UACN Shareholders to Receive 65kobo Dividend Despite 83% Profit Decline

Shareholders of UAC of Nigeria Plc are to receive a dividend of 65 kobo per share for the year ended December 31, 2017 despite a decline in the company’s profit for the year. The conglomerates firm was affected by huge finance cost that drove its bottom-line down by 83 per cent.

The audited results of UACN showed revenue of N89.178 billion, down by eight per cent from N82.572 billion. Cost of sales rose from N65.639 billion to N7.222 billion in 2017, bringing gross profit to N15.956 billion, down from N16.932 billion in 2016.

Sales and distribution expenses increased from N3.155 billion to N4.595 billion, while administrative expenses followed same pattern rising from N6.511 billion to N6.898 billion in 2017.

Operating profit fell by 19 per cent to N7.031 billion, from N8.639 billion. However, net finance cost soared by 218 per cent from N1.361 billion to N4.324 billion in 2017.

The surge in the cost of finance was fueled by high interest charges paid on bank borrowings. UACN paid N5.984 billion on charges on loans and overdraft from banks. Profit before tax stood at N3.246 billion, showing a decline of 61 per cent from N8.368 billion, while profit after tax fell by 83 per cent to N962 million in 2017 compared with N5.666 billion in 2016.

Assessing the fourth quarter results, analysts at FBN Quest said they were hit by rising input, finance and operating costs as well as increasing competition across key businesses. According to them, group sales of N20.4 billion (in Q4) declined 21 per cent while PBT fell by 88 per cent to N202 million.

“The drivers behind the significant decline in PBT were an 80 per cent rise in operating expenses to N3.5 billion a 64 per cent decline in other income to N756 million and a 130 per cent rise in net finance charges. UACN also posted a large loss on the income from associates line. Sales for the food and beverages segment are now more important to the business. Combined, this segment accounted for 86 per cent and 83 per cent of group sales in Q4 2017 and FY 2017 respectively. As such, increasing challenges within this segment, especially for the animal nutrition businesses, is likely to impact profitability going forward,” FBN Quest.

According to the analysts, compared with their estimates, sales and PBT both missed by 22 per cent and 89 per cent respectively.

“The major drivers of the variance were a weaker-thanexpected top-line growth and negative surprises on both operating expense and other income.