Machinery Failures Push Uganda Clays Back Into Loss Zone

Uganda Clays, which returned to profitability three years ago, is set to report a loss for the period ending December 2023 due to machinery breakdowns affecting product supply. This marks the second instance in a year where the company faced a shortage in products, impacting sales revenue. The breakdown, worsened by unfavorable macroeconomic conditions, including high inflation and shilling depreciation against the Euro, affected operating and production costs, leading to a negative bottom line.

Uganda Clays, in a notice to shareholders, highlighted the caution needed in trading its securities. The loss breaks the positive revenue trend since 2019, with the company facing challenges such as production inefficiencies, market dynamics, and increased competition from alternative construction material manufacturers.

The company struggled with product shortages amid pressures from a large loan portfolio, with significant funds directed towards debt repayments. Despite a decline in revenue from Shs18b to Shs13.3b in H1 2023, assets increased by 1 percent to Shs77.6b due to ongoing capital investment in manufacturing plant capacity enhancement projects.

Uganda Clays continues efforts to rejuvenate its manufacturing infrastructure, focusing on increasing production capacity. However, challenges persist, particularly in the Kamonkoli plant in Mbale, impacting the company’s aggregate assets value. The company recorded a 25 percent drop in profits in the period ending December 2022, signaling ongoing difficulties.

Analysts, including Mr. Paul Bwiso and Mr. David Bateme, emphasize Uganda Clays’ importance as an enduring stock with positive projections, underpinned by the growth in the construction sector. Investors remain committed for long-term returns, and the current financial challenges are perceived to have minimal impact on the company’s stock.