Unga Group reports lower profits, issues profit warning

KENYA – Leading manufacturer of human nutrition products and animal feeds Unga Group’s half year revenues for the six months ending 31 December 2016 decreased by 2.6% from KSh10.5 billion (US$102.29b) in 2015 to KSh10.2 billion ($99.37b) in 2016.

Profits before tax declined drastically by 58.7% from KSh 463.8 million (US$4.52m) in 2015 to KSh 191.4 million (US$1.86m) in 2016.

According to the financial results released recently, the company expects the tough times to continue in to the next half, with the miller issuing a profit warning for the full year.

The company blames the poor performance in the first half of the financial year due to adverse climatic conditions during the period.

It also blames unavailability of quality maize grains that made it difficult to produce maize meal and animal feeds at full capacity and at competitive prices.

According to the company, high raw material costs and lower volumes led to squeezed margins, negatively affecting its profitability in the half year.

In its Kenyan operations, capacity utilization of the new wheat mill at its main Commercial Street plant was optimized to address product availability gaps and to ease pressure on the Eldoret plant during the reporting period.

The millers’ bakery business is currently undergoing restructuring and the company expects this exercise to drive efficiency, improve product offering and market presence.

This follows the closure of some in store bakeries that were previously being run by the recently acquired Ennsvalley Bakery.

In its Ugandan business, the company faced challenges from increased competitive pressure leading to depressed selling prices.

Whilst the Uganda Shilling appreciated against the US Dollar, the Kenya Shilling continued to depreciate resulting in aggregate unrealized foreign exchange losses of KSh16 million (US$155,869), thereby resulting to an operating loss in the period.

Net Profits for the six-month period to 31 December 2016 dropped by 59.4% to KSh132.87 million (US$12.94m) in 2015 compared to KSh327.19 million (US$31.87m) in 2016, the results indicate.

Going forward the company expects the maize grain shortage to become a major challenge for the rest of the financial year due to adverse weather conditions, which will have an impact in supply and cost of raw materials.

It expects the human nutrition business to continue to be subdued for the rest of the financial year due to a general slowdown in demand and trading activities in the formal retail sector.

The company forecasts that the full year profits before tax will likely be at least 25% lower than the previous financial year.

February 24, 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.