Release Date: April 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Uac Of Nigeria PLC (NSA:UACN, Financial) recorded a 10% year-on-year increase in consolidated revenue, reaching NGN121 billion in 2023.
- The company achieved a significant turnaround in operating profit, recording NGN9.1 billion in 2023 compared to an operating loss of NGN2.4 billion in 2022.
- Uac Of Nigeria PLC (NSA:UACN) successfully launched a new brand, Kingsway Pastry Roll, which has performed well in the market.
- The company unlocked NGN9.2 billion through the sale of non-core assets, bolstering group liquidity.
- The Group's net finance income improved significantly, reaching NGN2.4 billion in 2023 compared to a net finance cost of NGN2.1 billion in 2022.
Negative Points
- Operating conditions in 2023 were challenging due to low growth, currency devaluation, foreign exchange scarcity, and high inflation.
- The animal feed and other edibles segment recorded only a modest 2% year-on-year revenue increase, largely driven by price increases to offset rising raw material costs.
- Operating expenses increased by 17% year-on-year, reflecting the impact of inflation and naira depreciation on expenses pegged to foreign currency.
- The quick-service restaurant segment faced significant cost escalations, particularly in energy costs, which slowed down the pace of expansion.
- The company expects economic conditions to remain difficult in 2024, with a focus on maintaining margins through supply chain efficiencies and proactive pricing.
Q & A Highlights
Highlights from UAC of Nigeria PLC (NSA:UACN) Q4 2023 Earnings Call
Q: Could you please speak more to the actual costs management strategy that was implemented in the animal feeds and edible segment? Also, what is the percentage of raw materials sourced locally versus internationally?
A: (Fola Aiyesimoju, Group Managing Director) We reduced conversion costs by switching to biomass-fired boilers and improving production efficiency. Most raw materials are sourced locally, with minimal imports, primarily in the paint business, where about 40% of raw materials are imported.
Q: For your QSR business, do you have a timeline for breakeven and updates on restaurant openings? Also, any progress on generating FX income from the paint business?
A: (Fola Aiyesimoju, Group Managing Director) We aim to breakeven within the next 12 months by managing energy costs and expanding profitable stores. For the paint business, we are focusing on scaling our Marine and Protective business and exploring export opportunities in the region.
Q: Could you shed some light on the profit from property sales?
A: (Funke Ijaiya-Oladipo, Group Finance Director) We sold non-core assets to unlock liquidity from low-yielding properties, which contributed to the one-off profit in 2023.
Q: How does the business plan to mitigate FX challenges this year? Can you provide more details on the expansion plan for the paint business?
A: (Fola Aiyesimoju, Group Managing Director) We manage FX challenges by finding alternative raw materials and maintaining pricing discipline. The paint business is expanding aggressively, focusing on distribution and salesforce to manage increased retail footprint.
Q: Is the company in a position to earn more from exchange gains in 2024? Has the increase in commodity prices affected production volumes?
A: (Fola Aiyesimoju, Group Managing Director) We don't plan to make FX gains but focus on avoiding losses. Despite price increases, volumes have held or increased in most segments, except for a dip in the animal feeds segment.
Q: What is the plan to boost performance and profitability in the animal feed segment?
A: (Fola Aiyesimoju, Group Managing Director) We focus on driving higher-margin segments within the feeds and edibles business, prioritizing profitability over volume growth.
Q: Have you been able to source FX, and which business are you most positive about for 2024?
A: (Fola Aiyesimoju, Group Managing Director) Yes, we have seen an improvement in FX liquidity. We are excited about the strategies in place for each business and will continue to support management teams in executing these strategies.
Q: Do you expect more sizable strategic sales of non-core assets this year and beyond?
A: (Fola Aiyesimoju, Group Managing Director) We don't anticipate similar moves from non-core real estate but will continually assess capital allocation to optimize returns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
