Kenya's Mumias Sugar expects to raise output

Kenya's Mumias Sugar expects to raise output, quality and therefore profits in the current half-year, putting behind it the production problems encountered in the last six months of 2010, its chief financial officer said. The firm, which supplies 60 percent of the country's sugar needs, posted a surprise 22 percent drop in profit in the six months ended December, sending its shares sharply lower.
Peter Kebati, the firm's CFO blamed the drop on a shutdown of its factory in July for maintenance and heavy rains between August and October, which interrupted cane delivery. "Here (in the current half-year) we are going to have a full six months of operation. Secondly it has been relatively dry since December and we are able to crush more cane," Kebati told Reuters by phone late on Thursday.
"As far as cane quality is concerned, we tend to have more sucrose in the cane during the dry period so we are able to get much better extraction." He blamed unfair trade practices for the firm's failure to benefit from high world sugar prices. Kenya imports a third of the 750,000 tonnes consumed annually, most of it from Tanzania, Madagascar and Egypt. The prices which are declared for imports are lower than those of global markets, thus affecting Mumias's pricing model, which depends on import parity, Kebati said.
He said there was no risk that lower import duties coming into effect this year will undermine Mumias's revenues because there wasn't enough sugar in regional and global markets. This year import duty will fall to 10 percent for imports above a set quota of 340,000 tonnes, down from 40 percent last year, as part of regional trade agreements among the Common Market for Eastern and Southern Africa (COMESA) states. "Is the sugar (for importation into Kenya) available? If you look at sugar surplus countries like Mauritius, Zambia, Swaziland and Malawi, all of them already have forward contracts, some of them with British companies and also have preferential terms with the EU," he said.