Kshs 000's
|
FY 2009
|
FY 2010
|
FY 2011
|
Revenue
|
11,791,708
|
15,617,738
|
15,795,300
|
Gross profit
|
3,322,539
|
4,884,538
|
5,446,730
|
Gross Margin
|
28%
|
31%
|
34%
|
Profit before tax
|
1,193,161
|
2,179,874
|
2,646,575
|
Net Margin
|
10%
|
14%
|
17%
|
Profit after tax
|
1,609,972
|
1,572,383
|
1,933,225
|
Earnings per share
|
1.05
|
1.03
|
1.26
|
Dividends per share
|
0.40
|
0.40
|
0.50
|
Change from prior year
|
FY 2009
|
FY 2010
|
FY 2011
|
Revenue
|
-1.36%
|
32.45%
|
1.14%
|
Gross profit
|
-22.11%
|
47.01%
|
11.51%
|
Profit before tax
|
-24.92%
|
82.70%
|
21.41%
|
Profit after tax
|
32.63%
|
-2.33%
|
22.95%
|
Earnings per share
|
32.91%
|
-1.90%
|
22.33%
|
Dividends per share
|
0.00%
|
0.00%
|
25.00%
|
Mumias Sugar Company revenues grew by 1.14% to Kshs 15.8 in 2011 from Kshs 15.6 reported in 2010.
Profit after tax rose by 22.95% to Kshs. 1.933 Billion.
The company’s performance has been improving over the last two financial years. While revenue growth between 2011 and 2010 was minimal the gross profit margin improved to 34% from 31% in 2010. The margin improvement reflects greater pricing power enjoyed by the company.
The steep increase in profit before tax indicates that Mumias Sugar is containing overhead costs. The net profit margin leaped from 10% in 2009 to 17% in 2011.
Mumias sugar has raised dividends by 25% to 50 cents a share. At the current share price of Kshs 6.10 (as of September 7, 2011), the dividend translates to a yield 8.20%.
The PE ratio is at an undemanding 4.84.
Outlook:
Global sugar prices are close to all time highs (currently USD 750 per tonne). Sugar prices are expected to remain at this elevated level in the medium term. The high price, if maintained, should shield the Kenyan sugar industry from the threat of cheap sugar imports. Lower cost sugar producers in the COMESA bloc would prefer to export to other world markets should the high prices be sustained beyond January 2012 when restrictions on selling to the Kenyan market are lifted.
Mumias Sugar has diversification strategies in place to mitigate the potential losses from cheaper sugar in the region come 2012. Mumias already produces electricity which fetched Kshs 353 Million in net revenue in 2011. A water bottling plant is expected to be commissioned in September 30, 2011 and an Ethanol distillery with a 22 Million litre annual capacity by December 31, 2011.
It is difficult to predict at this stage whether Mumias will withstand the potential influx of cheap sugar imports from 2012 onwards. The share is inexpensive on a PE, and price to book value basis (market capitalisation of Kshs 9 Billion versus shareholder’s equity of Kshs 14 Billion), however the significant competitive threat and uncertain earnings from its new product lines make it a speculative buy.
