Uganda Clays returns to full-year profit in 2016

Uganda Clays Limited returned to profitability in 2016, according to its results for the period, reversing a loss in 2015 that arose from interest payments on a shareholder’s loan.

The building materials’ manufacturer reported a net profit of Shs2.37bn, up from a loss of Shs1.20bn in 2015, according to its audited financials. This is the company’s first annual after-tax profit since 2012.

The company’s loss in 2015 was due to the Shs4.23bn it paid in finance costs, Shs4bn of which was interest on borrowed funds. Its largest loan was Shs11.05bn from the National Social Security Fund with a 15% annual interest rate granted in 2010. NSSF is Uganda Clays’ largest shareholder with a 32.5% stake.

But after making four annual payments between 2012 and 2015, totalling Shs10.84bn, interest on the loan was waived in 2016. Finance costs last year were Shs121.16bn.

Uganda Clays and NSSF have agreed in principle to convert the entire loan and interest – which stood at Shs23.2bn as of 31 December 2016 – and are still negotiating the transaction, Dr Martin Aliker, UCL’s board chair says in the company’s annual report.

Read more: Uganda Clays MD on NSSF debt and turnaround strategy

Revenue rose 7.99% to Shs26.03bn, with sales income of all the company’s products save for half bricks increasing. Roofing tiles contributed Shs16.89bn to total sales, or 65%, compared to Shs15.13bn in 2015.

Uganda Clays also paid a dividend for the first time since 2007; the final dividend is Shs1 per share, with the total payout coming to Shs900m. Between 2008 and 2015, the board did not recommend dividends because of investment in the factory at Kamonkoli – opened in 2009 – and the financing costs arising from the investment.

Kamonkoli is still operating at a loss, eight years after it started operations. The plant made a loss before tax of Shs712m compared to a profit before tax of Shs4.74bn for the Kajjansi plant. In 2015 it made a net loss of Shs7bn versus a Shs6bn profit for Kajjansi. George Inholo, UCL’s managing director, attributed last year’s loss to high costs of production at the plant, mainly because of load shedding.

Other than NSSF, other large shareholders in the company are National Insurance Corporation Ltd with 17.9%, Kenya Power and Lighting Company with 2.2%, Bank of Uganda Staff Retirement Scheme with 2.1%, Central Bank of Kenya Pension Fund with 1.87%, Joseph Tukuratiire with 1.68%, and Timothy Sabiiti Mutebile with 1.42%.

Related: Ray of sunshine for Uganda Clays after Shs1.3bn profit in HY 2016