United Africa Company of Nigeria Plc Q3’20 unaudited results – UACN returns to profitability in Q3’20

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UAC of Nigeria Plc (UACN: TP: N8.26; c.5.9% upside to market) has reported a return to profitability in its recently released third-quarter earnings. However, passthrough from the second-quarter loss resulted in a 67.0% YoY plunge in profits from continuing operations to N1.5 billion over the first nine months of the year.

United Africa Company of Nigeria Plc Q3'20 unaudited results - UACN returns to profitability in Q3’20
United Africa Company of Nigeria Plc Q3’20 unaudited results – UACN returns to profitability in Q3’20 – www,brandspurng.com

Highlights of the third-quarter results:
  • Revenue grew by 10.5% YoY to N21.2 billion, aided by growths across all operating segments (Animal Feeds & Other Edibles +10.0%; Paints +18.0%; Packaged Food and Beverages +8.0%; and Quick Service Restaurants +16.0%). Management noted the positive impacts of volume growths in fish feed and cereals as well as price increases in a few categories on Animal Feeds & Other Edibles in the quarter. Other notable growth drivers in the quarter included the lifting of COVID-19 restrictions (Paints) and the launch of company-owned restaurants (QSR)
  • Knock-on effect of price increases and a focus on higher-margin categories in the Animal Feeds & Other Edibles segment drove gross margin 1.7ppts higher YoY to 20.8%. These higher-margin categories included oils and cereals such as cornflakes
  • However, operating profit margin declined by 2.5ppts YoY to 5.6% on the impact of the high base effect from Q3’19 that was stoked by one-off entries. Specifically, the previous year’s numbers were flattered by the N631 million proceed from the sale of non-core real estate assets and writeback of a statute-barred unclaimed dividend of N206.3 million. Excluding these one-off entries, the operating profit margin would have been higher by 1.9ppts YoY
  • Overall, profit after tax from continuing operations rose by 8.2% YoY to N1.2 billion. There was however a 493 million loss from discontinued operations from UPDC (vs N14.0 billion loss in the corresponding period of 2019). This loss from discontinued operations moderated total Q3’20 profit to N743 million
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Other highlights:
  • Despite the Q3’20 recovery and potential festive-induced demand in the ongoing quarter, UACN looks on course to underperform our full-year profit forecast of N3.3 billion going by the contributions of the final quarter numbers in recent years
  • Nonetheless, the company’s increasing net cash position is supportive from a valuation standpoint. Cash position is also likely to be improved by the second tranche flows of the UPDC/Custodian deal. Net Debt to EBITDA ratio stood at negative 5.1x in 9M’20 compared to negative 2.2x in 9M’19
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United Africa Company of Nigeria Plc Q3'20 unaudited results - UACN returns to profitability in Q3’20 - Brand SpurUnited Africa Company of Nigeria Plc Q3'20 unaudited results - UACN returns to profitability in Q3’20 - Brand Spur

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United Africa Company of Nigeria Plc Q3'20 unaudited results - UACN returns to profitability in Q3’20 - Brand SpurUnited Africa Company of Nigeria Plc Q3'20 unaudited results - UACN returns to profitability in Q3’20 - Brand Spur

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