UACN’s profit drops by 52% to N2.5b in Q3

UAC of Nigeria (UACN) Plc recorded marginal growth in sales but profit before tax dropped by 51.2 per cent to N2.5 billion in the third quarter.

The interim report and accounts for the nine-month period ended September 30, 2020 showed that underlying profit before tax dropped by 52.1 per cent to N2.5 billion in third quarter 2020. The conglomerate attributed the decline to lower operating profit and 76.7 per cent drop in net finance income due to lower investment income yields compared to the previous year.

Turnover rose by 1.7 per cent to N57.8 billion supported by sales growth in the animal feeds and other edibles segment, which was considered an essential service during restrictions to movement of people and goods to curtail the spread of COVID-19.

Gross profit however, dropped marginally by 2.3 per cent N11.4 billion. The company attributed this to limited sales during the strictest phase of the lockdown between April and May, higher input costs, and distribution expenses. Adjusted for MDS, which has been re-classified as an associate, gross profit showed increase of 2.5 per cent. Adjusted gross profit margin was also 14 basis points higher in third quarter 2020 at 19.7 per cent.

Earnings before interest and taxes declined from N4.5 billion in third quarter 2019 to N2.0 billion in third quarter 2020. This was impacted by reduced sales in April and May, input cost escalation partly attributable to foreign exchange devaluation, supply chain disruptions, and rising employee costs on account of initiatives to strengthen management teams across the group.

Profit after tax from continuing operations also declined by 67 per cent from N4.4 billion in third quarter 2019 to N1.5 billion in third quarter 2020. Total profit for the period stood at N1.9 billion in 2020, a recovery from the N10.3 billion loss reported in corresponding period of 2019. Earnings per share for thus increased from loss of N2.13 in third quarter 2019 to positive earnings of 47 kobo in third quarter 2020.

The report showed that free cash flow improved considerably during the third quarter 2020 to N1.3 billion compared with negative N5.2 billion in the full-year ended December 2019. According to the company, free cash flow in third quarter 2020 was boosted by more than N4.7 billion net cash flow generated from operations driven by increased sales and improved working capital management.

Annualised return on equity (ROE) from continuing operations at the end of September 2020 was 3.5 per cent, up from negative 17.2 per cent in comparable period of 2019. Annualised return on invested capital (ROIC) however dropped from 4.3 per cent in third quarter 2019 to 2.4 per cent in third quarter 2020.

Group Managing Director, UAC of Nigeria (UACN) Plc, Folasope Aiyesimoju said the group’s strategy of investing for growth yielded encouraging results in the third quarter with consolidated revenues, gross profit and operating profit growing 11 per cent, 20 per cent and 65 per cent respectively.

He noted that the company recorded topline growth across all its continued operations during the period.

“We are focused on strategies to mitigate the impact of a challenging foreign exchange environment and managing the recent trend of cost escalation. We expect to complete the sale of a controlling interest in UACN Property Development Company Plc to Custodian Investment Plc and are supportive of the recently announced merger between Chemical and Allied Products Plc and Portland Paints and Products Nigeria Plc,” Aiyesimoju said.