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Why Uganda Clays recorded Shs722million loss

Performance was dented by routine factory maintenance and spikes in operating costs

Kampala, Uganda | JULIUS BUSINGE | Clay products maker, Uganda Clays Limited, has recorded a Shs722million loss. But company officials say the future is bright. Financial results released on Sep.04 indicate that the loss in question was for the period ended June 30, 2019.

It is partly attributed to reduced production and increased operational cost.

The company’s cost of sales increased from Shs8.6bn to Shs11.2bn. Last year, the listed firm recorded a Shs1.2bn net profit and another Shs14.4bn net profit was made in 2017. It however recorded an increase in total revenue from Shs14.4bn to Shs14.9bn during the period under review.

This comes as competition in the clay products for the building and construction industry is increasing owed to entry of new players and imports. George Inholo, the managing director and Martin Kasekende, the Chairman Board of Directors at UCL said in a notice that the decline in profits was attributed to a routine machine shutdown at the Mbale based – Kamonkoli plant for maintenance and a reduction in the firing capacity occasioned by scarcity of the main fuel source – coffee husks.

The firm’s increase in the overhead costs, officials said, was attributed to legal costs incurred in the pursuit of compensation from Uganda National Roads Authority for the compulsory acquisition of company land at Kajjansi, and an increase in internet costs following the connectivity and integration of all the sales locations to the head office as part of the implementation of the Enterprise Resource Platform (ERP).

However, the company’s current assets remained flat at Shs23.4bn in the first half of 2019 compared to the same figure recorded in the same period last year.

On the other hand, liabilities reduced from Shs4.6bn to Shs4.4bn during the same period under review. The company’s share price has largely remained unchanged at average of Shs14 per share.

The firm remains strong

Amidst the loss for the first half of this year, Inholo says the company remains strong and determined to continue taking lead in the clay products business.

He says they are using a production approach that is largely market driven as well as strengthening the distribution points through dealers. The firm has recently opened up distribution points in Arua, Lira, Gulu, Hoima, Mbarara, Fort Portal, Kabale and several others in Kampala Ntinda, Lugogo, Bukasa areas in bid to get closer to the customers.

More selling points are expected to be opened in the due course, according to Inholo. “With these outlets, our customers don’t need to come to our manufacturing points,” Inholo told The Independent in a recent interview. He said the firm is working on new products to match the changing tastes and preferences for customers. Other areas the company is working on to improve are health and safety for staff.

The company also wants farmers to grow more coffee to be able to get more coffee husks used in the making of the products.

Key facts and figures

UCL has been in the business of manufacturing quality baked clay building products since 1950. It became publically owned after listing on the Uganda Securities Exchange in 2000. It uses hoffman kilns to currently provide the building materials in a brick –red color. It operates two factories – Kajjansi which churns 300 tones of clay a day and Kamonkoli which does 200 tons a day. The company exports to South Sudan and the Democratic Republic of Congo and is exploring other new markets in the region. The company’s total number of staff is 325. It controls about 60% of the clay sector business in Uganda. It also features among the top 100 taxpayers in the country.

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