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As UAC’s 37% y/y PAT drops H1 pre-empts 2017 FY result

The weak performance of UAC of Nigeria Plc for the first half of the year ended 30th June, 2017, has been described by analysts as major factor to preempt the direction of the company’s 2017 financial year result.

This was coming as the company’s management is considering price increase across products’ segments to drive value and profitability in the H2 2017 period, as the company’s subsidiaries sustained pressure from macroeconomic headwinds.

Recent analysts report posited that UACN’s earnings remain under pressure from rising costs across its various businesses. The company for the H1 period recorded -37 per cent decline year on year to N450million, while it also dropped -18 per cent quarter on quarter (q/q).

The results, cross section of market analysts said, continue to mount pressure on the board to reverse the losing trend which might likely drag to the end of H2 2017.
Meanwhile, given capital raising efforts across various UACN subsidiaries, dilution fears continue to weigh on investors’ minds triggering a market hearsay that may impact on equity pricing.

The report showed that rising input cost, and high cost of debt has sustained unabatingly pressure on the company’s earnings and wiping off what could have accrued to positive profit and loss lines.

The food & beverage segment accounted for 82 per cent of Q2 sales. Though, UACN’s animal nutrition business continues grew by 46 per cent y/y on average, mounting cost of raw materials and costly debt subdued profitability.

In the period under consideration (Q2), Livestock Feeds posted a loss before tax of –N139million, while PBT margin for Grand Cereals dropped by -260bps y/y to 3.0 per cent.
The consumer good giant, has continued to benefit from lighter cost imputes due to improved Fx supply for imports and the harvest season in H2 are also supportive.

As such, we see overall business costs easing in H2. However, we have cut our EPS estimates over the 2017-18E period by 6.6% given that Q2 earnings missed our forecast by c.21%. “noted a market analyst company.

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