Unga warns of profit slump for second consecutive year

Unga Group’s #ticker:UNGA profit for the year ended June 2020 will fall by at least Sh136.2 million, the listed firm warned on Thursday, citing increased cost of operations and a fall in sale of animal nutrition products.

The profit warning by the maize and wheat flour maker as well human and animal nutrition products for the second year running, dims expectations by investors for a raise on dividend while new jobs may also be at risk.

Net income in six months through December 2019 dropped by half (50.6 percent) to Sh151.32 million, and the firm says the downturn has persisted into the second half ending June 2020.

“The decline in profitability is attributable to reduced volumes in the animal nutrition segment and increased cost of maize and wheat grains attributable to unfavourable local weather conditions and rallying world wheat prices,” Unga said a note to investors.

“In addition to low consumer demand, local farmers faced increased competition from imports of farm produce from the region, specifically in poultry and dairy sectors.”

Unga’s full-year profit for the period ended June 2019 dipped 30.44 percent to Sh544.81 million, and a further fall of at least 25 percent this year will bring it down to a maximum of Sh408.61 million in June 2020.

This means the firm’s profit would have plunged Sh374.59 million in two years.

Last year, shareholders took a 50 percent cut in dividend per share to Sh0.50, and hopes for a raise now looks unlikely with odds on payout remaining steady or being slashed.

Delaware-based conglomerate Seaboard Corporation in mid-2018 failed in its bid to buyout the Nairobi Securities Exchange #ticker:NSE listed firm after its Sh40 per share offer did not get at least 75 percent acceptance from shareholders.