Unga closes loss-making Uganda unit

Unga Group CEO Nick Hutchinson. FILE PHOTO | NMG 

By VICTOR JUMA

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Summary

• The Uganda operation lost Sh118.9 million in the year ended June, contributing to the parent company’s slip into a net loss of Sh32.2 million from a net profit of Sh508.8 million a year earlier.
• Unga’s sales in the review period increased three per cent to Sh19.5 billion but its operating profit margin declined to one per cent from four per cent, underlining the impact of the rising costs.

Unga Group has ceased operations in Uganda where it made losses three years in a row, with the miller saying it is reviewing its business model in that market.

The Uganda operation lost Sh118.9 million in the year ended June, contributing to the parent company’s slip into a net loss of Sh32.2 million from a net profit of Sh508.8 million a year earlier.

“The Ugandan subsidiary continued to be faced by a challenging business environment leading to an operating loss for the third consecutive year. Bad debt provisions and local currency depreciation against the US dollar significantly worsened its performance,” Unga said in a statement.

“The board has reached a decision to cease milling operations while it evaluates available business remodelling options going forward. This has necessitated the reporting of the entity as a discontinuing operation.”

Besides the performance of the Ugandan unit, Unga also recorded rising costs.

Its investment in Ennsvalley Bakery was also hit by the challenges facing its key distributor, Nakumatt Holdings.

Unga’s sales in the review period increased three per cent to Sh19.5 billion but its operating profit margin declined to one per cent from four per cent, underlining the impact of the rising costs.

READ: Unga Group’s deal values NAS bakery at Sh1bn

Part of the costs include the reduction of the value of its investment in Ennsvalley Bakery by Sh151 million.

Despite the performance, Unga maintained its dividend payout of Sh1 per share, drawing from its reserves.

The miller announced it will make a full acquisition of Ennsvalley Bakery despite the subsidiary’s current challenges, saying it is ready to buy the 48 per cent stake it does not already own for Sh70 million.

The company first acquired a 52 per cent stake in the bakery from NAS Holdings in July 2015 for Sh465.2 million, with the pricing of the latest transaction indicating the diminished value of the subsidiary.

Unga’s CEO Nick Hutchinson had not responded to our queries by the time of going to press.

“The board … has reached an agreement with the minority shareholders to purchase the entire 48 per cent non-controlling interest in Ennsvalley Bakery Limited,” the company said in the statement.