UAC of Nigeria suffered a significant decline in its post-tax profit in the first three months of the year, on the back of a massive dip in net finance income, its financial result for during this period has shown.
The conglomerate post-tax profit went down 64.1% to ₦669 billion in the first quarter of 2021 compared with ₦1.86 billion it recorded in the corresponding period last year.
The dip in profit occurred despite revenue trending up 13% to ₦22.0 billion, driven by sales growth in the animal feeds & other edibles segment and the packaged food & beverages segment of the company, although operating profit was 1% higher at ₦1.1 billion, supported by revenue growth and cost management efforts.
The gross margin was down 3.44% due to rising raw material prices and supply chain disruptions.
Net finance income 77% lower at ₦109 million on account of lower average yields year on year, but profit after tax from continuing operations was ₦669 million, down 42% from ₦1.1 billion in Q1 2020.
Meanwhile, earnings per share from continuing operations was 12 kobo, 56% lower than 27 kobo recorded in Q1 2020.
Commenting on the results, Group Managing Director, Fola Aiyesimoju, stated: “Growth across our operating platforms translated to 13% revenue growth. Operational improvement initiatives resulted in a 6% reduction in operating expenses which supported marginal operating profit growth in spite of a 5% decline in gross profit. Raw material cost escalation remains a key concern and as such we are carefully assessing pricing. Our Paints business suffered production disruptions which impacted performance and our interest income declined materially in light of the low-interest rate environment.
These together with losses from our associates UPDC and MDS resulted in a 42% decline in profit from continuing operations. Performance in Q1 2020, being the comparative quarter last year, benefited from N717 million in exceptional income from discontinued operations relating to net gains from the divestment of a stake in MDS which impacts quarter on quarter comparisons.”