Unilever in talks with Nakumatt on supplies cut

Shoppers at Nakumatt Mega along Uhuru Highway. FILE PHOTO | NMG
Shoppers at Nakumatt Mega along Uhuru Highway. FILE PHOTO | NMG 

Food and personal care company Unilever says it is in talks with supermarket chain Nakumatt to restore supplies to the retailer.

The consumer goods maker cut supplies of all its products including Blue Band margarine, Omo washing powder, Vaseline petroleum jelly, soaps such as Lifebuoy, Geisha, Rexona and Sunlight, citing non-payment of dues.

“Unilever and Nakumatt are currently engaged in contractual discussions, the subject of which is confidential hence details cannot be disclosed to the public,” Unilever said in a response to Business Daily queries.

The Anglo-Dutch firm, however, declined to reveal how much it is owed by Nakumatt. Unilever, which also makes Royco and Knorr stew mix, said supplies to Nakumatt will resume “as soon as the discussions, which are in the final stages, close.”

Nakumatt declined to comment on this story, but has previously acknowledged that it was facing stock outs related to delayed payments to suppliers.

The supermarket chain is awaiting a $75 million (about Sh7.7 billion) cash injection from an unnamed private equity fund which is eyeing a 25 per cent stake in the regional retailer.

In Uganda, aggrieved suppliers and landlords have taken Nakumatt to court seeking to be paid their dues grossing $0.5 million (about Sh515 million).

Nakumatt has in recent years been on a debt-funded acquisition spree, which saw the chain take up space in multiple new malls, but chalked up financing costs and hampered free cash flow.

This saw Nakumatt’s gross debt more than quadruple in as many years to Sh18 billion in the half year to August 2016, from Sh4.2 billion in 2011.

“Growth of the business has been highly leveraged, with the ever-growing working capital and capex requirements having been largely funded through short term debt,” said ratings agency GCR which downgraded Nakumatt long-term rating to BB-(KE) in December 2016 from BB(KE).

Nakumatt gross sales grew to Sh51.6 billion for the fiscal period ended February 2015 compared to Sh48 billion a year earlier. But surging finance costs have eaten into Nakumatt’s earnings, with gross profit dropping to Sh305 million as at February 2015 compared to Sh823 million in 2013.