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Traded On:  18th-August-2015
Avg Share Price : 1.90
High :1.95
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Shares Traded :312,300
  
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Corporate Strategy

Factory Rationalization Project
In September, 1993, the Company management initiated the Factory Rationalization Project which was aimed at increasing the daily milling capacity to 8,000 tons of cane per day (tcd). In addition, the Project introduced diffuser technology of sucrose extraction which increased from 82% to 87% following the commissioning of Diffuser tandem on May 4, 1997. The Project consisted of the erection of a new 110 tch boiler, a 7.0 MW Turbo Alternator, an SR Juice Clarifier, Heaters, Juice Evaporators, De-watering Mills and Cane Handling Equipment. This improved the Factory’s cane crushing capacity to two million tons a year translating in 230,000 tons of sugar. The factory capacity to process cane rose from 1.9 million tons to 2.3 following the Factory expansion.

During the same year (1993), the Government signed the COMESA Treaty which allowed free trade among member countries and this opened a flood-gate of imported sugar affecting local sales which were then being carried out by the Kenya National Trading Corporation. The move immediately sent the government to the drawing board coming up with a divestiture program that saw Mumias Sugar privatized in 2000.

Factory Performance
The superiority in factory efficiency (8.1%) is probably higher but the different factories have different methods of measuring factory efficiency this therefore distorts the comparison. The company is above the industry average by 16.8% in overall time efficiency, the true measurement of efficiency. It has been particularly strong in reducing cane outages (unavailability of cane for crushing).

Cane supply is the single most important variable in production costs. The recovery rate is boosted by the ultra efficient diffuser technology compared to milling technology used by most factories. The company has invested in 'de-bottlenecking' it process house. The improved extraction rates and recovery rates should result in a higher rendement of cane to sugar ratio. The de-bottlenecking should increase the amount of cane crushed to 2,598,000 and hence increase sugar production to 300,000 tons. The Company is the industry leader in all facets of factory performance.

Capacity Expansion
The Company has invested in an expansion programmewhich has increased its production capacity to 300,000 tons per annum. The expansion programme has seen improvements to the mill, a larger area under cane and larger sugar output which has boosted top line growth. This is also extremely important for future competitiveness of the Company’s product given that the Safeguard Measure Extension (which limits duty free imports in the country to 220,000 tons with anything above that attracting a punitive tax of 120%) granted to Kenya by the COMESA Council of Ministers expires in 2012.

Production efficiency therefore needs to be achieved for Kenya to be able to compete in the long term with import prices. Currently the Company is mitigated from imports due to the attractiveness of other markets as compared to the Kenyan market.

Co-Generation
The Company has installed a new power production plant, which has seen its generating Capacity increase to 35MW. Mumias currently exports up to 25MW to the National Grid. Global statistics also suggests that as the price of oil keeps rising, ethanol is increasingly becoming a reliable and cheap substtitute. In a move to diversify the company's product portfolio the company has embarked on the establishment of an ethanol plant which it hopes to complete by 2011.

In addition, the Company has entered into a 10 year agreement (2009 – 2019) with the Japanese Carbon Finance Company Limited. This arrangement should see the Company receive “credits” as a result of replacing thermal production with the more environmentally friendly “baggasse” production. The Company will then exchange these credits for hard currency. However the revenues are based on a complex formula that takes into account the amount of thermal power production and Mumias power exports to the National Grid.

Agriculture Operations
The Company produces approximately 50% of the domestic sugar output in the country. Small cane outgrowers  supply the bulk of the company’s cane requirements.  The Company grows the balance on a nucleus estate that it has leased on a long term basis from the GOK. Outgrowers represent approximately 66,000 registered small scale farmers with cane fields around Butere, Mumias, Kakamega, Bungoma, Siaya, Busia and Teso Districts.

Currently the Company has 67,800 hectares of land in total under cane. of this the Nucleus estate represents approximately 3,800 hectares . 64,000 hectares is outgrower land which is owned by the farmer and is within a 40km radius of the factory. Cane fields are rain-fed, with well spread falls totalling to about 2,000 millitres annually and harvested on an 18-20 months cycle 

To educate cane farmers, the company organizes educational programmes, public meetings, seminars, field days, farmers’ education days, field demonstrations in collaboration with relevant government ministries and other relevant service providers. Previous field days have been organized and held in collaboration with the Kenya Sugar Research Foundation, the Ministry of Agriculture and the Provincial Administration.

The table below shows the current sugar production of the major mills in Kenya:
FactorySugar Production in Metric TonnesPercentage of Local Production
Nzoia67,00013.19%
Sony79,00015.55%
Chemelil43,0008.46%
Muhoroni26,0005.12%
West Kenya 23,0004.53%
Mumias Sugar270,00053.15%
TOTAL508,000100.00%
SOURCE: Kenya Sugar Board Year Book
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