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Kampala, Uganda | THE INDEPENDENT | Uganda Clays Ltd, the oldest manufacturer of clay building materials continues its revival trend, posting a sharp rise in profits, for the second consecutive year. The company posted 5.92 billion Shillings as profits after tax for the year 2021, which is a sharp 21 per cent increase from the 4.87 billion Shillings recorded in the year 2020.
According to the financial results for the year, the company’s revenues grew to 36.7 billion in 2021 from 29.7 billion Shillings, 50 percent short of the 72 billion Shillings that the company had planned to realise revenues.
“By the end of next year, we want to achieve 72 billion Shillings in revenue and our ambition by 2026 is to grow to 200 billion Shillings annual revenue. We are confident that we will deliver this given the support of the board and the public,” Managing Director Reuben Tumwebaze stated at the release of the 2020 results.
The increase in profits was boosted by slower growth in the cost of sales and overhead expenses. The company’s management says their performance would have been better, but that it is satisfactory considering the two years of the pandemic and the not-so-good general economic environment as well as the lingering effects of the 2021 general elections.
“Business conditions in the first half of the year remained difficult due to the continuing impact of COVID-19, which dampened an already challenging macro-economic environment. The country was emerging from general elections and was hit by a severe second wave of Covid-19 which eventually led to a second national 42-day lockdown in June,” says a statement by Board Chairman Martin Kasekende and Tumwebaze.
During the lockdown, the company faced challenges in sales and distribution as well as internal production processes due to the restrictions on the movement of persons. While the construction industry was one of the sectors left to operate, activities were affected by these movement restrictions.
However, the company says there have been improvements in efficiency across its operations. “Amidst the strong headwinds, the company has continued to focus on maintaining business continuity, increasing product inventory by improving production efficiencies while ensuring the health and safety of staff and customers,” it says.
The increase in the revenues has been attributed mainly to “improved efficiencies in production and a change in the sales model to the use of agents to reach more customers across the country.”
The company has opened up distribution points in the countryside in Arua, Fort Portal, Gulu, Hoima, Kabale, Lira, Mbarara, as well as in Bukasa, Lugogo and Ntinda, to cater for the market in and around Kampala. The use of distribution agencies enhanced the supply chain by having easier access to the market and reducing costs.
The board chairman Dr Kasekende says the current positive performance is a result of the decision made several years ago and therefore the trend is expected to be sustained. For example, in 2015, to reduce operational expenses, the company switched from using heavy fuel oil (diesel) to coffee husks, as the energy source to fire its furnaces.
“We believe this is not a one-off good performance and the company is now well-positioned to continue on the path of growth and profitability,” he said. In the beginning, even the coffee husks proved to be expensive with a kilo going for 320 shillings, but the streamlining of the purchase and supply system saw this reduce to an average of 160 Shillings.
This is also expected to go further down when new suppliers are contracted, according to management. The Managing Director also says they are improving technology to cut down on the waste that stood at 20 per cent in 2020, at both the Kajjansi and Kamonkoli factories to around 5 percent.
The operations at the Kamonkoli factory are more automated than those at Kajjansi, and management hopes to continue improving technology at both factories to improve efficiency. It is hoped that the full re-opening of the economy will enable the management to meet its projections, including revenues of 200 billion shillings by 2026 as stated by the MD at the Annual General Meeting of 2020.
This will also depend on the stability of the region for the company to increase its export sales, as well as the stability in the cost of husks, which rise sharply during the coffee off-season.
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