Unga Group, a listed miller, has posted a decline in its half-year earnings to KSh 83, 476,000 for the six months ending 31st December 2020.
These earnings are compared to a net profit of KSh 151,322,000 over a similar period in 2019.
Unga Group Plc is a Kenya-based holding company that has a majority shareholding in companies involved with the manufacture and marketing of a broad range of human nutrition, animal nutrition, and animal health products.
The firm’s revenues also fell to KSh 9.7 Billion from KSh 10 Billion in 2019, while the balance sheet size also shrunk to KSh 9.8 Billion in H1, 2020 from KSh 10.3 Billion in H1, 2019.
Unga Group profitability
Directors at Unga attributes this 3% fall in revenue to the prevailing unfavourable business environment and weak demand arising from effects of the Covid-19 pandemic.
The Group said its profitability was impacted by depressed margins and massive restructuring and finance costs. The rising price of maize and wheat during the period under review also hit the grain miller’s bottom line.
This was despite some improvements in the second quarter when the local maize harvest season arrived.
A weakening Kenya Shilling also led to high import costs, which led to substantial foreign exchange losses by Unga Group. While credit risk remained high, the Group made every effort to accommodate its customers to ensure product availability.
Opportunities in new product lines continue to be explored by Unga Group, with necessary investments to bring these ongoing initiatives to fruition.
Delayed payment from the Government of Kenya continues to impact operations and cashflows of the milling firm negatively.
The board says debt owed to the human nutrition business remains outstanding more than three years after grain was supplied in support of the government-led maize subsidy program.
In the period since, significant expenses have been incurred in interest on borrowings.
In its outlook, Unga Group says World wheat prices have rallied to levels not seen in the past decade. This is due to some major exporting economies imposing adverse export fiscal measures.
The miller says weak demand coupled with excess production capacity and reducing maize grain supply, will be a challenge for the rest of the financial year.
The change of maize and wheat flour VAT status from zero-rated to exempt in January 2021 has increased operations costs. The firm says the delay in receipt of tax refunds and government debt will hurt performance.
Unga Group says it will continue to leverage its strengths to drive performance improvement initiatives across all operations to counter the challenging business environment.
Directors of the milling firm do not recommend payment of any interim dividend to the firm’s shareholders.
Unga Group Plc has operations in Kenya and Uganda, with subsidiaries dealing with human and animal consumption products. Over 90% of products are produced for the Kenyan domestic market, with some exports to Uganda, Tanzania and Rwanda.
Unga Group Plc entered into a strategic investment partnership with US-based Seaboard Corporation in 2000 to form Unga Holdings Limited in which Unga Group Plc owns 65% and Seaboard Corporation 35%.