Economy
UAC Nigeria’s Strategy to Invest for Growth Yields Results in Q3
By Dipo Olowookere
Though the nine months results of UAC Nigeria Plc were not too impressive, its third-quarter earnings were better and this was because of the decision of the company to invest for growth and free up its burden.
In Q3 of 2020, the revenue jerked by 10.5 per cent to N21.2 billion from N19.2 billion in Q3 2019 compared with the meagre 1.7 per cent rise in nine months of 2020 N57.8 billion from N56.8 billion achieved in the same period of last year.
The Q3 growth in turnover was as a result of revenue growth across all operating segments (Animal Feeds & Other Edibles +10 per cent, Paints +18 per cent, Packaged Food and Beverages +8 per cent, and Quick Service Restaurants +16 per cent).
Volume growth in the fish feed and cereals categories, as well as, price increases across major categories to offset rising raw material costs contributed to topline growth in the Animal Feeds & Other Edibles segment.
Paints sales rebounded strongly following the easing of COVID-19-related restrictions, growing 18 per cent compared to the same quarter last year as a result of strong volume growth across the portfolio.
The Packaged Food and Beverages segment achieved growth in key categories i.e snacks, dairy, and water. Quick Service Restaurants revenue growth was primarily driven by sales from the recently launched company-owned restaurant.
In the third quarter of the year, when the lockdown in Nigeria was eased, the earnings before interest and taxes (EBIT) declined 23.7 per cent to N1.2 billion in Q3 2020, however, adjusting for non-recurring and non-operating income in Q3 2019 (profit from the sale of non-core real estate N631.3 million and write back of statute-barred unclaimed dividend N206.3 million), underlying EBIT increased 65.1 per cent year-on-year and EBIT margin increased 186bps to 5.6 per cent.
A key contributor to the improvement in underlying EBIT was the 642.5 per cent YoY increase in Animal Feeds & Other Edibles operating profit in Q3 2020.
In the third quarter of the year, the profit before tax reduced by 24.7 per cent to N1.4 billion from N1.9 billion, while the nine months pre-tax profit shed 58.8 per cent to N2.5 billion from N6.0 billion.
Business Post reports that the profit after tax from continuing operations rose by 8.1 per cent to N1.2 billion from N1.1 billion in Q3 2019, but dropped 67.0 per cent in nine months to N1.5 billion from N4.4 billion.
A N493 million loss from discontinued operations was recognised in Q3 2020 attributable to UPDC versus the N14.0 billion loss recorded in Q3 2019. As a result, UAC Nigeria’s total profit for the period was N743 million in Q3 2020, a reversal from the N12.9 billion loss reported in Q3 2019, while the earnings per share (EPS) for the period was 15 kobo, up from negative 274 kobo in Q3 2019.
“Our strategy to invest for growth yielded encouraging results in the third quarter with consolidated revenues, gross profit and operating profit (excluding non-recurring items) growing 11 per cent, 20 per cent and 65 per cent respectively,” the Group Managing Director, Folasope Aiyesimoju, stated.
“We recorded topline growth across all our continued operations in the quarter. We are focused on strategies to mitigate the impact of a challenging foreign exchange environment and managing the recent trend of cost escalation.
“We expect to complete the sale of a controlling interest in UACN Property Development Company PLC to Custodian Investment PLC and are supportive of the recently announced merger between Chemical and Allied Products PLC and Portland Paints and Products Nigeria PLC,” the company’s chief said.
By Adedapo Adesanya
Energy stocks influenced the 4.76 per cent loss recorded by the NASD Over-the-Counter (OTC) Securities Exchange on Friday, December 5.
The culprits were the duo of 11 Plc and Nipco Plc,with the former shedding N32.17 to end at N291.83 per share compared with the previous day’s N324.00 per share, and the latter down by N21.00 to sell at N195.00 per unit versus the previous session’s N216.00 per unit.
Consequently, the NASD Unlisted Security Index (NSI) slumped by 170.16 points to 3,401.37 points from 3,571.53 points and the market capitalisation lost N101.81 billion to close at N2.035 billion from the N2.136 trillion quoted in the preceding session.
The OTC securities exchange suffered the decline yesterday despite the share prices of three companies closing green.
Central Securities Clearing System (CSCS) Plc was up by N1.80 to close at N39.80 per share compared with Thursday’s price of N38.00 per share, Air Liquide Plc appreciated by N1.09 to N11.99 per unit from N10.90 per unit, and FrieslandCampina Wamco Nigeria Plc grew by 78 Kobo to N56.57 per share from N55.79 per share.
During the session, the volume of transactions rose by 6,885.3 per cent to 18.2 million units from 4.3 million units, the value of transactions ballooned by 10,301.7 per cent to N389.7 million from N347.2 million, but the number of deals declined by 29.7 per cent to 26 deals from 37 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the day as the most traded stock by value on a year-to-date basis with 5.8 billion units worth N16.4 billion, followed by Okitipupa Plc with 170.4 million units valued at N8.0 billion, and Air Liquide Plc with 507.5 million units worth N4.2 billion.
InfraCredit Plc also finished the day as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units worth N524.9 million.
By Adedapo Adesanya
The Naira depreciated further against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, December 5, as FX demand pressure mounts.
The Nigerian currency lost N2.60 or 0.18 per cent against the greenback to close at N1,450.43/$1 compared with the previous day’s N1,447.83/$1.
Equally, the domestic currency declined against the Pound Sterling in the official forex market during the session by N4.48 to trade at N1,935.45/£1, in contrast to Thursday’s closing price of N1,930.97/£1 and shrank against the Euro by 43 Kobo to end at N1,689.17/€1 versus the preceding session’s rate of N1,688.74/€1.
Similarly, the local currency performed badly against the US Dollar at the GTBank FX counter by N2 to close at N1,455/$1 versus Thursday’s N1,453/$1 but traded flat at the parallel market at N14.65/$1.
As the country gets into the festive period, pressure mounted on the local currency reflecting higher foreign payments and lower FX inflows.
However, there are expectations that the Nigerian currency will be stable, supported by interventions by to the Central Bank of Nigeria (CBN) in the face of steady dollar Demand and inflows from Detty December festivities that will give the Naira a boost after it depreciated mildly last month.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450/$1 next week, buoyed by improved FX interventions by the apex bank.
As for the crypto market, it was down yesterday due to profit-taking associated with year-end trading. However, the December 1-Year Consumer Inflation Expectation by the University of Michigan fell to 4.1 per cent from 4.5 per cent previously and 4.5 per cent expected. The 5-Year Consumer Inflation Expectation fell to 3.2 per cent from 3.4 per cent previously and 3.4 per cent expected.
With the dearth of official economic data of late, these private surveys have taken on a new level of significance and the market banks of them to make decisions.
Cardano (ADA) depreciated by 5.7 per cent to $0.4142, Dogecoin (DOGE) slid by 5.1 per cent to $0.1394, Ethereum (ETH) dropped by 3.9 per cent to $3,039.75, Solana (SOL) declined by 3.8 per cent to $133.24, and Litecoin (LTC) fell by 3.7 per cent to $80.59.
Further, Bitcoin (BTC) went down by 2.6 per cent to sell at $89,683.72, Binance Coin (BNB) slumped by 2.2 per cent to $883.59, and Ripple (XRP) shrank by 2.1 per cent to $2.04, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
The oil market was up on Friday on increasing expectations the US Federal Reserve will cut interest rates next week, which could boost economic growth and energy demand.
Brent futures rose by 49 cents or 0.8 per cent to $63.75 per barrel and the US West Texas Intermediate (WTI) futures expanded by 41 cents or 0.7 per cent to $60.08 per barrel.
Investors digested a US inflation report and recalibrated expectations for the Federal Reserve to reduce rates at its December 9-10 meeting.
US consumer spending increased moderately in September after three straight months of solid gains, suggesting a loss of momentum in the economy at the end of the third quarter as a lackluster labor market and the rising cost of living curbed demand.
Traders have been pricing in an 87 per cent chance that the US central bank will lower borrowing costs by 25 basis points next week, according to CME Group’s FedWatch Tool.
Investors also focused on news from Russia and Venezuela to determine whether oil supplies from the two sanctioned members of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) will increase or decrease in the future.
The failure of US talks in Moscow to achieve any significant breakthrough over the war in Ukraine has helped to boost oil prices so far this week.
A loss of Venezuelan oil production in case of a US military intervention will materially impact global benchmark prices as the market will have to replace Venezuela’s heavy crude.
Venezuela is estimated to pump about 1.1 million barrels per day of crude oil at present, so if the US-Venezuela tension escalation into an invasion in the South American country, this volume of crude would be at risk.
Reuters reported that the Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban in a bid to reduce the oil revenue that helps finance Russia’s war in Ukraine.
Any deal that could lift sanctions on Russia, the world’s second-biggest crude producer after the US, could increase the amount of oil available to global markets, weakening prices.
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