October 30, 2024/CSL Research
In its recently released 9M 2024 results, UAC of Nigeria Plc. (UACN) reported a 63.4% y/y Revenue growth to ₦133.18 billion from ₦81.53 billion in 9M 2023. On a quarterly basis, Revenue also advanced by 16.9% q/q, reaching ₦49.93 billion in Q3 2024 compared to ₦42.70 billion in Q2 2024. The Revenue growth was driven mainly by price increases across products in response to rising costs, in addition to volume growths and new product rollouts in the period. Revenue numbers for the reporting segments in 9M 2024 are seen below:
· Edibles & feed: ₦66.18bn, up 50.8% y/y from ₦43.88bn in 9M 2023. Contributed 49.69% of total Revenue compared to 53.83% in 9M 2023.
· Paints: ₦23.65bn, up 54.9% y/y from ₦15.26bn in 9M 2023. Contributed 17.76% to overall Revenue in 9M 2024, down from 18.72% in 9M 2023.
· Packaged food and beverages: ₦41.20bn, up 112.0% y/y from ₦19.44bn in 9M 2023. Added 30.94% to overall Revenue compared to 23.84% in 2023.
· Quick service restaurants (QSR): ₦1.99 bn, down 28.0% y/y from ₦2.78 bn in 2023. Contributed 1.50% to total Revenue, down from 3.41% in 9M 2023.
· Others: ₦156.28m, down 7.0% y/y from ₦167.96m in 9M 2023. Contributed 0.12% to overall Revenue in 2024 compared to 0.21% in 2023.
Volume growth in the packaged food and beverage segment was supported by Kingsway pastry roll, and the launch of two new products – Gala Chin-Chin, and Kingsway Loaf in the snacks category, while QSR performance was impacted by lower sales due to the closure of stores. UACN’s annualized asset turnover improved to 1.24x in 9M 2024, up from 1.07x in FY 2023, reflecting better efficiency from the company in utilizing its asset base for revenue generation during the period.
In 9M 2024, UACN’s Cost of Sales increased by 52.0% y/y to ₦102.44bn, up from ₦67.39bn in 9M 2023. The growth was driven by increases in cost related to changes in inventories of finished goods and work in progress (+55.8% y/y to ₦89.70bn) and electricity & power (+48.9% y/y to ₦3.96bn). This reflects the impact of the high inflation environment, elevated cost of energy, and currency depreciation in the period. However, the cost-to-sales ratio for UACN moderated by 5.7 percentage points to 76.9% in 9M 2024 from 82.7% in the previous year, reflecting the strong revenue growth and better cost saving initiatives across its production lines in the period.
Gross Profit for the company surged by 117.4% y/y to ₦30.74bn in 9M 2024 from ₦160.17bn in 9M 2023 while the Gross Margin increased to 23.1% in the period, up 5.7 percentage points from 17.3% in 9M 2023. The company notes that the moderation in cost-to-sales and expansion in gross margins, are testament to 1) improved production efficiency, 2) disciplined procurement and supply chain management particularly in the edibles and feed segment and the packaged food segment, and 3) effective pricing across all companies to mitigate the impact of inflation on input costs.
Total Operating Expenses for UACN increased to ₦19.98bn in 9M 2024 compared to ₦15.61bn in 9M 2023, pushed mainly by increases in personnel and directors’ expenses (+34.25% y/y to₦11.47bn) and information technology charge (+98.81% y/y to ₦1.68bn) amongst other moderate increases across the Administrative, and Selling and Distribution expense lines. Overall, OPEX margin for UACN contracted to 15.0% in 9M 2024, down from 19.1% in 9M 2023.
UACN’s 9M 2024 EBITDA amounted to ₦15.71bn, a 57.5% y/y increase from ₦9.98bn in 9M 2023 while EBITDA margin in 9M 2024 dipped marginally by 0.4 percentage points to 11.8%, down from 12.2% in 9M 2023. Furthermore, UACN’s Operating Profit advanced by 73.2% y/y to ₦12.30bn in 9M 2024 compared to ₦7.10bn in 9M 2023 while Depreciation, Amortization, and Impairment Loss on assets increased by 18.8% y/y to ₦3.42bn for 9M 2024 from ₦2.88bn in the same period of 2023. The company’s EBIT margin for 9M 2024 stood at 9.2%, 0.5 percentage points higher than the 8.7% recorded in the same period last year.
Finance Income for UACN in 9M 2024 was ₦12.27bn, significantly higher than ₦4.39bn in 9M 2023. This was buoyed by higher interests received on increased volume of short-term bank deposits and interest income on bond holdings in the period. Also, under Finance Income included exchange gains to the tune of ₦10.19bn from income received on the company’s US Dollar denominated holdings. On the flip side, Finance Cost grew by 76.2% y/y to ₦4.42bn in 9M 2024, up from ₦2.51bn in 9M 2023 primarily due to the high-interest rate environment. Net Finance Income for UACN increased significantly in the period, advancing by 317.6% y/y to ₦7.85bn in 9M 2024, up from ₦1.88bn in 9M 2023.
Overall, UACN’s Profit Before Tax increased by 116.9% y/y to ₦20.83bn in 9M 2024 compared to ₦9.60bn in 9M 2023. After accounting for an income tax expense of ₦7.17bn, Profit after Tax for UACN settled at ₦13.67bn, up 103.7% y/y from ₦6.71bn in 9M 2023.
Our estimates are currently under review. Current Price: ₦21.90/share.
Kindly click on the below link to download the full report.
UACN 9M 2024 Quick Take.pdf
