Unga Group Half Year Profits drops by half, issues Profit Warning!

Earnings Release

Flour milling and manufacturer of human nutrition products and animal feeds company Unga Group’s half year revenues for the six months ending 31 December 2016 decreased by 2.6%  from Ksh 10.5 billion in 2015 to Ksh 10.2 billion in 2016. Profits before tax declined drastically by 58.7% from Ksh 463.8 million in 2015 to Ksh 191.4 million in 2016.

The company blames the poor performance in the first half of the financial year due to adverse climatic conditions during the period and lack of availability of quality maize grains that made it difficult to produce maize meal and animal feeds at full capacity and at competitive prices. High raw material costs and lower volumes led to squeezed margins.

The company 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 Ugandan business also faced challenges from increased competitive pressure leading to depressed selling prices. Local currency depreciation against the dollar resulted in an operating loss in the period.

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

Net Profits for the six month period to 31 December 2016 dropped by 59.4% to Ksh 132.87 million in 2015 compared to Ksh 327.19 million in 2016.

No interim dividend was declared.

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

Unga Group is currently trading at Ksh 30.50 per share down by roughly 7% since the year began.

Source: (Unga Group, Kenyan Wall Street)