Unga subsidiary sale softens forex losses, profit up 31pc

Flour miller Unga Group’s recent sale of its paper packaging subsidiary boosted its full-year net profit by nearly Sh200 million, cushioning the company from high foreign exchange losses incurred in the year.

The Nairobi Securities Exchange (NSE)-listed miller has booked a Sh192.1 million gain in its books that includes the profit made after selling its 51 per cent stake in Bullpak Limited to UK-based Nampak Holdings.

This transaction was completed in September 2014 and Nampak, which already held a minority stake in the firm, has indicated in its latest annual report that it paid Sh335 million to Unga to gain full control.

“The group…through its subsidiary Unga Holdings Limited…completed the disposal of its shareholding in Bullpak Limited, a paper packaging company,” Unga Group said in an announcement of its full-year financials on Thursday.

Bullpak manufactures paper packaging products that are used by producers of fast-moving consumer goods.

The business’ volumes had progressively come under pressure from competitors, forcing the flour miller to dispose of its remaining stake and parcels of land to boost its cashflow.

READ: Unga sells land, paper packaging firm to boost cashflow

The sale bolstered Unga’s cash reserves and also dampened its high foreign exchange losses that totalled Sh186.4 million at the end of the year, representing a substantial jump from last year’s Sh15.8 million.

Finance costs also increased 54 per cent to Sh40.2 million.

“Maize grain availability improved compared to the prior year with prices remaining relatively stable over the first three quarters of the year,” the company said in the statement.

“Scarcity in the closing months (of the financial year) caused prices to increase, which has since been eased by regional inflows.”

The company’s total assets during the year increased 8.5 per cent to Sh8.7 billion, while its total liabilities increased 4.5 per cent Sh3.3 billion.

One contributor to this increase in assets value was Unga’s recent acquisition of a 51 per cent stake in Ennsvalley Bakery from Kenya’s sole inflight caterer NAS Holdings.

The transaction, which marked Unga’s re-entry into the bakery sector after exiting Elliots Bakery in the 1990s, was valued at Sh542 million.
This move is in line with Unga’s strategy to diversify its product portfolio away from human and livestock flours.

The miller last year started dealing in pulses such as beans, green grams, pigeon peas, black beans (njahi) under the brand.

“Amana” and plans to start selling premium rice this year. Unga, which has five milling factories across the country, is in the process of rehabilitating its grain silos to increase storage capacity at its Eldoret plant as well as installing a new integrated management software (ERP).