UAC Reports 41.7% Drop in Profit to ₦669M in Q1 2021

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UAC of Nigeria PLC (UAC) announced its unaudited results for the quarter ended 31 March 2021.

Highlights

  • Revenue 13% ahead of Q1 2020 at ₦22.0 billion, driven by sales growth in the Animal Feeds & Other Edibles segment and the Packaged Food & Beverages segment.
  • Gross margin 344 bps lower due to rising raw material prices and supply chain disruptions.
  • Operating profit 1% higher at ₦1.1 billion, supported by revenue growth and cost management efforts.
  • Net finance income 77% lower at ₦109 million on account of lower average yields year on year.
  • Profit after tax from continuing operations was ₦669 million, down 42% from ₦1.1 billion in Q1 2020.
  • Earnings per share from continuing operations was 12 kobo, 56% lower than 27 kobo recorded in Q1 2020.
  • In Q1 2020, UAC recorded ₦717 million from discontinued operations which impacts quarter on quarter comparison.

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

“Growth across our operating platforms translated to 13% revenue growth. Operational improvement initiatives resulted in a 6% reduction in operating expenses which supported marginal operating profit growth in spite of a 5% decline in gross profit.”

“Raw material cost escalation remains a key concern and as such we are carefully assessing pricing. Our Paints business suffered production disruptions which impacted performance and our interest income declined materially in light of the low interest rate environment.”

“These together with losses from our associates UPDC and MDS resulted in a 42% decline in profit from continuing operations. Performance in Q1 2020, being the comparative quarter last year, benefited from N717 million in exceptional income from discontinued operations relating to net gains from the divestment of a stake in MDS which impacts quarter on quarter comparisons.”

Group Performance and Financial Review: Q1 2021

Revenue in Q1 2021 increased 12.7% YoY to ₦22.0 billion. Revenue growth wassupported by sales growth in all operating segments apart from Paints. Animal Feeds & Other Edibles segment (+12.7% YoY) driven largely by price increases in reaction to rising raw material costs.

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Packaged Food & Beverages segment (+25.1% YoY) and the Quick Service Restaurant segment (+21.0% YoY). Revenue in the Paints segment was 4.9% lower YoY; lower sales as a result of supply chain disruptions and availability of key raw materials which impacted production in the first quarter of the year.

Gross profit in Q1 2021 declined 5.2% YoY to ₦4.0 billion on account of currency devaluation and supply chain disruptions which resulted in higher raw material prices in the Paint segment, as well as higher raw material prices in the Packaged Food and Beverages segment. Animal Feeds & Other Edibles reported margin improvements on account of price increases in response to the rising price of raw materials, as well as a decrease in operating expenses.

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Operating Profit was ₦1.14 billion in Q1 2021, a marginal increase of 0.8% from ₦1.13 billion in Q1 2020. In addition to revenue growth, operating profit was supported by cost management efforts. Operating expenses in Q1 2021 were 6.1% lower than the same period last year.

Profit after Tax from continuing operations was ₦669 million, down 41.7% YoY against ₦1.1 billion in Q1 2020. Decline was attributable to 76.9% decline in net finance income and share of loss from associates (UPDC and MDS) in Q1 2021, a reversal from share of profit from associates in Q1 2020.

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Total profit for the period was ₦669 million in Q1 2021, a 64.1% decline from the ₦1.9 billion reported in Q1 2020. Variance is due to profit from discontinued operations which was recognised in Q1 2020.

Earnings per share from continuing operations for Q1 2021 was 12 kobo, a decline of 56% from 27 kobo in Q1 2020.

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