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Sunday, March 26, 2023

UPDC Swallowed by its Own Expenses as Losses Pile

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UACN Property Development Company (UPDC) has been swallowed by total operating costs that are much higher than revenue it generates, which underscores the harsh operating environment sector players operate in.

The company has been recording recurring losses since 2017, while revenues have been deteriorating, and the broader implications is that shareholders will not be paid dividends since entities often only make such distributions to their owners from profit.

For the first nine months through September 2021, UACN Property Development Company (UPDC) posted a loss after tax of N1.18 billion from a loss of N3.37 billion the previous year.

It incurred N1.13 billion in total operating expenses, which is 1.81 times revenue for the period, according to MoneyCentral calculations. Total operating expenses increased by 24.14 percent to N1.13 billion in June 2021 from N897.23 million the previous year.

The chart shows the last time the company recorded a profit was in 2016 when the total cost per sales was low.

Analysts say the lackluster performance can be attributed to weak demand for durable goods, particularly for low- and- middle-income-earners who have seen inflationary pressures steal their ways.

However, analysts at Cordros Capital are of the opinion that the growing demand for rented apartments, among the low -and-middle-income earners, would stimulate the demand for rented residential.

“We believe the reduction in the cost of credit, triggered by CBN’s unorthodox policies (which have also impacted mortgage costs positively), may encourage the development of commercial properties. Properties,” said the analysts.

“We also believe the cheaper credit will spur demand from the upper echelons of middle-class consumers who currently opt for expensive rental payments,”

There are growing concerns about rising cost of building materials as scarcity of foreign currency continues to undermine growth.

The government has to formulate policies that will unlock the potentials in the economy and attract foreign direct investment needed to spur job creation and accelerate real estate activities.

Affordability means a very big issue as people will buy properties when they are employed or their businesses are booming.

Nigeria’s unemployment rate rose to 33.30 in the three months to December 2020, the second highest on the global list. That’s up from 27.10 percent in the second quarter of 2020, according to recent data from the National Bureau of Statistics (NBS).

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