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Uganda Clays Returns to Making Profit

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Uganda Clays Ltd, Uganda’s oldest clay building materials manufacture, has returned to making profit despite a slight decline in revenues in year ended December 2020, according to the financial statements.

The company reports that profit after tax for the period increased by 5639% to Ushs 4.9 Billion from a loss of Ushs 88.4 Million that was registered in 2019.

The directors and management of the company expressed delight that the turnaround was recorded in a year that has been difficult for all sectors in Uganda and globally due to the effects of the Coronavirus (COVID-19) pandemic, a sign that it will stabilise.

“The year 2020 was unprecedented because of the impact of the COVID-19 pandemic on most businesses. Despite the tough times, the company’s business continued to show resilience but was not immune to the impact of the COVID-19 pandemic,” says the statement.

The Kajansi-based company company says that their main focus throughout the year was maintaining production to build inventory and employee safety. UCL, which is listed on the Uganda Securities Exchange, saw the revenue decreased by 3% to Ushs 29.7 Billion for the period compared to Ushs 30.7 Billion in the year 2019, notably due to business disruptions impacted by the Covid-19 pandemic.

The increase in profit amidst decline in revenues was due to a sharp reduction in the cost of sales. This declined to Ushs 16.1 billion from the 21.3 billion that was recorded in the previous year. In 2019, the high loss was attributed to among others, the increase in the cost of doing business due to factors like scarcity of husks used for heating, as well as outsourcing of casual workers.

In the same year, the company also registered an increase in salaries and wages due to recruitment for offices that had not been occupied. And the Board then correctly forecast that this was a temporary problem that could be solved by proper planning and execution of activities such that the Company could return to profit. Like many other enterprises in various sectors, in 2020, costs declined especially as workers were either laid off, sent to work from home, or told to accept pay cuts. 

“Gross profit for the period increased by 43% to Ushs 13.5 Billion from Ushs 9.5 Billion recorded in the year 2019, driven by cost management initiatives put in place during the year resulting in a decrease of production costs.” In all, the cash generated for the period from operating activities fell Ushs 6.1 Billion compared to Ushs 6.3 Billion over the same period in 2019 due to a decline in sales as a result of the impact of covid-19 on the business.

While the company notes that the business environment remains uncertain, it will still give its shareholders Ushs 1.35 for each share as dividends for the year. “Taking into consideration the current uncertainty of the business environment and the need to invest in the business to improve production capacity and product quality, the Board of Directors recommends a dividend payment of UGX 1.21 Billion (UGX 1.35 per share) for the year ended 31 December 2020.”  

The return to profit should come as good news to investors as it should boost the share price of the company, which has dropped 11% over the last one year to Ushs 8 currently.