Unga Group issues Profit Warning for its Full Year 2016 Results

Unga Group Ltd’s net profit dropped to Sh132.8 million in the half year ended December 2016 on the back of higher costs posting Ksh Sh327.1 million a year earlier.

“Revenue and profit before tax declined by 2.6 percent and 58.7 percent respectively compared to prior year. While overall sales volumes declined marginally over prior year, wheat flour volumes increased, maize flour and major category animal feed volumes reduced over prior year,” read the Unga Group financial statement.

The company also disclosed that the rising expenses were spread across various units including production and marketing.

“Manufacturing overheads, selling and general administration expenses increased in the period compared to prior year,” Unga said in a statement on Friday.

“This was a consequence of increased investments in human resources, marketing spends and increased amortisation of the recently commissioned ERP system,” it added.

The company further disclosed that the adverse climate that prevailed in the region during the first half of the financial year and non-availability of quality maize grin posed a significant challenge in the ability to produce maize meal and animal feeds at full capacity and at competitive rates.

“The maize grain shortage is expected to remains major challenge for the remainder of the year due to adverse weather,” it said.

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However, “the company has initiated various business performance improvement initiatives across all of its operations. These are expected to deliver improved results in the second half of the year,” it says.

Further, the company issued a profit warning for its financial year ending 30 June 2017 citing the adverse weather experienced in the region and difficulties in the modern trade business impacting on its revenue and cash flow and the continued depression of the Kenya and Uganda shilling against the US dollar.

“Based on the company’s unaudited financial results for the first six months ended 31 December 2016 and the company’s preliminary second half forecast, full year profit before tax is likely to be at least 25 percent lower than prior year,” it said in a statement issued on Friday.