UNGA Group issues Profit Warning, Profits decline by 50%
Unga Group Plc expects to post 25 per cent lower net earnings for the 2019/20 financial year compared to the previous year. Last year, the company issued a profit warning to shareholders and reported a loss for the FY18/19.
Based on the Companys unaudited financial results for the first six months ended 31 December 2019 and the Company’s second half forecast, profit for the full year is likely to be at least 25% lower than prior year.
From the financials, the company recorded a 49.8% decline in profit before tax to Kes.219 Million from Kes 437 Million recorded the previous year. The company has attributed the decline in profit before tax to reduced volumes in the animal nutrition segment and increased cost of maize and wheat grains, attributable to unfavorable local weather conditions and rallying world wheat prices. In addition to low consumer demand, local farmers faced increased competition from imports of farm produce from the region, specifically in the poultry and dairy sectors.
The company’s revenues increased by 11% over prior period driven by the human nutrition business.
The Kenya Shilling remained strong against the US Dollar. Compared to prior period, finance costs increased due to CAPEX and working capital related borrowing.
The continued low consumer demand coupled with excess production capacity, aggressive finished product pricing across the industry and restricted maize grain supply will remain a challenge. The Board and management will continue to work on strategies to deliver improved performance. The slow pace of Value Added Tax refunds will continue to strain our cash flows and in turn increase finance costs.
In view of the results, the Directors have not recommended the payment of an interim dividend.