2022 financial year: UAC of Nigeria posts N2.69 billion loss

UAC of Nigeria Plc (NGX: UACN) has posted a loss of N4.67bn after tax from continuing operations for the 2022 financial year.

The loss contained in its unaudited condensed consolidated financial statements for the 12 month period ended 31 December 2022 seen by Investogist, is a 280.6% reversal from the N2.58bn profit it reported in the preceding year.

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Commenting on the results, Group Managing Director, Fola Aiyesimoju, stated:

“Our profitability was negatively impacted by losses in our animal feeds segment, which more than offset contributions from other segments.

Our businesses grappled with escalating costs particularly energy, distribution, and finance costs which negatively impacted performance.

Tighter working capital management resulted in N10.7bn free cash flow across the UAC Group. We will execute growth initiatives with caution until macroeconomic conditions improve.”

Highlights

Revenue of ₦109 billion, 8% higher as a result of topline growth in all segments apart from Packaged Food and Beverages(-1.7%). Animal Feeds and Other Edibles (+5.0%), Paints (+25.1%), and Quick Service Restaurants (+39.3%).
Gross profit 13% lower at ₦15 billion impacted by rising input costs; Gross margin compressed 337 bps to 13.9%.
Operating loss of ₦1.3 billion compared to operating profit of ₦5.0 billion in 2021. Performance was impacted by:
- ₦3.6bn operating loss from the Animal Feeds and Other Edibles segment which more than offset the ₦3bn
  operating profit from the Paints segment.
- Significantly higher electricity and power (+₦2bn) and distribution costs (+₦2bn) across the UAC group.
- Unrealised fair value loss of ₦676mn recognized on investment properties at the holding company.
- In 2021, the holding company recognized a one-off dividend as well as a fair value gain post unbundling the UPDC Real Estate Investment Trust (“UPDC REIT”) (₦569mn) which impacts year on year comparison.
Loss before tax of ₦3.4 billion. Profitability was further impacted by finance costs (500bps interest rate increase YoY).

Strategic Initiatives

Completed groupwide ERP implementation to SAP S/4 Hana (a ₦2.5bn investment) focused on enhancing controls.
₦2.8bn invested to increase SWAN spring water capacity 3x.
Invested ₦1.2bn expanding the Mr Bigg’s and Debonairs Pizza restaurant network.

Significant transactions / new developments

The following are responsible for key differences when comparing performance in FY 2022 compared to FY 2021: In September 2021, UAC acquired Tiger Brands Limited’s minority shareholding (49%) in UAC Foods Limited (UFL) for a cash consideration of N3.92billion. Consequently, UFL is now a wholly owned subsidiary of UAC and the total profit attributable to equity holders of UFL for FY 2022 was recognised by UAC versus FY 2021 where 51% of UFL’s profit was recognised for 8 months and 100% of its profit was recognised for 4 months.
In June 2022, UAC increased its stake in Chemical and Allied Products PLC (CAP PLC) by 1.31% to 57.85%.
UAC’s issued share capital increased by 44,835,076 ordinary shares to 2,926,131,656 as a result of the scrip dividend.

Group Performance and Financial Review: FY 2022

Revenue in FY 2022 increased 8% YoY to ₦109 billion supported by sales growth in the Animal Feeds and Other Edibles,
Paints and Quick Service Restaurants segments. Animal Feeds and Other Edibles segment (+5% YoY) driven by price
increases taken to offset rising raw material costs, Paints segment (+25% YoY) on account of price increases and retail
expansion, and the Quick Service Restaurants segment (+39% YoY) driven by increase in company-owned restaurants
(corporate stores). The Packaged Food and Beverages segment revenue declined 1.7% YoY, impacted by lower volumes
and supply constraints.

Gross profit in FY 2022 was 13.2% lower YoY to ₦15.2 billion and gross profit margin contracted by 337 basis points to
13.9%. Margin contraction was largely a result of rising raw material costs across all businesses.

Operating loss was ₦1.3 billion in FY 2022 (2021: operating profit of ₦5bn). The decrease is attributable to the poor performance in our Animal Feeds and Other Edibles businesses, as well as increased operating expenses across all businesses particularly power costs and distribution costs. In 2021, the holding company recognized a one-off dividend as well as a fair value gain post unbundling the UPDC REIT (totalling ₦569mn) which impacts year on year comparison.

The Group recorded higher net finance costs on account of higher interest rates, impacted by the 400bps increase in the monetary policy rate, and increased short-term borrowings in the Animal Feeds and Other Edibles, Paints and Packaged Food and Beverages segments.

Share of profit from associate companies (UPDC and MDS Logistics) was ₦105 million, compared to the share of loss from associate companies of ₦895 million in FY 2021.

Loss before tax was ₦3.4 billion compared to ₦4.1 billion profit before tax recorded in FY 2021.

Loss after tax from continuing operations was ₦4.7 billion compared to a profit after tax of ₦2.6 billion in FY 2021. Total loss for the period was ₦4.7 billion in FY 2022 impacted by a ₦26 million expense incurred as part of the voluntary winding up process of UNICO CPFA Limited, a discontinued operation.

Loss per share was 121 kobo in FY 2022 compared to 63 Kobo earnings per share recorded in FY 2021.

Free Cash Flow for the period was ₦10.7 billion in FY 2022, compared with negative ₦19.1 billion in December 2021, due to improved working capital management in FY 2022.

Return on Equity from continuing operations at for FY 2022 was a negative 8.5%, compared to a positive 3.9% in FY 2021.

Return on Invested Capital (ROIC) was 1,057 basis points lower at a negative 2.6% (FY 2021: positive 8.0%).

About UAC

UAC of Nigeria PLC (UAC) is a holding company with subsidiary and associate companies operating in the Animal Feeds and Other Edibles; Paints; Packaged Food and Beverages; Quick Service Restaurants; Logistics and Real Estate segments.

UAC has played a prominent role in Nigeria’s development for over a century. The company is focused on building its businesses into leaders in their chosen segments.

UAC has four operating platforms;

Animal Feeds and Other Edibles

- Grand Cereals Limited (71.4% ownership) – a leading producer of cereals, edible oils, poultry feed, fish feed, ruminant feed and dog food. The company has production and distribution facilities in Northern and South Eastern Nigeria. It owns a portfolio of strong brands including Grand, Vital, and BestMate.
- Livestock Feeds PLC (73.3% ownership) – produces and distributes poultry feed, feed concentrates and full fat soya. The company recently expanded its offering to include veterinary drugs. Livestock Feeds’ geographic strength is in South West Nigeria. The company is listed on The Nigerian Exchange (“NGX”).

Paints

- - Chemical and Allied Products PLC (57.9% ownership) – the leading paints and coatings company in Nigeria with a diversified product range spanning decorative and marine segments. CAP PLC is the sole technology licensee for AkzoNobel’s decorative range in Nigeria and is also a distributor for Hempel’s industrial products. The company’s brand portfolio is comprised of Dulux, Sandtex, Caplux, and Hempel. The company benefits from a unique distribution model – franchised retail outlets, which it pioneered in Nigeria’s paint industry. CAP PLC is listed on NGX.

Packaged Food and Beverages

UAC Foods Limited (100% ownership) – a leading player in the packaged food and beverages industry with three
distinct business segments – snacks, ice-cream, and spring water. It owns iconic brands such as Gala, SWAN Spring Water, Supreme and Funtime.

Quick Service Restaurants

UAC Restaurants Limited (51% ownership) – a joint venture with Famous Brands, manages the network of Quick Service Restaurants across Nigeria under the Mr Bigg’s and Debonairs Pizza brands.

UAC owns minority stakes in Logistics and Real Estate businesses;

Logistics

MDS Logistics Limited (43% ownership) – a leading logistics provider in Nigeria, offers the complete suite of outbound logistics and supply chain services including Warehousing, Haulage and Distribution.

Real Estate