UAC reverses 2019 loss with N4.3bn net income in 2020
By Kayode Tokede
UAC of Nigeria PLC announced its unaudited results for the fourth quarter and year ended December 31, 2020 with group profit after tax from continuing operations down 27.8per cent YoY to N 3.8 billion, against N5.3 billion in FY 2019.
The result released at the Nigerian Stock Exchange showed that total profit for the period was N4.3 billion in FY 2020, a reversal from the N9.3 billion loss reported in FY 2019. Earnings per share for FY 2020 was 106 kobo, up from negative 183 kobo in FY 2019.
Highlights of the group result showed that, “Revenue in FY 2020 increased three per cent YoY to N81.6 billion supported by sales growth in the Animal Feeds & Other Edibles segment (+4.6per cent YoY), the Packaged Food & Beverages segment (1.8per cent) and the Quick Service Restaurant Segment (1.9per cent).
“These segments were deemed essential services during the period of stringent restrictions to movement of people and goods to curtail the spread of COVID-19.
“Gross profit in FY 2020 declined 5.5per cent YoY to N15.7 billion as a result of limited sales during the strictest phase of the lockdown (April and May), higher input costs, and distribution expenses.
“Operating Profit was N3.6 billion in FY 2020 compared to N5.7 billion in the previous year. Adjusting for non-recurring income in 2019 from the sale of non-core real estate assets (¦ 631 million) and the writeback of statute barred unclaimed dividend (N206 million), underlying FY 2020 EBIT declined 24.6per cent YoY to N 3.6 billion in 2020 versus N 4.8 billion in 2019.
“The decline was on account of reduced sales in April and May, input cost escalation partly attributable to foreign exchange devaluation, supply chain disruptions, and rising employee costs on account of initiatives to strengthen management teams across the Group.
“Underlying Profit before Tax was 19per cent lower YoY at N5.4 billion in FY 2020 on account of lower operating profit and steep decline in net finance income (-69per cent YoY) because of lower investment income yields compared to the prior year.
“The decline in net finance income was offset by the share of profit of associates of N1.2 billion earned from MDS and UPDC, largely attributable to a non-cash, mark to market increase in the fair value of UPDC REIT.
“Free Cash Flow for the period was negative N3.3 billion in FY 2020, compared with negative N5.2 billion in FY 2019. Free cash flow in FY 2020 improved significantly on account of the N4.2 billion gain from the change in net assets of disposal group held for sale, as a result of the sale of controlling stake in MDS and UPDC. Free cash flow was also impacted by higher net capital expenditure YoY (+63per cent increase to N4.4 billion in FY 2020) from investments in production capacity and cold chain distribution for the Packaged Food and Beverages segment.
Commenting on the performance, Group Managing Director, Fola Aiyesimoju, stated: “FY 2020 was challenging, with operational disruptions related to COVID-19 and ENDSARS protests. I thank my colleagues across the Group for their courage, sacrifice, and dedication in navigating complexity.
“We focused on executing our strategy, implementing initiatives relating to UPDC, significantly reducing leverage and increasing cash, strengthening management, and driving profitability.
“Operating performance for the year was negatively impacted by aforementioned disruptions, as well as, input cost escalation. Our efforts resulted in net income of N4.3 billion in 2020. We benefited from N1.2 billion in nonrecurring gains from investments in associates, MDS Logistics Limited (MDS Logistics) and UACN Property Development Company PLC (UPDC).
“In the fourth quarter, our businesses rebounded and profit after tax increased 136per cent to N2.4 billion (N1.4 billion, adjusting for non-recurring items) from N1.0 billion in 2019, supported by cost management initiatives that reduced operating expenses by N1.4 billion (30per cent).
“In December 2020, UAC received 649 million units of UPDC Real Estate Investment Trust (UPDC REIT), valued at N3.6 billion as part of the partial exit from UPDC. This is in addition to the N6.6 billion received in H2 2020 for the sale of a 51per cent stake in UPDC.”
