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Wednesday, February 8, 2023

UACN: Earnings plunge on higher operating expense

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UAC of Nigeria Plc (UACN) has announced a 41.6 percent contraction in profit from continuing operations to N1.1 billion in its Q1’20 unaudited results. The numbers also suggest that free cash flow slightly weakened from full year 2019 levels.

Revenue declined by 2.9% YoY to N19.5 billion in Q1’20, driven by the reclassification of MDS as an associate. Notably, UACN divested control of MDS through the sale of 8.0% equity interest in the company (MDS) to Imperial Capital Limited in H2’19. Thus, UACN accounted for its investment in MDS using one-line consolidation (i.e. under “share of profit/loss from associates”). Ex MDS reclassification, revenue would have been 4.7% higher YoY in Q1’20

According to management, improved product availability and higher volume growth in poultry feeds respectively supported revenue in the Packaged Food & Beverages (+9.8% YoY) and Animal Feeds & Other Edibles (+2.4% YoY) segments in Q1, 2020.

Operating profit declined by 34.5% YoY due to knock-on effect of weaker top-line and a 14.0% YoY increase in operating expense to N3.2 billion. The increase in operating expense was driven by investments in marketing and distribution in the Animal Feeds & Other Edibles, Packaged Food & Beverages, and Paints businesses. UACN also strengthened management teams across portfolio companies

Free cash flow weakened to negative N5.6 billion in Q1’20 from negative N5.2 billion in FY’19, on account of a N2.0 billion capital expenditure in the Packaged Food & Beverages segment and inventory purchases in the Animal Feeds & Other Edibles segment

UACN will have a teleconference call to jointly discuss the Q1’20 results and the audited FY’19 results on Thursday, 07 May 2020 at 3pm West African Time (WAT)

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