Ray of sunshine for Uganda Clays after Shs1.3bn profit in HY2016

The Uganda Clays plant at Kamonkoli, Budaka District [Photo: Uganda Business News]
The Uganda Clays plant at Kamonkoli, Budaka District [Photo: Uganda Business News]
Roofing tiles maker Uganda Clays Limited (UCL) returned to profitability in the first half of 2016, posting a Shs1.3 billion ($0.38 million) profit reversing a similar loss from the same period in 2015, according to unaudited financials released by the firm.

The company’s stock price remained unchanged at Shs13 at the Uganda Securities Exchange where it has a market capitalisation of Shs11.7bn. It has however fallen 13.33% since the beginning of the year.

Revenues rose 8.9% to Shs12.4bn ($3.7mn) from Shs11.4bn ($3.4mn) while cost of sales fell marginally by 0.7% to Shs7.96bn on the back of tight cost-savings. Management said performance had been weighed down by tight liquidity in the Ugandan market in the election-dominated first half of the year, as well as political instability in South Sudan, a key market.

High financing costs, stiff competition, and high operational costs of a second plant in Kamonkoli, eastern Uganda, pushed the company into the red, posting a Shs3.9bn loss in 2013 which rose to Shs5bn in 2014.

As part of its cost-cutting, the company switched from furnace oil to cheaper coffee husks in Kamonkoli, laid off 40 employees and recruited George Inholo from Unilever to lead the turn-around effort. After losing Shs2.4bn in net profit for HY2014, the company made an operating profit of Shs203m in HY2015 and has now moved out of the red for the first time in more than three years.

Assets grew marginally from Shs62.7bn to Shs63.7bn and liabilities fell 2.9% to Shs36.1bn while an improvement in net cash flows from investing activities of Shs3.1bn increased cash and cash equivalents by Shs2.1bn.

Shareholders’ equity grew 8.3% to Shs27.6bn from Shs25.5bn year-on-year while retained earnings doubled from Shs3.1bn to Shs6.6bn. Earnings per share improved to Shs1.41 while return on equity and return on assets were at 4.61% and 2% respectively but the board of directors did not recommend payment of an interim dividend as the company continues its recovery.

Uganda Clays Limited was the first company to list on the USE, in 2000. As of December 31, 2015, the National Social Security Fund (Uganda) was the biggest shareholder with 32.52% followed by the National Insurance Corporation with 17.86%. Other major shareholders include: Central Bank of Kenya Employee Pension Fund (2.66%); Kenya Power and Lighting Company (2.25%); Uganda Communications Employees Contribution Plan (2.19%); Bank of Uganda Staff Retirement Plan (2.09%); Kenya Airways Staff Provident Fund (1.67%); Joseph and Ketrah Tukuratiire (1.41%); Uganda Development Bank (1.13%) and National Social Security Fund Staff Investment Plan (1.06%) while minority shareholders own 35.17%.