January 31, 2022/CSL Research
UACN released its unaudited FY 2021 result last week. In its full-year results, the company reported a 24.3% y/y increase in Revenue to N101.1bn in 2021 from N81.4bn in 2020. Q/q standalone, the company reported a solid topline growth of 19.6% q/q to N29.7bn in Q4 2021 from N24.9bn in Q3 2021. It is interesting to note that the Q4 results were particularly impressive. Notably, the company reported price increases on some of its products in a bid to pass on some of the increase in raw material costs to consumers. Looking ahead, the management guided on implementing pricing strategies to improve gross margin. All segments contributed to the y/y topline growth in 2021, Animal Feeds & Other Edibles (+16.5% y/y), Paints (+45.7% y/y), Packaged Food & Beverages (+32.7% y/y), QSR (+44.9% y/y) and Others (+4.7% y/y). The Revenue growth in the Paint segment was quite impressive considering the competition in that segment and the weak performances recorded in prior times. Its Quick Service Restaurant (QSR) segment also grew significantly, up 44.9% y/y to N2.2bn in 2021.
Cost of Sales (adjusted for depreciation) rose stronger than Revenue, up 28.6% y/y to N81.78n in 2021 from N63.6bn in 2020. However, on a q/q basis, Cost of Sales growth lagged Revenue growth, up 18.9% q/q to N24.1bn in Q4 2021. Due to the y/y elevated costs, Gross profit moderated, rising by 8.8% y/y to N19.3bn in 2021. On a q/q basis, Gross profit rose significantly, up 22.5% q/q to N5.6bn in Q4 2021. Y/y, Gross margin contracted by 271bps y/y to 19.1% in 2021 from 21.8% in 2020.
Operating Expenses (adjusted for depreciation) was up 8.8% y/y to N13.9bn in 2021 from N12.7bn in 2020. The growth in Opex was driven by increase in Selling & Distribution Expenses (up 10.3% y/y to N6.1bn) and Administrative Expenses (up 7.7% y/y to N7.7bn). Growth in Administrative Expenses was largely driven by increase in Personnel Expenses (+13.5% y/y) resulting from the company’s focus on improving the quality of management personnel. Meanwhile, due to a surge in Net Other Income (+159.7% y/y to N2.8bn), EBITDA growth improved greatly, climbing higher by 35.1% y/y to N8.3bn in 2021. Depreciation & Amortisation was relatively flat at N2.5bn in 2021, positively making room for Operating Profit to increase by 59.9% y/y to N5.8bn in 2021 from N3.6bn in 2020.
The firm recorded a Net Finance Cost of N0.3bn in 2021 from a Net Finance Income position of N0.6bn in 2020. This was driven by a spike in Finance Cost (up 188.5% y/y to N1.5bn) amidst a 13.5% y/y rise in Finance Income to N1.2bn in 2021. The sudden increase in Finance Cost was driven by higher interest expense on bank loans (up 260.9% y/y to N1.4bn). The marked impact of the Net Finance Cost coupled with a Loss of N0.9bn arising from Investment in Associates resulted in a 10.3% y/y decline in Pre-tax Profit to N4.6bn in 2021 from N5.1bn in 9M 2020. Profit from continuing operations also dipped, down 4.6% y/y to N3.3bn in 2021 despite the lower effective tax rate 0f 28.9% in 2021 from 33.1% in 2020. In the same vein, the company reported Loss from discontinued operations of N2.1m in 2021 compared with a Profit of N0.5bn in 2020. Consequently, Profit for the year dipped by 16.1% y/y to N3.3bn in 2021 from N3.9bn in 2020. Profit attributable to equity holders was N2.4bn in 2021 compared with N2.6bn in 2020 resulting in EPS of N0.83/s in 2021 compared with an EPS of N0.91/s in 2020.
Our estimates are under review. Current Price: N8.90/s.
