UAC of Nigeria Plc has announced its unaudited results for the year ending December 31, 2022. The company reported an operating loss of N1.3 billion compared to an operating profit of N5billion in 2021. It reported a loss before tax (LBT) of N3.4 billion in FY’22.
UACN said its performance was impacted by: N3.6billion operating loss from the Animal Feeds and Other Edibles segment which more than offset the N3billion operating profit from the Paints segment. At N9.55kobo it closed on Monday January 30, UACN share price has decreased this year by 6percent underperforming the Nigerian Exchange Limited (NGX) All Share Index (ASI) which rose same period by 3.72percent.
The company reported revenue of N109 billion, 8percent higher as a result of top-line growth in all segments apart from Packaged Food and Beverages (-1.7percent).
Animal Feeds and Other Edibles (+5percent), Paints (+25.1percent), and Quick Service Restaurants (+39.3percent). Gross profit came 13 percent lower at N15 billion impacted by rising input costs; Gross margin compressed 337 basis points (bps) to 13.9percent.
Others are: significantly higher electricity and power (+N2billion) and distribution costs (+N2billion) across the UAC group; unrealised fair value loss of N676million recognised on investment properties at the holding company.
Commenting on the results, Fola Aiyesimoju, Group Managing Director, UACN stated: “Our profitability was negatively impacted by losses in our animal feeds segment, which more than offset contributions from other segments. Our businesses grappled with escalating costs particularly energy, distribution, and finance costs which negatively impacted performance. Tighter working capital management resulted in N10.7billion free cash flow across the UAC Group. We will execute growth initiatives with caution until macroeconomic conditions improve.”
In 2021, the holding company recognised a one-off dividend as well as a fair value gain post unbundling the UPDC; Real Estate Investment Trust (UPDC REIT) (N569million) which impacts year-on-year comparison. Profitability was further impacted by finance costs {500 basis points (bps) interest rate increase year-on-year (YoY)}.
Strategic Initiatives
UACN completed groupwide ERP implementation to SAP S/4 Hana (a N2.5billion investment) focused on enhancing controls. Invested N2.8billion to increase SWAN spring water capacity 3x. Invested N1.2billion expanding the Mr Bigg’s and Debonairs Pizza restaurant network.
Significant transactions / new developments
The following are responsible for key differences when comparing performance in FY 2022 compared to FY 2021: In September 2021, UAC acquired Tiger Brands Limited’s minority shareholding (49percent) in UAC Foods Limited (UFL) for a cash consideration of N3.92billion. Consequently, UFL is now a wholly owned subsidiary of UAC and the total profit attributable to equity holders of UFL for FY 2022 was recognised by UAC versus FY 2021 where 51percent of UFL’s profit was recognised for 8 months and 100percent of its profit was recognised for 4 months.
In June 2022, UAC increased its stake in Chemical and Allied Products PLC (CAP PLC) by 1.31percent to 57.85percent. UAC’s issued share capital increased by 44,835,076 ordinary shares to 2,926,131,656 as a result of the scrip dividend.
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Group performance and financial review: FY 2022
Revenue in FY 2022 increased 8percent YoY to N109 billion supported by sales growth in the Animal Feeds and Other Edibles, Paints and Quick Service Restaurants segments. Animal Feeds and Other Edibles segment (+5percent YoY) driven by price increases taken to offset rising raw material costs, Paints segment (+25percent YoY) on account of price increases and retail expansion, and the Quick Service Restaurants segment (+39percent YoY) driven by increase in company-owned restaurants (corporate stores). The Packaged Food and Beverages segment revenue declined 1.7percent YoY, impacted by lower volumes and supply constraints.
Gross profit in FY 2022 was 13.2percent lower YoY to N15.2 billion and gross profit margin contracted by 337 basis points to 13.9percent. Margin contraction was largely a result of rising raw material costs across all businesses.
Operating loss was N1.3 billion in FY 2022 (2021: operating profit of N5bn). The decrease is attributable to the poor performance in our Animal Feeds and Other Edibles businesses, as well as increased operating expenses across all businesses particularly power costs and distribution costs. In 2021, the holding company recognized a one-off dividend as well as a fair value gain post unbundling the UPDC REIT (totalling N569million) which impacts year on year comparison.
The Group recorded higher net finance costs on account of higher interest rates, impacted by the 400bps increase in the monetary policy rate, and increased short-term borrowings in the Animal Feeds and Other Edibles, Paints and Packaged Food and Beverages segments.
Share of profit from associate companies (UPDC and MDS Logistics) was N105 million, compared to the share of loss from associate companies of N895 million in FY 2021. Loss before tax was N3.4 billion compared to N4.1 billion profit before tax recorded in FY 2021. Loss after tax from continuing operations was N4.7 billion compared to a profit after tax of N2.6 billion in FY 2021. Total loss for the period was N4.7 billion in FY 2022 impacted by a N26 million expense incurred as part of the voluntary winding up process of UNICO CPFA Limited, a discontinued operation.
Loss per share was 121 kobo in FY 2022 compared to 63 Kobo earnings per share recorded in FY 2021. Free Cash Flow for the period was N10.7 billion in FY 2022, compared with negative N19.1 billion in December 2021, due to improved working capital management in FY 2022.
Return on Equity from continuing operations at for FY 2022 was a negative 8.5percent, compared to a positive 3.9percent in FY 2021.
Return on Invested Capital (ROIC) was 1,057 basis points lower at a negative 2.6percent (FY 2021: positive 8percent).
Group Performance and Financial Review: Q4 2022
Revenue in Q4 2022 increased 4.7percent Quarter on Quarter (QoQ) to N31.4 billion. The Animal feeds and Other Edibles segment, Paints segment and the Quick Service Restaurant segment recorded strong topline growth of 7.7percent, 19.3percent and 53.9percent respectively when compared to Q4 2021. Revenue growth in the Animal feeds and Other Edibles segment was driven by by price increases taken to offset rising raw material costs, Paints segment was driven by volume growth, price increase and retail expansion while revenue growth in the Quick Service Restaurant segment was driven by the increase in the number of Company owned stores.
Gross profit was 44.1percent lower QoQ at N2.9 billion and gross profit margin contracted by 804 bps to 9.2percent. Operating loss was N2 billion in Q4 2022, compared to operating profit of N2.8 billion recorded in Q4 2021, driven by gross profit underperformance in the Animal Feeds and Other Edibles, Packaged Foods and Beverages and Quick Service Restaurant segments, increase in selling and distribution expenses, and the recognition of fair value loss on investment properties at the holding company compared with a fair value gain in Q4 2021.
The Group recorded a net finance cost of N471 million in Q4 2022 compared with a net finance income of N227 million in Q4 2021, on account of higher interest rate on short-term borrowings in the Animal Feeds and Other Edibles segment and Packaged Food and Beverages segment, and increased borrowings in the Paints segment.
Share of profit from associate companies of N143 million was recorded in Q4 2022, compared to the share of loss from associate companies of N283 million in Q4 2021.
Loss before tax was N2.4 billion, compared to a profit before tax of N2.7 million in Q4 2021. Loss after tax from continuing operations was ₦2.7 billion compared to a profit after tax of N2 billion in Q4 2021. Total loss for the quarter was N2.7 billion. Loss per share was 74 kobo compared to the earnings per share of 66 kobo in Q4 2021.
