Unga Group’s half-year profits fall despite double digit growth in revenue

KENYA – Unga Group Limited, a Kenyan-based holding company with investments in flour milling and manufacturing of human nutrition products and animal feeds has reported a decrease in profit to Sh151 million (US$1.48m) for the six months period ending December 31, 2019 from Sh306 million (US$3m) registered in the same period in 2018.

The drop is attributed to reduced volumes in the animal nutrition segment and increased cost of wheat and maize grains.

The low production and inflated costs were caused by unfavourable weather conditions in the year.

Unga Group registered Sh219 million (US$2.1m) profit before tax down from Sh437 million (US$4.3m) in 2018.

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Revenue, however, increased by 11 per cent, from Sh9 billion (US$88.7m) to Sh10 billion (US$98.5m), helped by the human nutrition business.

The Seaboard-backed grain miller commissioned a new state-of-the art wheat milling plant in Eldoret with a 300-tonne daily milling capacity and a storage silo with a capacity of 15,000 tonnes in a bid to grow its production capacity.

Commissioned in mid-December 2018, the Eldoret plant is expected to double the millers’ production capacity and further rise competition in the sector.

Unga feels that the main challenges that affected the industry in 2019 might persist.

“The continued low consumer demand, coupled with excess production capacity, aggressive finished product pricing across the industry and restricted maize grain supply will remain a challenge. The board and management will continue to work on strategies to deliver improved performance,” read the report.

Taking a closer look of the previous year performance of the Nairobi Stock Exchange listed firm, the company reported a 10.4% decrease in revenue to Ksh17.9 billion (US$172m) for the year ended 30th June 2019.

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The Nairobi Stock Exchange listed firm’s finance costs went up by 83.7% to Ksh166.75 million (US$1.6m) as increased raw material costs was absorbed by the animal nutrition business thus constraining margins while supporting volume.

The profit for the year decreased by 30% to Ksh544.81 million (US$5.2m) mainly attributed to increased competition mostly in the human nutrition business.

The bakery business recorded a reduction of 16% in revenues attributed to the credit risk challenges in the retail sector.

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