UAC of Nigeria Plc (NSE – UACN) recorded a 67% decline in profit after tax from continuing operations despite a 1.7% rise in revenue largely due to 18.0% increase in the operating expense according to the Unaudited Financial Statements for the Period ended 30 September 2020 filed with the Nigerian Stock Exchange.
Revenue in 9M 2020 increased 1.7% YoY to ₦57.8 billion supported by sales growth in the Animal Feeds & Other Edibles segment (+3.6% YoY) which was considered an essential service during restrictions to the movement of people and goods to curtail the spread of COVID-19.
Major components of UAC of Nigeria PLC revenue;
- Animal Feeds and Other Edibles – N36.6 billion, 63.4% of the 9M revenue
- Packaged Food and Beverages – N12.9 billion, 22.1% 0f the 9M revenue
- Paints – N7.139, 12.4% of the 9M revenue
Revenue in Q3 2020 increased 10.5% to ₦21.2 billion from ₦19.2 billion in Q3 2019 as a result of revenue growth across all operating segments (Animal Feeds & Other Edibles +10%, Paints +18%, Packaged Food and Beverages +8%, and Quick Service Restaurants +16%).
Gross profit in 9M 2020 declined 2.3% YoY to ₦11.4 billion as a result of limited sales during the strictest phase of the lockdown (April and May), higher input costs, and distribution expenses. Adjusting for MDS, which has been re-classified as an associate, gross profit increased by 2.5% YoY. The adjusted gross profit margin was 14 bps higher in 9M 2020 at 19.7%.
Gross profit increased 20.1% YoY to ₦4.4 billion in Q3 2020, with gross margin increasing 167 bps to 20.8%.
EBIT was ₦2.0 billion in 9M 2020 compared to ₦4.5 billion in the previous year. Adjusting for non-recurring income from the sale of non-core real estate assets (₦631 million) and the writeback of statute-barred unclaimed dividend (₦206 million), underlying 9M 2020 EBIT declined 45.5% YoY.
EBIT declined 23.7% to ₦1.2 billion in Q3 2020, however, adjusting for non-recurring and non-operating income in Q3 2019 (profit from the sale of non-core real estate +₦631.3 million and writeback of statute-barred unclaimed dividend +₦206.3 million).
The profit before tax margin dropped from 10.6% to 4.3% in 9M 2020.
Profit after Tax from continuing operations was ₦1.5 billion, down 67.0% YoY against ₦4.4 billion in 9M 2019.
The decline in profit from continuing operations is mainly due to the 18% rise in operating expenses buoyed by the 29.6% rise in administrative expense to N5.3 billion and 6.6% rise in selling and distribution expense to N4.5 billion.
Total profit for the period was ₦1.9 billion in 9M 2020, a reversal from the ₦10.3 billion loss reported in 9M 2019 due to the loss of N14.5 billion recorded from discontinued operations in 2019. Earnings per share for 9M 2020 was 47 kobo, up from negative 213 kobo in 9M 2019.
Profit after Tax from continuing operations rose to ₦1.2 billion, up 8.1% YoY against ₦1.1 billion in Q3 2019. A ₦493 million loss from discontinued operations was recognized in Q3 2020 attributable to UPDC versus the ₦14.0 billion loss recorded in Q3 2019. As a result, UAC’s Total profit for the period was ₦743 million in Q3 2020, a reversal from the ₦12.9 billion loss reported in Q3 2019. Earnings per share for the period was 15 kobo, up from negative 274 kobo in Q3 2019.
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Free Cash Flow for the period was ₦1.3 billion in 9M 2020, compared with negative ₦5.2 billion in FY 2019. Free cash flow in 9M 2020 improved significantly on +₦4.7 billion net cash flow generated from operations driven by increased sales and improved working capital management. Free cash flow was also impacted by higher net capital expenditure YoY (+107% increase to ₦3.4 billion in 9M 2019) from investments in production capacity and cold chain distribution for the Packaged Food and Beverages segment.
Annualised Return on Equity (ROE) from continuing operations at the end of September 2020 was 3.5%, up from negative 17.2% as at the same period last year. Annualised Return on Invested Capital (ROIC) was 192bps lower at 2.4% (4.3% in 9M 2019).
The total assets declined by 8.1% to N98.8 billion from N107.6 billion as at 31 December 2019. 61.2% of the total assets are financed by equity (N60.5 billion) while the rest is financed by liability (N38.3 billion).
Real Estate (UPDC) Corporate Action: On 3 August 2020, UAC entered into a binding agreement with Custodian Investment PLC regarding the acquisition of a 51% stake in UPDC. Custodian completed the acquisition of an initial 5.1% stake in UPDC in September 2020 reducing UAC’s stake in UPDC to 88.8%. Upon completion of the second tranche (45.9%), UAC will own a 43% stake in UPDC.
Financial review: UPDC’s 9M 2020 revenue was ₦458 million, 75.8% lower than 9M 2019 as a result of a challenging operating environment exacerbated by the ongoing pandemic. Revenue declined on account of lower sales of properties at ₦138 million compared to 9M 2019 of ₦1.3 billion (-89.6%), lower rental income and management fees at ₦78 million compared to 9M 2019 of ₦105 million (-25.7%).
The segment recorded an operating loss of ₦379 million in 9M 2020, a slight improvement compared to an operating loss of ₦386 million in 9M 2019 due to ongoing cost-saving initiatives (operating expenses declined by 18.6% compared to 9M 2019).
Net finance costs of ₦1.3 billion (-41.1% lower YoY) and provision for First Festival Mall loan guarantee of ₦776 million contributed to UPDC recording a ₦3.4 billion Loss before Tax in 9M 2020, against a ₦14.7 billion Loss before Tax in 9M 2019.
On 26 October 2020, Chemical and Allied Products PLC (CAP) and Portland Paints and Products Nigeria PLC (Portland Paints) announced their intention to merge their respective businesses. The boards and management of CAP and Portland Paints expect the proposed merger to be value accretive to stakeholders of both companies. Completion is subject to regulatory and shareholder approvals.
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 the development of Nigeria for over a century. The company is focused on building its subsidiaries into leaders in their chosen segments.
UAC of Nigeria PLC operates in six segments through the following subsidiary and associate companies:
Animal Feeds and Other Edibles · Grand Cereals Limited (71% ownership) – a leading producer of cereals, edible oils, poultry feed, fish feed, ruminant feed, and dog food. · Livestock Feeds PLC (73% ownership) – produces and distributes animal feeds, 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 Stock Exchange.
- Chemical and Allied Products PLC (52% ownership) – the leading player in the premium paints segment and the sole technology licensee for AkzoNobel’s decorative range in Nigeria. CAP is listed on The NSE.
- Portland Paints and Products Nigeria PLC (85% ownership) – is a distributor for Hempel’s industrial products in Nigeria. It also manufactures and markets decorative and industrial paints under its own brand Sandtex. PPNL is listed on The NSE.
Packaged Food and Beverages
- UAC Foods Limited (51% ownership) – a joint venture business with Tiger Brands and leader in snacks, dairy, and spring water categories. It owns iconic brands including Gala, Funtime, Supreme, and SWAN Spring Water. Quick Service Restaurants
- UAC Restaurants Limited (51% ownership) – a joint venture with Famous Brands, manages the network of Quick Service Restaurants across Nigeria under Mr. Bigg’s and Debonairs Pizza brands.
- MDS Logistics Limited (43% ownership) – the leading logistics provider in Nigeria, offers the complete suite of outbound logistics and supply chain services including Warehousing, Haulage, and Distribution. Real Estate
- UACN Property Development Company PLC (89% ownership) – a foremost property development and management company quoted on The NSE. Upon completion of the announced sale to Custodian Investment PLC, UAC will own a 43% stake in UPDC.
At the close of trading on Friday, the equity price of UAC of Nigeria PLC stood at N7.8 per share, having gained 6.85%. YTD the share price is down by 9.30% while in 3 years and 5 years it has lost 58.95% and 73.20% of its value respectively.
By; Ifunanya Ikueze