Unga Group to sell baking business in cost-cutting plan - VIDEO

Unga Group PLC #ticker:UNGA is set to exit baking business for the second time with the sale of Ennsvalley Bakery to a logistics company, just a decade after it acquired it.

The company will be selling its bread business to BigCold as it seeks to cut costs and improve efficiency.

The Nairobi Exchange-listed company had in 1990s sold its stake at Elliots Bakery and acquired Ennsvalley, the makers of premium bread in 2014 as it sought to diversify its income and cut overreliance on milling of maize and wheat flour.

“Following discussion, BigCold Kenya Limited and Ennsvalley Bakery Limited… have entered into an asset purchase agreement on July 26, under which, subject to satisfaction of certain conditions and upon completion, Ennsvalley shall sell and BigCold shall purchase Ennsvalley’s assets,” said Unga Group in a notice.

The sale of the bakery business comes at a time when bakers are struggling with high cost of production amid low demand for bread due to reduced purchasing power by consumers as a result of decreased income.

The cost of wheat at the international market, where Kenya acquires over 75 percent of its annual needs, has gone up by nearly 30 percent, prompting a price rally on the price of bread.

The company has been grappling with competition in the baking business from firms like mini bakeries, retail chains like Naivas and Quickmart as well as established bakers like Broadways, whose cost of bread is lower when compared with Ennsvalley high-end variety.

The human and animal nutrition grain business accounts for 49 percent and 51 percent of the Group’s revenues respectively.