FSDH Initial Reaction: UAC of Nigeria 1Q24 results 
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May 2, 2024/FSDH Research

Key Performance Highlights:

• In 1Q24, UAC of Nigeria reported solid revenue growth of 64.7% YoY to N40.5 billion, powered by strong growth in the Packaged Food and Beverages and Paints segments. However, it is worth noting that 1Q23 numbers were impacted by constrained demand driven by reduced trading days due to the election and cash scarcity last year. In 1Q24, the Packaged Foods and Beverages segment (29.6% of total revenues) remarkably grew by 124.8% YoY to N12.0 billion, mainly driven by price increases and strong volume growth supported by the launch of Kingsway roll in the snacks category. Further, the Paints segment (21.0% of total revenues) exhibited robust 114.2% YoY growth amounting to N8.5 billion due to increased volume across all product categories and price increases in response to escalating costs. The Animal Feeds and Other Edibles segment (47.3% of total revenues) increased 34.1% YoY to N19.2 billion because of price increases to counter rising costs and volume growth in the edible oils category. Quick Service Restaurants segment (2.0% of total revenues) declined from N942 million in 1Q23 to N819 million in 1Q24. Other revenues (0.1% of total revenues) decreased from N72 million to N48 million in 1Q24.
   
• Although the Company’s Cost of Sales increased 47.4% YoY to N31.5 billion in 1Q24, Gross Profit jumped 177.4% YoY to N9.1 billion in 1Q24. Moreover, Gross margin expanded 911 bps YoY to 22.4%, driven by improvement in production efficiency, disciplined procurement and supply chain management, particularly in the Animal Feeds segment and the Packaged Food segment, as well as effective pricing across all segments to mitigate the impact of inflation on input costs.
   
• During 1Q24, Selling and Distribution expenses rose 29.1% YoY to N2.5 billion, while administrative expenses jumped 56.8% YoY to N3.4 billion. Despite this, the Operating Profit increased to N3.4 billion in 1Q24 from a loss of N700 million in 1Q23 due to improvement in production efficiency, disciplined procurement and supply chain management, particularly in the Animal Feeds segment and the Packaged Food segment, as well as effective pricing strategy. Operating margin turned positive from -2.8% in 1Q23 to 8.4% in 1Q24.
   
• Finance income increased to N6.5 billion from N430 million in 1Q23, driven by higher cash, higher yields on investments and gains in the treasury portfolio. Despite finance cost increased rising by 107.5% YoY to N1.4 billion, the Company’s net finance income rose to N5.1 billion from -N232 million in 1Q23. Further, the Share of Profit from associates using the equity method increased to N493 million, compared to an N5 million loss in 1Q23 driven by the expansion of MDS Logistics’ transport business and Profit from UPDC PLC (real estate business). Income Tax expense increased to N3.1 billion Vs. N222.0 million in 1Q23. Subsequently, Profit for the period increased to N5.9 billion from N1.2 billion loss in 1Q23, with all segments exhibiting growth in profitability except for the Quick Service Restaurant segment. The Company reported an N1.85 Earnings per share in 1Q24 versus N0.29 Loss Per share in the prior year quarter.
   
• The Company also reported solid sequential performance, with sales increasing 9.2% on a QoQ basis to N40.5 billion in 1Q24. Despite the Cost of Sales rising 6.8% QoQ, Gross Profit increased 18.4% QoQ to N9.1 billion, and Gross margin expanded to 22.4% from 20.7% in 4Q23. Moreover, Operating Profit significantly increased by 67.8% QoQ to N3.4 billion. Net Finance income increased to N5.1 billion Vs. N794.0 million in 4Q23. Consequently, Profit after Tax witnessed a substantial rise of 441.3% QoQ to N5.9 billion, compared to N1.1 billion in 4Q23.

Market Reaction: The investor reaction to the 1Q24 results was buoyant as the stock jumped 10.00% to N14.85, compared to a 0.35% gain for the All-Share Index (30/4).

UAC of Nigeria Earnings Highlights 1Q24

Source: Company Financials, FSDH