UACN Plc reported a 13% YoY revenue growth from N19.55bn in Q1 2020 to N22.02bn in Q1 2021. The Group’s revenue growth was majorly driven by the Animal Feeds & Other Edibles business segment, and the Packaged Foods & Beverages segment.
Operating profit grew marginally by 1% YoY from N1.13bn to N1.14bn. However, profit before tax dipped by 38% YoY from N1.67bn in Q1 2020 to N1.03bn in Q1 2021. Net profit declined by 31% YoY from N1.15bn in Q1 2020 to N791mn in Q1 2021.
Sustained Growth in Animal Feeds Business Drive Topline Growth
The Animal Feeds & Other Edibles business segment recorded a 14% YoY revenue growth from N11.70bn in Q1 2020 to N13.39bn in Q1 2021, attributed to price increases implemented across all categories, to offset rising input costs. The Animal Feeds & Other Edibles segment accounted for 60% of the Group’s total revenue in Q1 2021.
Packaged Foods Topline Grows on the back of Increased Market Penetration
Revenue from the Packaged Foods & Beverages rose by 22% YoY from N4.72bn in Q1 2020 to N5.89bn in Q1 2021. The revenue growth was driven by improved demand amid economic recovery from the Coronavirus pandemic.
Also, the management’s efforts towards market penetration yielded results during the period. The resulting increase in market share supported the topline growth in this segment.
The Packaged Foods & Beverages segment accounted for 25% of the Group’s total revenue in Q1 2021.
Continued Expansion Drive in the QSR Segment
Based on the strategic plans of the management to drive value in the Quick Service Restaurant business, revenue grew by 21% YoY from N376mn in Q1 2020 to N454mn in Q1 2021.
The Group’s strategy to drive growth and value in this segment include the opening of new corporate-owned stores and leveraging on its brand perception among consumers. New stores were opened during the quarter, thus spurring the double-digit topline growth.
Macroeconomic Pressures Weigh On Paints Business
The Paints segment recorded an 11% YoY revenue decline from N2.70bn in Q1 2020 to N2.21bn in Q1 2021, due to lower production activities during the quarter. Raw materials were scarce during the quarter, resulting from a significantly higher demand relative to supply as major economies rebounded from the Coronavirus pandemic. The scarce raw materials also led to higher costs incurred on raw input, which led to a 49% YoY profit before tax declined in the Paints segment.
Profit Declines Despite Cost Optimisation Efforts
Given an 18% YoY cost of sales growth (largely driven by costs incurred in the Paints business) relative to a 13% YoY total revenue growth, the Group’s gross profit declined by 3% YoY from N4.23bn in Q1 2020 to N4.01bn in Q1 2021.
Meanwhile, operating expense also declined by 5% YoY from N3.19bn in Q1 2020 to N3.04bn in Q1 2021, driven by a 12% reduction in selling and distribution expenses.
The 5% decline in operating expense supported operating income, as it grew by 1% YoY from N1.13bn to N1.14bn. However, net finance income declined by 77% YoY from N470mn in Q1 2020 to N109mn in Q1 2021.
The decline in net finance income was due to lower average yields on financial assets, given the low-interest-rate environment in the fixed income market. Consequent to the steep decline in net finance income, profit before tax declined by 38% YoY from N1.67bn in Q1 2020 to N1.03bn in Q1 2021. The effective tax rate in Q1 2021 was lower (23% versus 31% in Q1 2020).
Hence, the decline in profit after was 31% YoY from N1.15bn in Q1 2020 to N791mn in Q1 2021.
