United Africa Company of Nigeria (UAC), a leading diversified conglomerate operating in the food and beverage space has recorded an 83 percent drop in profit, despite putting some N89.2 billion as revenue in full year 2017.
Data compiled by BusinessDAY and sourced from company’s financials on the Nigerian stock exchange, shows that its 2017 earnings was the highest in four years (since 2014), when the NSE started compiling data.
While UACN revenue surged 8 percent from N82.6 billion that it recorded in 2016 to N89.18 billion in 2017, this could not be said about its profit for the year, rather its profit shrunk 83 percent from N5.67 billion in 2016 to N962.8 million in 2016.
A stockbroker that is familiar with issues hovering around the company discloses that the major challenge facing the company is UAC Property Development Company (UPDC).
“The main problem with UACN is UAC properties, the stockbroker said. Stressing that UAC property as a subsidiary is not doing well at all”.
“Also, most of what companies in the consumer goods space recorded as turnover were as a result of increase in the prices of goods and nothing else, as many of them last year had to review their prices north,” he added.
In a bid to position the group solely as a Fast and Moving Consumer Goods (FMCG) company, the management of last year disclosed that they are working on the deconsolidation of UAC Property development company (UPDC) from the group. The management also revealed that UPDC was unable to recover construction costs for some of its completed properties
Analyst at Lagos-based cardinal stone, an equity research institute said they view the move as a positive development as it eliminates the risk of earnings volatility from UPDC’s operations on the group; as earnings have been stifled, largely due to the consolidation of operating losses from its property segment.
“Whilst UPDC’s revenue appears to have rebounded, we believe the outlook for the real estate sector (particularly the luxury end) remains soft. Also with seemingly bright prospects for the other segments (especially food and beverage), we expect the group to remain profitable into the future with the exclusion of UPDC,” Analyst at Cardinal Stone said in a note.
UAC is one of Nigeria’s biggest players in the consumer goods space, with a market cap of 48.69 billion.
The company has remained a foremost and active participant in Nigeria’s economic landscape since 1879, following the merger of four trading companies namely, Alexander Miller Brother & Company, Central African Trading Company Limited, West African Company Limited and James Pinnock.
In 2015, its revenue declined 13.9 percent to N73.77 billion from N85.65 billion. This figure increased to N82.57 billion and N89.17 billion in 2016 and 2017 respectively.