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Uganda Clays switches investment to machinery to recover from losses

Uganda Clays workers on duty

Uganda Clays workers on duty

Uganda Clays Limited is to invest in purchasing and installing new equipment following its below-par financial performance in the year ending December 2023, where its revenue declined by 17 per cent from Shs 36.6 billion in 2022 to Shs 30.4 billion in 2023, writes ERNEST JJINGO.

The company attributes its decline in revenue to a decrease in the efficiency levels of equipment at the Kajjansi plant, resulting in lower production volumes and output of major products in the second and third quarters of 2023.

The manufacturer of baked clay products made a net loss of Shs 2.85 billion in 2023 compared to the net profit of Shs 2.4 billion in 2022, and the gross profit cost of sales amounted to Shs 21.8 billion in 2023, 0.5 per cent lower than Shs 21.9 billion in 2022. This decrease was also attributed to reduced production volumes resulting from increased machine breakdowns.

Because of this loss, the company has not been able to pay a dividend to its shareholders for the fiscal year 2023 since the earnings per share decreased to minus 3.17 from 2.71 in 2022. In 2022, the company paid out a dividend of Shs 0.5 per share to its shareholders.

During the company’s annual general meeting at Kampala Serena hotel last Friday, Uganda Clays managing director Reuben Byaruhanga Tumwebaze noted that equipment integrity and machine breakdowns hit them hard in 2023, negatively impacting their operations, and because of this, the average turnaround time for delivery of products increased from a three-day average in 2022 to an average of 45 days in 2023, which affected their customer satisfaction.

He, however, noted that to address the ageing condition of the Kajjansi plant and its machinery, the company has invested Shs 7.9 billion into its capacity expansion project and is seeking external financial support to further the commitment of improving production capacity and quality of products.

“One of the main challenges we faced was the nature of our equipment. Our plant at Kajjansi, which is the biggest, has a very old set of equipment, but the good news is that during the last half of last year, we installed two new tile presses, and by the end of August this year, we shall be installing another one. So, we shall be having three new tile presses with bigger capacities, which will increase the efficiency levels, resulting in higher volumes and better quality of products,” Tumwebaze said.

He added, “Additionally, two years ago we started a project of setting up a completely new automated tile line. We bought the new equipment from Italy, which started arriving last year, and out of that equipment, we are installing the preparation machines that grind the clay because it was very old and breaking down regularly, and soon we shall be installing the new drying and baking machinery.”

Tumwebaze noted that this investment is already paying off as they achieved improvements in production performance in the last quarter of the year 2023, where output went up as well as increased monthly revenues, and they expect to have full benefits from the new tile presses this year.

In line with the new tile line project, the company last year acquired seven acres of land in Kajjansi through a renewed lease for the next 50 years where the new plant is going to be installed. This, he said, will help to increase the net availability index of their machines from the current 55 per cent, which is by world standards very low, to around 75 to 80 per cent.

“2023 was a complex year for Uganda Clays Ltd. However, our reputation and strong position in the construction and building materials sector mean we still have a prosperous future. Despite recent challenges in operations, I would like to reassure our shareholders and all stakeholders of our continued commitment to returning the company to profitability while staying true to our heritage of offering sustainable building solutions,” an optimistic Tumwebaze reassured shareholders.

To finance the acquisition of the critical spare parts, the company obtained a short-term loan facility of Shs 1.6 billion (Shs 1 billion as a loan and Shs 0.6 billion as an overdraft) from Stanbic bank.
   
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