 1,283,438.00 |
| Retained earnings | 4,553,495.00 | 3,317,597.00 |
| Dividend declared (gross) | 0.00 | 459,000.00 |
| 7,709,049.00 | 6,080,035.00 | |
| Non-current liabilities | 2,155,414.00 | 1,880,854.00 |
| TOTAL EQUITY AND LIABILITIES | 9,864,463.00 | 7,888,889.00 |
Notes accompanying Mumias Sugar Company for the year ended 30 June, 2006
Results
The financial results for the year ended 30 June 2006 were very encouraging in view of the difficult operating environment during the year. The profit after tax of Shs 1,526, 615,000(2005- Shs 1,289,930,000) was an increase of 18.3%. This was attributable to favorable selling prices during the year and effective management of operational costs.
Production
The company processed 2,450,548 tonnes (2005- 2,348,019 tonnes) of cane, which increase of 4.4%. Note that the severe drought experienced throughout the country in 2005 had a major impact on cane availability and cane development. This too contributed to increased incidences of cane fires thereby exacerbating the situation. These factors led to crushing of younger cane which had less sugar content therefore lowering productivity. Besides, heavy rains in the period of March to June 2006 made it difficult to access cane fields and delivering cane to the factory.
Sales
The Gross turnover was Shs 14,255,499,000 (2005- shs 12, 511,512,000) which was 13.9% increase. The domestic selling prices were favorable for most of the year. The company continues to strengthen its distribution network for market penetration. New packaging sizes have been introduced for the various market segments.
It is also worthy noting that the company exported 10,000 tonnes on the European Union Special Preferential Sugar and 6,500 tonnes of sugar on the European Union sugar protocol during the year.
Contribution to government revenue
The company’s contribution to the exchequer in taxes from VAT, Sugar Development Levy, Corporation Tax and other taxes was over Shs 3.8 billion in the year.
Profit before tax
Profit before tax of Shs 2,219,889,000 (2005- Shs 1, 843, 381,000) was increase of 20.4%. Earning per share was shs 2.99 (2005- shs 2.53), thus growth of 18.2%.
Dividend
The Directors declared and paid an interim dividend of 37.5% per ordinary share of Shs 2 each which is shs 0.75 per share. The Directors propose a second and final dividend of 50% per ordinary share of shs 2 each which is shs 1.00 per share. The final proposed dividend is subject to approval by the shareholders at the Annual General Meeting scheduled for 8 December 2006. The proposed dividend of shs 510 million is included in retained earnings.
Government divesture
The Government of Kenya has started the process of selling a further 91,999,220 shares representing 18.04 % of the issued share capital of the company. This will be a secondary public offer on the Nairobi Stock Exchange. This is expected to be completed by 31 December 2006.
Outlook
The sugar industry in Kenya is undergoing a challenging period. The effects of the drought in 2005 resulted in lower cane availability. The sugar prices are lower due to world sugar prices having decreased considerably this year. Local competition is stiff which has depressed margins. Local production costs continue to be high due to increase in oil prices, very poor roads which have to be maintained by the company, small holder farms, unreliable weather and high operational costs from local and imported goods and services.
The transfer of sugar development levy to farmers as proposed in the June 2006 budget will lead to higher productions costs, lower income for the farmers and make imported sugar cheap which will have a major impact on productivity and profitability.
The Board of Directors and management are cognizant of the challenges facing the industry and the company. There are strategies and plans in place to introduce new products such as alcohol production, expanding co-generation, new packages for various market segments, capacity expansion and modernization, investment in computer technology and improved supply chain management for overall efficiency in the company.
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