January 31, 2024/CSL Research

In its unaudited FY 2023 earnings results, UAC of Nigeria Plc’s (UACN) Revenue was up 8.6% y/y to N118.68bn from N109.27bn in FY 2022. The Paints, Packaged Foods & Beverages, and the Quick Service Restaurants (QSR) segments reported the highest growths in sales to the tune of N23.86bn, N28.59bn and N3.72bn in FY 2023 from N19.21bn, N23.23bn and N3.08bn in FY 2022 respectively. Conversely, the Revenue inflow for Animal Feeds & Other Edibles and Other Revenue dropped to N62.30bn and N208m in FY 2023 from N63.46bn and N297m in FY 2022.

The company’s Cost of Sales (ex-depreciation) grew slower than Revenue, up 1.6% to N94.45bn from N92.95bn in FY 2022. Consequently, UACN reported Gross Profit of N24.23bn (+48.5% y/y) from N16.32bn in FY 2022 leading to a Gross profit margin of 20.4% in the period from 14.9% in FY 2022.

UAC of Nigeria Plc.

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Source: Company, CSL Research

The Total Operating Expense (ex-depreciation) for UACN increased by 14.6% y/y to N18.58bn in FY 2023 from N16.21bn in FY 2022 with the Administrative Expenses (ex-depreciation) advancing the most to N10.64bn (+29.6% y/y) in FY 2023 from N8.21bn in FY 2022. On the flip side, the Selling and Distribution expenses (ex-depreciation) dropped marginally by 0.9% y/y to N7.93bn in FY 2023 from N8.0bn in FY 2022. The company reported an Impairment Loss on Assets of N1.33bn in FY 2023 from N61m in FY 2022.

Depreciation and Amortization grew 23.9% y/y to N3.95bn from N3.18bn in FY 2022. Its Share of Profit from Associates grew to N860m (+731% y/y) in FY 2023 from N103m in FY 2022. Therefore, UACN reported Operating profit of N1.24bn in FY 2023 from a Loss of N3.03bn in the prior year. Other Income grew significantly to N8.69bn in FY 2023 from N743m in FY 2022 driven mainly by gains from sale of Properties, plant and Equipment (PPE). This led to the exponential rise in UACN’s Earnings Before Tax (EBIT) to N9.99bn in FY 2023 from a loss of N2.28bn in FY 2022.

The company reported Finance Income of N6.27bn in FY 2023 from N1.45bn in FY 2022 which was largely driven by an exchange gain of N4.50bn and Interest Income gains of N1.77bn in FY 2023 while its Finance Cost came in at N3.60bn in FY 2023 from N3.53bn in FY 2022. Overall, Net finance Income grew to N2.67bn in FY 2023 from a loss of N2.09bn in FY 2022. UACN reported Profit Before Tax of N12.66bn (+390% y/y from a Loss of N4.37bn in FY 2022) and a Profit After Tax of N7.80bn (+295.1% y/y from N4bn in FY 2022). Q/q however, PBT declined significantly, mainly due to the absence of gains from PPE sales in Q4.

We retain our target price of N17.59/s and a Buy recommendation for UACN. Current Price: N15.25/s.

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