stockbrokersUAC of Nigeria (UACN) Plc started this business year with appreciable growth in sales although the inability of the food company to pass down rising business costs to consumers impacted negatively on profitability.
First quarter report and accounts for the period ended March 31, 2009 showed that sales grew by about 33 per cent but the underlying pre-tax profit margin dropped from 14.5 per cent form first quarter 2008 to 11.9 per cent in first quarter 2009.
The report indicated a turnover of N14.02 billion in first quarter 2009 compared with N10.57 billion in comparable period of 2008. Profit before tax however rose marginally by 9.2 per cent from N1.53 billion in 2008 to N1.67 billion by March 2009. Profit after tax meanwhile rose by 13 per cent to N1.17 billion in first quarter 2009 as against N1.04 billion in similar period in 2008.
The actual performance of the conglomerate fell slightly below earlier forecasts for the period. UACN had estimated a turnover of N13.71 billion and pr4ofit after tax of N1.22 billion within the first three months of the year.
The first quarter performance also raised serious doubt on the potential of the conglomerate to achieve its half-year forecasts. The board of UACN had projected that the conglomerate could record about N4.5 billion as profit before tax during the six-month period ending June 30, 2009.
According to the forecasts, pre-tax profit margin is expected at 15.3 per cent while sales and net earnings are estimated at N29.2 billion and N3.03 billion respectively.
The first quarter performance however remained within the range of the forecasts for the full year ending December 31, 2009. The board of UACN had warned that the conglomerate might witness considerable slowdown in its profitability this year as Nigerian companies struggle against the muffling effects of inclement domestic operating environment and the global economic and financial crises.
UACN said some N1.34 billion might be shaved off its net profit in 2009 with post-tax profit expected to drop by about 20 per cent from N6.79 billion in 2008 to N5.45 billion in 2009.
Basically, shareholders’ earnings per share might drop by N1.04 with the forecasts indicating net earnings per share of N4.24 for 2009 as against N5.28 in 2008. This implies a significant loss in shareholders’ value given that expected net earnings per share loss of N1.04 could have added some 52 per cent to cash payouts, according to the payout rate for 2008.
The board of UACN said it expected 19 per cent growth in sales this year but growing costs could undercut net earnings by about 20 per cent. Turnover is projected at N62.52 billion in 2009 in contrast with N53.49 billion in 2008.
The projected earnings per share of N4.24 indicates a dividend cover of 2.12 times on the dividend per share of N2 paid for 2008 business year, leaving enough room for growth.
UACN had distributed a cash dividend per share of N2, totaling about N2.57 billion after net earnings jumped by 49 per cent in 2008. The current dividend per share of N2 represented an increase of about 18 per cent on N1.70 per share paid for 2007.
The conglomerate had increased cash payouts by 70 per cent last year with a total dividend per share of N1.70 for the 2007 business year as against N1 paid for 2006.
Audited report and accounts of UACN for the year ended December 31, 2008 showed that all the key actual profit and loss figures surpassed earlier forecasts made by the board of the company. UACN’s turnover had grown by 44 per cent while pre and post tax profits rose by 46 per cent and 49 per cent respectively in 2008.
Turnover rose from N37.16 billion in 2007 to N53.49 billion in 2008. Profit before tax stood at N8.78 billion in 2008 as against N6.0 billion in 2007. Profit after tax rose from N4.55 billion in 2007 to N6.79 billion in 2008. The board of UACN had projected a basic net earnings per share of N3.63 for the 2008 business year but actual net earnings per share nearly doubled at N5.28, representing an increase of about 121 per cent on N2.39 per share recorded in 2007.    The company had projected that turnover could crossed the N40 billion mark while profit before tax was expected at N6.58 billion in 2008. Profit after tax was estimated at N4.64 billion in 2008.
Market analysts were unsure of the ability of the conglomerate to meet or surpass projections for this year but many were sure that the conglomerate still possesses stable performance outlook.