Unga Group, the only flour milling firm listed at the Nairobi Securities Exchange (NSE), posted a net profit of KSh 293.5 Million for the full year ended June 30th, 2021. This is compared to a net profit of KSh 66.2 Million in 2020, an increase of 342.8%.
According to the milling firm’s audited accounts, its operating profit increased from KSh 299.8 Million in 2020 to KSh 616.2 Million in 2021.
Its revenue rose from KSh 17.6 Billion in 2020 to KSh 17.8 Billion in 2021 while pre-tax profit rose from KSh 118.1 Million to KSh 485.2 Million during the period under review.
Unga Group profitability improves
Earnings per Share (EPS), an indicator of Unga Group’s profitability increased from KSh 0.45 in 2020 to KSh 2.39 in 2021.
The Balance Sheet size of Unga Group, however, shrunk to KSh 10 Billion in 2021 from KSh 12.1 Billion in 2020. The Group’s revenue and profit for the year from continuing operations increased 1% and 343% respectively. Overall operating profit was impacted by reduced margins, re-organisation and finance costs.
Compared to the prior year, interest expense was reduced because of the restructuring of banking facilities.
International wheat prices increased by at least 30% during the year due to poor harvest and adverse fiscal measures imposed by some of the leading exporting economies. Other basic raw material prices were relatively high in the period.
With the onset of the local maize harvest, maize prices remained stable from the second quarter to the end of the financial year. Depreciation of the Kenya Shilling against the US Dollar impacted importation costs and led to substantial forex losses.
The Company said it received payment for grain supplied in support of the government-led maize subsidy program in 2017. However, it says the interest element of the debt remains outstanding.
The long outstanding tax refunds were also received during the year ending a protracted litigation process. Both receipts improved profit for the year.
Unga Group Diversification
The animal nutrition business broadened its portfolio further with the introduction of dog Food unit.
Subsequent to the end of the financial year, the Company entered agreements with Nutreco BV to form two joint ventures; one to expand aquafeed production and marketing capability in the region, the other to manufacture animal feed and expand the sale of feed premixes in Uganda.
An agreement was also reached with Big Cold Kenya Limited to buy its bakery business and assets. Both transactions are expected to be closed in the first half of the year 2021-22. The financial statements have presented the results of the discontinuing operations with respect to the bakery and the aquafeed businesses separately as a result of discontinuing operations. The assets and liabilities associated with the Nutreco and BigCold transactions are reported separately as held for sale.
In its outlook, Unga Group says its short-term performance is expected to remain subdued because of the prevailing high raw material prices, particularly for wheat and soybean.
The Company says it will continue to lobby the authorities to allow for the importation of alternative and lower cost raw materials. This will ease pressure on prices and therefore improve affordability.
The Directors do not recommend the payment of a dividend.
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