The KCB Group has terminated all Mumias Sugar Company employee contracts backdating the implementation of the layoffs to September 20.
In a press statement issued earlier on Tuesday, KCB’s appointed receiver for the crisis-strapped miller Ponangipalli Rao says the temporary hire of new staff is expected to hold until the resumption of the miller’s operations.
“The Receiver shall engage the services of an employee on a temporary basis on mutually agreeable terms until when the operations resume,” reads part of the notice.
Nevertheless, Mr. Rao has insisted the new hiring will give priority to past employees.
Layoffs at the debt ridden miller come slightly over a month since KCB’s takeover of the company operations on September 20 following the execution of a lender’s agreement deed.
The directive is expected to touch on 732 employees comprised of 433 permanent staff and 319 contracted workers as per the firm’s disclosure at September 30, 2019.
The firm long-documented woes have ratcheted up into a crisis in recent years with the company facing heightened demands from its shareholders and lenders in addition to an escalation of litigation.
Mumias Sugar last full financial disclosure in 2018 exacerbated the miller’s distress as the company’s net loss after tax expanded to Ksh.15.1 billion from Ksh.6.8 billion in June 2017.
In its annual report, the company’s auditor raised concern on the company’s continuity highlighting the expanded outstrip of current liabilities and current assets to Ksh.21 billion.
Further to the material concern is the weighted credit risk on the firm’s operations which saw the company’s largest customer in 2018 carry 21 percent of the net miller’s sales.
At the same time, the firm faced Ksh.12.2 billion in short term debt maturities of up to 12 months as at the end of June 2018.
Mumias Sugar Company owes its lenders an estimated Ksh.12.6 billion in outstanding credit including Eco Bank and the Kenya Sugar Board.
According to a recent report by the Kakamega County, the miller requires a minimum Ksh.5 billion to resume operations with the unit seeking for a strategic investor to input the required working capital.
Further to the turnaround, the County has resolved to curve out a piece of the company by having the national government relinquish part of its 20 percent stake in the miller.
Kenyan Business Feed is the top Kenyan Business Blog. We share news from Kenya and across the region. To contact us with any alert, please email us to [email protected]