Unga Group on Friday posted an 88% reduction in profits for the full year ended June 30, 2020, to Ksh66 million down from Ksh544.8 million reported at a similar period the previous year.
The company attributes the reduction in profitability to high prices of wheat and maize grain due to unfavourable weather conditions and rallying world wheat prices which exerted pressure on margins as well as the COVID-19 pandemic,
Following the huge reduction in profits and amid the COVID-19 pandemic, the company will not pay out dividends to its shareholders expressing the desire to conserve cash.
“With the existing challenges, the board is cautious about the new financial year. While the volumes may recover somewhat when the economy fully reopens, credit risk is likely to remain high as trade partners recover from lost revenue,” the company said in a statement.
“In the current economic conditions, recovery of our business is largely dependent on healthy cash flows. There is need to conserve cash to support the previously mentioned initiatives as well to invest in new business opportunities. The directors therefore do not recommend payment of a dividend,” the statement further said.
Revenue generated by the end of June, 2020 grew by 2% to Ksh18.3 billion from the Ksh9 billion posted at a similar juncture the previous year.
The company’s operating profit also fell to Ksh301 million from Ksh719 million even as taxes set back the company some Ksh50.7 million, a lower figure than the Ksh70.4 million captured in the company’s books at the same period last year.
Unga’s balance sheet also grew by 13% to Ksh12 billion from Ksh10 billion. Of the Ksh12 billion assets, non-current assets accounted for Ksh4.1 billion while current assets accounted for Ksh7.9 billion.
“The animal nutrition business was affected negatively by low uptake of farm inputs. Farmers faced competition from meat, milk, and egg imports from Uganda leading to unfavourable farm produce market prices. This led to shrinking demand for feeds, minerals, and animal health products,” further read the statement.
The company’s board says it is undertaking several initiatives to improve its financial perfomance including retrenching some employees, automation, introduction of new products into the market as well as investment in new business opportunities.