Uganda Clays to raise Shs12b for boosting production line

A structure shows Uganda Clays Limited products. The company wants to raise Shs12 billion to boost production at Kajjansi and Kamonkoli factories. FILE PHOTO

What you need to know:

Bad performance. The company has not given shareholders dividends for four consecutive years

Uganda Clays Limited (UCL) plans to raise about Shs12.8 billion ($5 million) for the Kajjansi and Kamonkoli factories as the company looks to turn around its business.

Talking to Daily Monitor yesterday, the firm’s finance manager, Ms Jacqueline Kiwanuka, said the planned Shs12.8 billion will be utilised for automating theKajjansi factory and reducing firing costs at the Kamonkoli factory by introducing gasification (producing gas from biomass).

This is in line with the company’s medium term plans to reduce production losses and improve efficiency.
Currently, drying of products is done naturally while firing especially at the Kamonkoli factory is costly due to the furnace fuel which increases production costs.

“The business needs recapitalisation and this together with the strategic interventions are what management is doing to ensure that the business picks up and eventually returns a dividend to its shareholders,” Ms Kiwanuka said.

UCL has been facing financial constraints and has not given shareholders dividends for four consecutive years due to the not-so-impressive performance.

The company further posted revenue decline for the six months ending June 30, 2014, according to the published financial statement, with its revenue falling 26 per cent to Shs9.8 billion from Shs10.4 billion posted over the same period last year.

Its gross profit on the other hand slumped to Shs1.3 billion from Shs3.7 billion while its current assets declined to Shs10.7 billion compared to Shs13.9 billion posted in the previous year. Its current liabilities on the other hand increased to Shs13.5 billion from Shs7.6 billion.

The company, in a statement, largely attributed the fall in the gross profit margin is to the consistently high firing costs and the production losses created by the worn factory machinery and spares.
The high finance costs are also a hindrance to profit realisation, accounting for 23 per cent of the gross revenue.

The poor results saw the company’s share price fall to Shs18 from Shs20 and a further drop is anticipated.

New strategy
The Uganda Clays counter has also not posted any trading since the release of results.

The company, however, noted in a statement that it has embarked on a refinancing strategy for the business to curb the effects of the debt burden and allow for major capital investment at both the Kajjansi and Mbale factories, a move that is expected to result into a significant reduction in the financing costs and the overall costs of production.

Although it is not yet clear how the company will raise capital, the Board is considering a number of options that could be used considering that Uganda Clays is a listed company.