Uganda Clays losses hit Shs5b

Uganda Clays Ltd products on display at the factory in Kajansi, Wakiso District on Monday. The company’s assets outdtripped its liabilities in 2014. PHOTO BY STEPHEN WANDERA

What you need to know:

Cause. Operational expenses on furnace oil explain the losses

Kampala.

Troubled clay products manufacturer, Uganda Clays, has for yet another year been in the red, after the company announced Shs5b loss in 2014. This is a further expansion of losses from the Shs3.9b in 2013.

The company blamed the rise in losses to operational expenses that come in form of furnace oil used to dry the clay products at their factory in Kamonkoli, Budaka District.
“The cost of furnace oil remained a hindrance to profit realisation in the business.

However, a cheaper alternative to furnace oil was implemented in the last month of the year. It is expected that significant cost saving will be realised from this charge during 2015,” a statement from the company reads.

This move was announced to shareholders in October 2014. The management of the company noted that by switching to coffee husks, it would save the company about 50 per cent of production costs.

The company is also set to lay off about 40 employees to cut operational costs.

The company also admitted that despite the competitive market, it was at least able to realise a slight increase in income from Shs21.1b in 2013 to Shs22b in 2014. However, this income was depleted by increased costs of production especially at the plant in Kamonkoli.

Uganda Clays manufactures roofing tiles, max pans, interlocking bricks and ventilators, among others. Its dominance has continued to shrink overtime from a market share of about 70 per cent to now less than 50 per cent, according to company officials.

Indebtedness has prevented the company from growing as income realised goes to pay off loans. The current level of indebtedness stands at Shs19.4b, up from Shs15b in 2013.

The bulk of this money is owed to National Social Security Fund (NSSF), the largest shareholder in the company. Admittedly, Uganda Clays points out that this loan has been hard to pay back.

“The finance charges have persistently strained the company’s financial performance. The bulk of these charges relate to the existing shareholder loan,” the statement from the company further reads.

NSSF is currently engaged in negotiations with Uganda Clays to convert this debt into more shares in the company, with hope that this will free-up money initially spent on paying interest on loans to investment. Although some shareholders approved this move at the Annual General meeting held in October 2014, others have contested the move in court.

Auditor’s warning
Jim Roberts Public Accountants, the Uganda Clays independent auditors, noted that the company’s liabilities continue to outstrip its assets.