Uganda Clays warns of loss, three years after returning to profitability

Roofings and building material manufacturer, Uganda Clays Limited (UCL) has warned shareholders of an expected loss during its half year results.

In a notice published yesterday, Mr George Inholo, the UCL managing director, said the company is expected to make a loss in its half year results attributed to operational challenges.

“It is expected that the company shall record a loss attributable to the shareholders for the period of January-June 2019 as compared to a profit for the same period in 2018,” the notice reads in part.

The loss, he said, was a culmination of reduction in revenue, which was spent on fixed costs, specifically on annual maintenance of the Kamonkoli factory, in eastern Uganda, which closed for one and a half months.

The closure, UCL noted was longer than expected.
Uganda Clays also said that a reduction in the firing capacity occasioned by scarcity of the main fuel source – coffee husks due to the current offseason in the country, had affected the company’s operations and income.

In May, Uganda Clays issued a cautionary notice, asking shareholders and the general public to exercise caution while dealing in its securities.

The caution followed a delay to release the company’s results for the year ended December 31, 2018.

Listed companies are required to publish details of their financial results before the end of April.

However, Uganda Clays had until May not published its resulting attributing the delay to pending assessment of the effect of flooding of its Kamonkoli factory, devaluation of some of its plots of land affected by the Kampala-Entebbe Express and loan and interest due to National Social Security Fund (NSSF).

In its half year results in 2018, Uganda Clays recorded an increment in revenue raising Shs14.4b from Shs12.8b in 2017.

However, the company’s profit in 2018 half year dipped to Shs1.2b from Shs2.1b during the same period in 2017, attributed to increase in distribution costs in a bid to increase accessibility of the products.

Uganda Clays woes
The company has suffered under a largely huge investment - Kamonkoli factory – whose capacity has not held up projected returns.

In May, Mr Inholo said the company grappled with flooding of the Kamonkoli factory, resulting from a long running road construction and the devaluation of the value of some the company’s plots of land.

The company has also struggled to repay loans due to NSSF, of which about Shs23.2b is NSSF’s debt that is in the process of being converted into equity.

This will turn NSSF into Uganda Clays’ largest shareholder with a 50 per cent stake. NSSF currently holds a 32.5 per cent stake in Uganda Clays followed by National Insurance Corporation, which holds about 17.8 per cent.

Negotiations for the conversion of the loan, whose deadline was the 2016/17 financial year, are still ongoing.