UACN TURNAROUND: CAN THE PROFITABILITY BE MAINTAINED?
UAC Nigeria went from losing money (N3.99 billion loss after tax in 2022) to making a good profit (N8.91 billion profit after tax in 2023). Their profit before tax also jumped significantly (N12.34 billion profit in 2023 vs N4.36 billion loss in 2022). This turnaround is reflected in their earnings per share, which went from a loss (N1.07) to a healthy profit (N3.14).
The company is rewarding investors with a dividend (N0.22 per share) for the first time in a while. This, along with their profit, is good news for investors, especially since UACN’s stock price performance hasn’t been the best (25.37% return in 2023, the lowest in their sector).
However, the big question is: can UAC Nigeria keep making money? The company believes so and says their strong 2023 results are due to smart business decisions.
UAC Nigeria turned things around in 2023, going from a loss to a healthy profit (N8.91 billion profit after tax). Their food and beverage business boomed, and their animal feed business finally turned a corner. The company is confident they can keep this momentum going in 2024.
However, there are some challenges to watch.
- Rising Costs: While UAC’s overall profit grew, their profit margin (the percentage of revenue left after covering costs) actually shrank. This suggests they’re struggling to control costs, which could continue in 2024. They might not be able to raise prices fast enough to keep pace with rising costs for materials and supplies.
- Working Capital Woes: The company also has more money tied up in inventory and outstanding debts from customers, which hurts their cash flow.
- Non-recurring Gains: A big chunk of their 2023 profit came from selling off assets, not core business operations. This one-time gain won’t be repeated in 2024.
Despite these challenges, there are some bright spots:
- Healthy Balance Sheet: UAC has a good balance between debt and equity financing, which gives them financial flexibility. They also have enough cushion to cover their interest payments.
- Undervalued Stock: Compared to similar companies, UAC’s stock price seems relatively cheap. This could attract investors and drive the price up.
The Bottom Line:
UAC Nigeria’s turnaround is impressive, but they need to focus on controlling costs, managing working capital better, and growing their core business organically to ensure long-term success. If they can do that, their stock price could be a good bet for investors.
Source: Nariametrics
