PRESS RELEASE

CHEMELIL SUGAR COMPANY IS A GOING CONCERN

Our attention has been drawn to a number of unfounded allegations against Chemelil Sugar Company to what we believe is an orchestrated campaign to discredit the Board and Management. The allegations which have been raised through a section of the Media are intended to create an impression that Chemelil is not in operation.

Contrary to such Media reports, the Board of Directors wishes to state that Chemelil Sugar Company is operating normally and remains a going concern, and is the least indebted of the government owned sugar firms because it strives to meet its obligations from internally generated revenue. The Board has full confidence in the Managing Director and will continue to support Management. Regarding specific allegations, our response is as follows:

1. Payment to Farmers on delivered cane

The Farmer still remains our primary stakeholder and the Company has ensured that it meets its obligations through payments for cane delivered. In the period October 2008 to January 2010, Chemelil Sugar Company paid out to farmers Kshs 1.78 billion. This has been achieved despite the fact that the current Management inherited a number of liabilities including Kshs 43 million Tax on sugar for exports that had to be paid to Kenya Revenue Authority.

It is noteworthy that every possible effort has been made to ensure that we amicably co-exist with our Farmers, with the Company undertaking initiatives to participate in the crucial cane development role both within Nucleus Estate and Outgrower farms.

Within the period 2009/2010, area under cane development went up by 20%. Over-mature cane which had been a nagging issue over the years, has all been milled.

Alongside this, the Company has sourced and issued to cane farmers fertiliser stock at a subsidized rate for cane development.

This has been done in demonstration of our good relationship with the farming community, which the Managing Director has emphasized and concretized through the farmer-outreach-programme he has been undertaking.

Within a short stint, Chemelil Management has had a number of meetings with cane farmers of Nyangoma, Chemase, and Achego areas to discuss issues of mutual concern.

2. Industrial Relations and Workers Issues:

Strike allegations

Indeed, Chemelil Management acknowledges that there was an externally instigated attempt to influence workers to go on strike, which was intended to coincide with an abortive meeting whose intentions were to disrupt operations within the Company. Our employees were wise enough to read the hidden agenda of the organisers of the abortive meeting and the strike, and declined to participate. These same organisers after failing in their hell-bent intentions, are still going about the Media with pilfered company information pursuing their evil plans. We urge the Farmers and the public to ignore them. Meanwhile, we urge the police to rein in on them for malicious propaganda.

Dismissal of Workers

The perpetrators are also alleging that the Company has dismissed workers on tribal grounds.

The Board wishes to note that 37 employees were dismissed after they were found to possess fake certificates. Authentication of the certificates was conducted by the Government’s Directorate of Industrial Training who went through all the certificates in an exercise that Chemelil management took up after the staff themselves raised the concern.

Another group of six senior managers were dismissed by the Board in late 2008 and early 2009 after numerous issues on corporate governance. At no point were these actions based on tribal consideration. Some of these issues are still a subject of the court, hence our inappropriateness to discuss through the press.

3. Sale of Sugar to SEO and SONS

It is unfortunate that an internal document was passed over to the Media by insiders in collusion with other people outside the Company, all intended to pursue a personal vendetta to Management. Management wishes to state that the Customer, SEO & SONS had a valid agreement of February 2009 which clearly spelt out the terms of sugar sale.

The company is in the process of clearing the balance it owes the Customer with due regard to the terms of the contract.

Also, the Board has instituted a forensic audit for the Company accounts in a housekeeping exercise to carry out an audit of sugar transactions for the years 2005 to-date. The exercise to identify an external firm is already underway.

4. Performance of the Factory

The Company took a bold step to conduct a comprehensive Factory maintenance in September 2009 after a lapse of over 5 years. A loan of Kshs 260 million was sourced from Kenya Sugar Board for the purpose including other internally generated funds for the annual maintenance.

Since maintenance, the production has improved with the Factory Time Efficiency (FTE) going up by 36%, Throughput went up by 36% Extraction is up at 87% as at the week ending 14th March 2010 and conversion of cane to sugar (TC/TS) recorded the best value at 11.65 during the same week.

With this level of improvement, we are now looking forward to serving the farmer more efficiently and to improve on all our operational areas.

5. Conclusion

The Company is committed to upholding good corporate governance and good management practices in its operations. Chemelil Sugar will continue to undertake its corporate social responsibility including supporting education through our Sugar primary school and the Academy, (the latter of which attained an impressive position 25 nationally), support health through our Health centre which serves company employees and the farming community, and nurturing youthful sporting talent through our Football team which participates in Kenya’s premier league.

We urge all our stakeholders to continue supporting the company as it continuously improves in its performance.

Dr. Simeon Mining
Chairman, Board of Directors,
CHEMELIL SUGAR COMPANY