The Nation Newspaper

Tag: UACN

  • What returns for conglomerate?

    Besides one or two banking stocks, there is hardly any stock with outstanding earnings report as influential as that of UAC of Nigeria (UACN) Plc and its subsidiaries. Obviously Nigeria’s largest and most active conglomerate, UACN Group comprises of several active companies spread through manufacturing, services, logistics and real estate sectors of the economy.

    UACN Group included four quoted companies- UACN, CAP Plc, UACN Property Development Company (UPDC) Plc and Livestock Feeds, each leader in its business segment. Other members of the group included UAC Foods Limited, GM Nigeria Limited- a joint venture with General Motors Corporation of United States of America, MDS Logistics Limited, Warm Spring Waters Nigeria Limited, Grand Cereals Limited, UAC Registrars and Unico CPFA Limited.

    With another major acquisition that would likely bring number of active publicly quoted members of UACN Group to five; UACN Group’s market considerations have been on the upswing. The listing at the weekend of 800 million ordinary shares of Livestock Feeds that resulted from the special placement to UACN fully inducted the agrarian stock into the conglomerate structure.

    Within the past seven weeks, market value of UACN has grown considerably. With year-to-date return of 35.7 per cent, UACN opened with twice the average return at the stock market. The main index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), opened trading yesterday at 17.64 per cent. UACN opened yesterday at N57 per share, 35.7 per cent on its year’s opening value of N42. With a high of N59.06, the conglomerate has shown the strongest resilience this year. It had reached a high of N43.99 per share in 2012. UACN’s share price had traded between a range of N58.48 and N36.16 to close 2010 at N37.51. In 2011, the conglomerate pricing trend ranged between N42.50 and N28.70 before it closed at N31.18. But these recent periods have seen an increasingly resilient performance by the conglomerate and its major constituents. Viewed against the negative full-year return of 16.9 per cent in 2011 and the full-year return of 34.7 per cent in 2012, the current year-to-date return signals major recovery for the stock.

     

    Widening the group

     

    With the completion of the acquisition of Livestock Feeds, UACN is expected to close the deal on another acquisition target- Portland Paints and Products Plc (Portland Paints). UACN had announced last year that it had signed agreement to buy controlling equity stake in Portland Paints and Products Plc (Portland Paints), another publicly quoted company. The acquisition represents a major market consolidation thrust for the conglomerate, which already has controlling equity stake in CAP Plc, the largest quoted paints and chemical company. With already established presence in the Nigerian paint industry, the new deal would deepen the conglomerate’s control in existing markets and create synergies for growth through larger scope and scale economies in procurement, production and distribution. The acquisition of Portland Paints will not only enhance the existing decorative paints portfolio of the UACN Group, but it also holds possibilities for new businesses. Besides its flagship brand-Sandtex, Portland Paints’ products include marine and protective coatings for oil and gas sector, sanitary ware, instant road repair material for repairs in all weather for cracks and potholes in asphalt, concrete and landing runway areas in airports as well as its traditional decorative and industrial paints. UACN, with its market-leading UPDC in the real estate sector, will find cost-saving synergies from other non-paint businesses of Portland Paints.

     

    Previewing the earnings

     

    The main pricing factors in the immediate period for UACN would be the conglomerate’s earnings and dividends. The three quoted companies that formed the nucleus of the UACN Group are expected to pool about N13.6 billion in pre-tax profit for the year ended December 31, 2012, some N3.4 billion short of combined pre-tax earnings for the 2011 business year. According to the full-year forecasts by directors of the group, both UACN and UPDC are expected to witness declines in profits while CAP is expected with modest increase. But net earnings of the companies are expected to remain substantially high to cover previous dividend payouts.

    While UACN is still estimated to provide more than two-thirds of the total profit by the three companies, CAP remains the most profitable company. UACN, which aggregate returns from subsidiaries, is expected to contribute 71.7 per cent of pre-tax profit while UPDC and CAP are estimated with 17 per cent and 11.5 per cent respectively. Average pre-tax profit per N100 unit of sales by UACN is estimated to drop from N20.4 in 2011 to N14.12 in 2012. With this, net earnings per share for the conglomerate could decline from N6.37 made in 2011 to N4.39 in 2012. UACN had paid a dividend per share of N1.50 for the 2011 business year.

    Also, average pre-tax profit margin for UPDC is expected to drop from N25.3 on every N100 income in 2011 to N16.73 in 2012. The real estate’s net earnings per share, which had closed 2011 at N1.48, is projected to drop to N1.14 in 2012. UPDC distributed dividend per share of 65 kobo for 2011 business year.

    But CAP is projected to fight off the sluggish bottom-line. Pre-tax profit margin is expected to improve marginally from N30.15 on every N100 sales in 2011 to N30.87 in 2012. Basic earnings per share could thus increase from N1.79 in 2011 to N1.90 in 2012. CAP had paid N1.50 cash dividend on every share for the 2011 business year.

    The forecasts show that while UPDC is expected to witness increase in turnover from N10.75 billion in 2011 to N13.74 billion in 2012, rising costs may undermine the bottom-line. Profits before and after tax are estimated at N2.30 billion and N1.57 billion in 2012 respectively as against N2.72 billion and N2 billion recorded respectively in 2011.

    In the same vein, UACN is expected to increase total sales from N63.59 billion in 2011 to N69.03 billion in 2012. But profit before tax is estimated to slow down to N9.75 billion this year as against N12.98 billion made in 2011. After taxes, net profit is projected to drop to N7.02 billion from N10.20 billion in 2011.

    However, CAP is expected to sustain exceptional resilience with modest increase in all key performance indicators. Turnover is estimated to increase to N5.06 billion in 2012 compared with N4.31 billion in 2011. Profit before tax is projected to improve from N1.30 billion in 2011 to N1.56 billion in 2012 while net profit after tax is expected to inch up to N1.06 billion from N1.0 billion in 2011.

    What dividend expectations

    But by the third quarter ended, it was only CAP that was closed to the forecasts. Nine-month interim report showed that UACN recorded total sales of N47.53 billion while profits before and after tax stood at N5.83 billion and N3.91 respectively. During the same period, UPDC reported pre-tax profit of N869.06 million on total sales of N7.78 billion. After taxes, net profit for the real estate company stood at N800.31 million. CAP appeared to be in good stead to surpass forecasts. CAP’s turnover stood at N3.83 billion. Profit before tax closed the ninth month at N1.31 billion while net profit after tax stood at N889.8 million.

    But beyond the immediate earnings, UACN’s enlarged growth base holds strong potential. While it may be too early to pinpoint the actual synergistic values of UACN’s expansionary drives and the headwinds of costs also still remain threats, but there are several incontrovertible macro variables that suggest some potential. First, agricultural businesses hold strong potential under government’s pro-farm fiscal policy. With several sector-specific intervention funds and fiscal concessions, UACN can leverage on government’s incentives to strengthen its internal productivity. The building and construction industry, with its allied sectors such as paints sector, is a buoyant sector with significant headroom for growth. Nigeria is not only below average housing target, its national infrastructure is inadequate. Growing as emerging economy will imply substantial growth in these areas. Besides, expected growth in mortgage finance, domestic cement production and availability, per capita income and other related variables would positively impact the demand for paints and accessories.

    As investors expect the full-year earnings reports of members of UACN Group, dividend recommendations would have substantial influence on the market considerations of the constituents. But investors would need to keep in view the medium to long term earnings potential while considering current earnings and dividend recommendations.

     

  • UACN acquires 51% stake in Livestock Feeds

    UAC of Nigeria Plc (UACN) has completed acquisition of 51 per cent majority shareholding in Livestock Feeds Plc, entrenching the conglomerate further as Nigeria’s most diversified business group.

    Quoted in the agriculture sector, Livestock Feeds is one of the leading animal feeds producers in the country. The acquisition gives UACN Group one third of the animal feeds industry.

    UACN adopted a two-way secondary and primary market approach to acquire the controlling stake. It acquired some 11 per cent shares of Livestock Feeds through the secondary market and sealed the 51 per cent stake with additional shares purchased through special placement.

    The conglomerate at the weekend confirmed the completion of the deal. The Nation had in February reported exclusively the conclusive phase of the acquisition process. UACN had in July 2012 announced that it had signed memorandum of understanding (MoU) with Livestock Feeds. The conclusion of the deal followed final approvals of the Securities and Exchange Commission (SEC and the Nigerian Stock Exchange (NSE).

    With two subsisting quoted subsidiaries, there is strong indication that UACN will allow Livestock Feeds to continue to operate as a stand-alone quoted company while the conglomerate provides managerial and logistics supports to leverage the performance of the agro-allied company.

    Group Managing Director, UAC of Nigeria (UACN) Plc, Mr Larry Ettah, described the acquisition as a move that would redefine the agriculture industry.

    According to him, the acquisition underscores the conglomerate’s strategy to position itself as a portfolio of companies with exposure to the growth segments of the economy.

    He noted that the addition of Livestock Feeds consolidated the conglomerate’s industry position and provided it with immediate opportunity to diversify its manufacturing and sales locations.

    “Further benefits will accrue from the attractive synergies in the supply chain as well as in distribution. We are delighted by the prospect of these outcomes and the value they will add for shareholders of UAC and Livestock Feeds,” Ettah said.

     

     

     

     

     

     

     

     

     

     

  • UACN Group targets N6b Q1 profit

    Companies under the UAC of Nigeria (UACN) Group would pool about N6 billion in pre-tax earnings for the second quarter ending June 30, 2013, according to estimates made available by the directors of the companies.

    The three companies under the UACN Group include UAC of Nigeria (UACN) Plc, the parent company; UACN Property Development Company (UPDC) Plc, the real estate and property business and CAP Plc, the paint and chemical company.

    The group’s profit forecast for second quarter of 2013 is similar to forecast for the comparable period of last year, although the earnings projections for each company vary.

    In second quarter of this year, UACN is expected to contribute more to bridge decline in earnings potential of UPDC, while CAP would complement the group’s performance with higher earnings.

    According to the forecasts, the three companies are expected to pool total sales of about N47.08 billion while pre and post-tax profits could be N5.8 billion and N4.05 billion respectively. Both the pre and post-tax profits are flat with previous year’s projections while turnover expects modest increase of about 19 per cent.

    The forecasts underline changes in performance distribution within the group with both UACN and UPDC expected to witness declines in average profit per unit of sale while CAP is expected to see encouraging increase in average profit relative to the comparable period of previous year.

    CAP is projected with pre-tax profit margin of 32.1 per cent while 10.9 per cent and 12.1 per cent respectively are forecast for UACN and UPDC.

    According to the forecasts, CAP is expected to record profit before tax of N895 million on total sales of N2.78 billion. Net profit is estimated at N609 million.

    On the other hand, UACN’s turnover is expected to be N37.44 billion while pre and post-tax profits are forecast to hit N4.09 billion and N2.78 billion.

    UPDC projected total income of N6.86 billion. The real estate company is expected to pool profits before and after tax of N827 million and N660 million for the three-month period.

    In the comparable period ended June 30, 2012, the group had total sales of about N39.6 billion while pre and post-tax profits were estimated at N5.8 billion and N4.02 billion respectively.

    In terms of figures, UACN was expected to contribute about 65 per cent of total pre-tax profit but in real terms of profitability, it was the least profitable company within the group with a pre-tax profit margin of 12.1 per cent. CAP was the most profitable company with average profit per unit of about 30 per cent while UPDC trailed with 21.5 per cent pre-tax profit margin.

    UACN was projected to earn profit before tax of N3.75 billion on turnover of N31.01 billion during the period. Profit after tax was estimated at N2.63 billion for second quarter 2012.

    UPDC forecast turnover of N6.27 billion while profits before and after tax were put at N1.35 billion and N920 million.

    CAP was projected with net profit of N468 million from total sales of N2.30 billion while profit before tax was estimated at 681 million.

    Investors are awaiting the full-year annual reports and accounts of the quoted companies that formed the nucleus of the UACN Group. The Group had projected to pool about N13.6 billion in pre-tax profit for the year ended December 31, 2012.

    Many analysts said they expected UACN Group to surpass its earnings forecasts.

     

  • Annual report: Firms opt for e-report, notice

    Annual report: Firms opt for e-report, notice

    Several companies might send their 2012 annual reports and accounts in electronic copies to shareholders as companies seek to cut costs of shareholders’ relations.

    Quoted companies and Securities and Exchange Commission (SEC) are seeking regulatory changes to pave way for unfettered take-off of electronic-reporting scheme.

    Companies had used their last annual general meetings to sensitize shareholders and seek necessary consents, prior to take-off of the e-reporting initiative.

    Shareholders of companies under the UAC of Nigeria (UACN) Group including UAC of Nigeria, CAP Plc, and UACN Property Development Company (UPDC) had at the yearly general meetings of the companies considered amendments to the articles of association of the companies to enable the companies send annual reports and accounts and other notices through compact disc, electronic mail or web publication in addition to existing option of hard printed copy.

    Cadbury Nigeria had earlier notified that it would now distribute its audited reports and accounts and other related documents in soft electronic format rather than in paper form.

    The company said the decision to use compact disc to distribute information to shareholders was part of its desire to ensure the sustainability of environment and align with international best practice.

    According to the company, to ensure fairness and equity, shareholders will be given the option of requesting for a paper copy of these documents by exception, if they determine that they do not want to receive same in a CD format.

    Nestle Nigeria has also said it was introducing electronic delivery of annual reports and other corporate documents to ensure quick and effective access to information.

    At its last general meeting, Nestle Nigeria provided shareholders with an electronic mandate form, which would legally allow the company to send soft edition of its reports online through email address or compact disc. Nestle Nigeria’s shareholders would also be able to download all the reports from web address to be provided by the company.

    The Securities and Exchange Commission (SEC) has requested the National Assembly to amend the Companies and Allied Matters Act (CAMA) 1990 to allow electronic shares issuance, dematerialization, electronic bonus and dividends among other initiatives.

    SEC has sought for amendments to section 117 of CAMA, which gives companies the general powers to issue shares and section 125, which makes provisions relating to allotment of shares and issuance of share certificates to allow electronic issuance and allotment.

    According to SEC, these amendments would allow companies to electronically issue shares through CSCS accounts, which would enhance the dematerialisation of paper share certificates.

    SEC called for general review of sections 114 to 165 of CAMA.

    The apex capital market regulator also wanted the legislators to amend section 220 of CAMA, which provides for service either by giving the member personally or sending it to him by post or to his registered address to provide for service of notices electronically in the first instance where a member has provided an email address as a means of communication and the definition of registered address should include an electronic address.

    “Sections 83 and 84 should recognise the use of electronic registers as a mandatory backup and provide for a location of that register securely on independent servers or disks not in the premises of the company or the registrar,” SEC stated.

    SEC also called for amendment of section 379 on dividends to allow for electronic payment of dividends and subsequently full automation of dividend payment after expiration of a grace period.