By John Njiraini

Sony Sugar Company has launched a restructuring programme to guarantee its survival, once the local sugar market is opened up to foreign competition in four years time.

The company, which is indebted to the tune of Sh2.5 billion, yesterday announced the Sh6 billion programme, in anticipation of the expiry of the Common Market of Eastern and Southern Africa (Comesa) safeguards on sugar importation.

“In 2012, there will be an influx of cheap sugar in the country. We need to restructure our business in order to survive,” said John Imbogo, the company’s Head of Finance. He said the company is technically insolvent, as the level of its debts exceeds its assets.

The revelation comes only a week after the Cabinet approved the privatisation of 16 parastatals, among them Sony Sugar Company.

It also comes at a time when the local sugar industry, which has relied on Comesa protectionism for survival, is at a crossroads because the special safeguards on duty free sugar imports would not be extended come 2012.

Strategic investor

Managing Director, Paul Odola unveiled the five-year roadmap that would transform the sugar miller’s fortunes.

This includes a petition to the Government to write off, or convert to equity, a debt of Sh1.5 billion. The debt, which has accumulated over many years, incorporates tax arrears and penalties by the Kenya Revenue Authority.

Odola revealed the Government is “seriously” considering the request to clean the tattered balance sheet and make the company attractive to strategic investors.

“All stakeholders have realised the huge potential in the company if the neccesary steps are taken to revive it,” he said.

Agriculture Minister, William Ruto told The Standard in October that the proposal had been presented to Cabinet and was only awaiting a decision.

The process of sourcing for a strategic investor, who is expected to inject funds to drive the restructuring programme, is in top gear.

The funds, together with loans and money generate internally, would be used to expand the company’s production capacity to 10,000 tons a day by 2013.

Though the company has a capacity of crushing 3,000 tonnes of cane per day, the it is doing 2,700 tonnes.

“We want to optimise our operations, modernise our production processes and diversify our products,” noted Odola who was spoke after the launch of its brown sugar product.

He added the company would also upscale its power co-generation from the current 3MW to 35MW to meet its power requirements and sell the excess to the national grid.

Fuel costs account for 15 per cent of the company’s production costs, and its power bill has soared from Sh1.5 million last year to Sh5 million per month.

Outsourcing

The company is also considering outsourcing some of its process like transport and concentrate on its core business of milling.

“We want to move away from nore core functions and focus on what we are best at, which is milling.In this way shall be more productive as we seek to turnaroung the company,” he said.

Courtesy of:www.eastandard.net