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Weaker than expected returns push UACN to 15-year low

UAC Nigeria
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Shares of UAC of Nigeria (UACN) Plc, one of Nigeria’s largest and oldest business conglomerates, are down to their lowest levels in more than 15 years as the company’s unimpressive financial performance continues to weaken investor sentiment.

Despite gaining o.58 percent to close at N8.65 per share Friday, the stock is hovering around its cheapest price since January 9, 2004.

“We have seen investors dumping the stock and moving to other consumer goods company that have been able to deliver impressive results,” said Gbolahan Ologunro, equity research analyst at CSL Stockbrokers.

BusinessDay analysis of UACN’s results for the nine months to September 2018 show revenue of the leading conglomerate dipped 18.33 percent to N55.76 billion from N68.28 billion recorded in the corresponding period of 2017.

Profit before tax fell 84.48 percent to N483 million down from a whooping N3.11 billion recorded a year earlier. Likewise, post-tax profit dropped by 87.22 percent to N252 million as against N1.98 in the same period of 2017.

“Investors are reacting negatively to its weaker-than-expected performance,” said Ologunro.

The significant depreciation in UACN’s market value largely occasioned by the firm’s weak financial performance coupled with uncertainties ahead next month’s general elections indicates lower returns, which come in form of dividend and capital appreciation, for investors who primarily took positions in the stock to make profit.

“The ability of a company to declare dividend is based on the strength of the company,” Ologunro explained, adding that the “challenges from its real estimate and animal feed business which are the two major segments that have dampened its earnings in the last six (6) quarters.”

Although UACN jumped 1.18 percent Thursday to close at N8.60 per share, thereby improving its year-to-date loss to 11.79 percent, the stock is most likely to maintain the downward trend after the elections until there is a turnaround in its earnings.

UACN Plc manufactures food products, operates fast-food restaurants, and offers logistic as well as real estate services. The company also produces cereals, oils, paints, personal care products, and bottled spring water through subsidiaries. UACN further imports, sells, and services Isuzu motor vehicles via its subsidiary GM Nigeria Limited.

 

OLUWASEGUN OLAKOYENIKAN

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