FSDH Initial Reaction: UAC of Nigeria FY23 results 
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February 1, 2024/FSDH Research

Key Performance Highlights:

• On January 30, 2024, UAC of Nigeria declared its FY23 set of numbers, showcasing a notable turn-around in profitability vs last year. Revenue grew modestly at 8.6% YoY to N118.7 billion, experiencing growth across all segments. The paints segment was up 24.2% YoY because of price increases and the positive impact of the growth strategy on volumes. The packaged Food and Beverages segment increased 23.1% YoY due to volume growth in snacks and spring water categories and price hikes across the board. Revenue for the Quick Service Restaurants segment surged +20.8% YoY, driven by an increase in company-owned restaurants (corporate stores).
   
• In FY23, the Company’s cost of sales witnessed a marginal rise of 1.9% YoY to N96.9 billion. The top-line growth and production efficiency in the Animal Feeds and other Edibles segment resulted in gross profit jump of 53.3% YoY to N21.8 billion, while gross margin improved by 536 bps to 18.4% in FY23 (FY22: 13.0%).
   
• UAC of Nigeria exhibited a substantial recovery in its FY23 operating performance, reporting a robust operating profit of N9.1 billion, a notable improvement compared to the operating loss of N2.4 billion in the previous year. The positive shift was primarily driven by the gross profit expansion and gains from selling non-core property assets. Note that underlying operating profit, adjusted for gain from property sale and non-recurring impairment charge, was N2.6 billion. Full-year operating profit margin expanded 987 bps to 7.7% YoY.
   
• The Company recorded a Net finance income of N2.7 billion in FY23 compared to the Net finance cost of N2.1 billion in FY22. The Company managed to control Finance Costs and significantly increase Finance income due to a rise in cash from the disposal of non-core assets and gains in the treasury portfolio recorded during the year.
   
• The share of profit from associate companies was N860 million, compared to N103 million in FY22, driven by MDS’s transport business expansion. Underlying Profit Before Tax, adjusted for exceptional items, was N1.7 billion. Total profit for the period was N7.8 billion in FY23, impacted by tax expense of N4.9 billion, compared to Loss after tax of N4.0 billion in FY22. EPS for the year increased to N2.76 from a loss per share of N1.07 in FY22. UAC exhibited impressive margin expansion across the board, with EBITDA margin expanding by 1,028 bps to 11.0% and operating margin improving by 987 bps to 7.7%.
   
• In 4Q23, revenue reached N37.1 billion, reflecting an 18.1% YoY increase, with Packaged Food and Beverages up 78.7% YoY, Paints at 39.9% YoY, and QSR at 0.7% YoY. The Gross Profit soared to N7.7 billion, marking an impressive 300.5% YoY growth. The gross profit margin of 20.7% (4Q22: 6.1%) reflected the net impact of the price increases to mitigate inflation, growth strategy on volumes, and conversion cost-saving initiatives in the Animal Feeds segment. Operating profit of N2.0 billion in 4Q23 compared to N3.1 billion operating loss recorded in 4Q22. Despite Operating expenses increasing due to broader inflationary pressures, UAC of Nigeria achieved a commendable operating margin expansion of 1,544 bps in 4Q23, reaching 5.5%. Net finance income recovered to N794 million in 4Q23 Vs. a Net finance cost of N269 million in 4Q22. Note that the share of profit from associate companies increased to N235 million from N142 million in 4Q22, reflecting the improved performance at MDS Logistics Limited. Excluding exceptional items, the profit before tax was N2.0 billion. Total profit for the quarter was N1.1 billion compared to N2.0 billion loss after tax in 4Q22. EBITDA Margin surged to 8.3% in 4Q23, significantly improving from -6.8% in 4Q22.

Market Reaction: The investor reaction to the FY23 results was tepid as the stock was down 7.87% to N14.05, versus a 1.90% fall for the All-Share Index (31/1).

UAC of Nigeria Earnings Highlights FY23

Source: Company Financials, FSDH