UACN swings to record quarterly profit on FX gain
UAC of Nigeria (UACN) Plc, an investment holding company, reported an after-tax profit of N5.92 billion in the first quarter of this year compared with a loss of N1.16 billion in the same period of 2023, according to its latest financial statements.
Businessday analysis of the company’s financials shows that the profit, the highest in at least 12 years, was largely driven by foreign exchange gain, which surged to N5.92 billion from N71.4 million.
“We recorded strong performance in Q1 2024 which reflects our ongoing efforts to drive sustainable growth and profitability. Our consolidated revenues, gross profit, and operating profit grew 65 percent, 177 percent, and 586 percent respectively,” Fola Aiyesimoju, group managing director of UACN, said in a statement.
He said revenue growth was on account of positive performance from the company’s operating segments and that efforts at driving production and supply chain efficiencies resulted in margin improvements.
“We expect economic conditions to continue to remain difficult over the course of 2024 and remain focused on creating shareholder value despite this backdrop. We also aim to focus on factors within our control which are to drive simplicity, maintain margins via supply chain efficiencies and proactive pricing, as well as alleviating the impact of inflation on our employees by improving salaries and work conditions.”
Further analysis shows that the company recorded a N3.4 billion operating profit in Q1 compared with a N700 million operating loss a year earlier. Revenue jumped 65 percent yearon-year to N40.6 billion from N24.6 billion.
“In its unaudited Q1 ‘24 result, UAC of Nigeria Plc reported a 64.7 percent increase in revenue, driven by increases in the sales of its animal feeds (34.2 growth), paint (114.2 percent growth), and packaged food and beverages (124.8 percent) business segments,” Cardinalstone analysts said in a recent note.
“Furthermore, the company recorded a 47.4 percent rise in the cost of sales, owing to increases in inventories (52.4 percent), personnel expenses (35.0 percent), and electricity and power (10.9 percent),” they said.
Operating profit increased to N3.4 billion from a negative balance of N700.3 million in the previous year.
UACN’S management said in a statement that this development is due to increased sales resulting from a combination of volume growth and price increases, as well as improvements in production efficiency and cost-cutting initiatives conducted in the animal feeds division.
UACN’S gross profit margin increased to 22.4 percent from 13.3 percent during the period reviewed.
The firm stated in its earnings release statement that it recorded improved performance due to higher sales driven by a mix of volume growth and price increases and improvements in production efficiency and cost-saving initiatives implemented in the animal feeds segment.
“Revenue in Q1 2024 increased 65 percent year-on-year to N41 billion supported by sales growth in all segments apart from Quick Service Restaurants. The comparable period last year in 2023 was impacted by constrained demand driven by reduced trading days due to the election and cash scarcity,” UACN said.
UACN’S gross profit increased by 177 percent to N9.1 billion during the period reviewed.
“Gross profit margin expanded 911 basis points to 22.4 percent on account of improvement in production efficiency, disciplined procurement, and supply chain management, particularly in the animal feeds segment and the packaged food segment, as well as effective pricing across all companies to mitigate the impact of inflation on input costs,” the firm said.
UACN recorded a net finance income of N5.1 billion in Q1 2024 compared to a net finance cost of N232 million in Q1 2023.
“Finance income was positively impacted by higher cash, higher yields on investments as well as gains in the treasury portfolio,” the firm said. “Share of profit from associate companies of N493 million, compared to N5 million loss in Q1 2023 driven by the expansion of MDS Logistics’ transport business as well as profit from UPDC Plc, our real estate business.”
Its interest expense on lease liability surged to N74.8 million from N12.4 million during the period. Annualised return on equity was 38.5 percent for Q1 2024 compared to a negative 8.3 percent in Q1 2023 while annualised return on invested capital was 27.1 percent in Q1 2024 from a negative 5.5 percent in Q1 2023.