KAMPALA: For the second consecutive year, Uganda Clays Ltd, the oldest manufacturer of clay building materials, continues its revival trend by posting a sharp rise in profits. Profits after tax for 2021 were Shs5.92 billion, a sharp 21% increase from the previous year’s Shs4.87 billion .
Revenues rose from Shs29.7 billion to Shs36.7 billion in 2021, but the company didn’t make the Shs72 billion that it had planned to make.
By the end of next year, we want to achieve Shs72 billion in revenue, and our ambition by 2026 is to grow to Shs200 billion in 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. People at the company say their performance could have been better, but that it’s good given the two years of the pandemic, the bad economy, and the effects of last year’s election.
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. According to a statement by Board Chairman Martin Kasekende and Tumwebaze, “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.”
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 people. When these restrictions on movement were put in place, the construction industry was one of the few businesses that could still work.
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 and increasing product inventory by improving production efficiencies while ensuring the health and safety of staff and customers, it says.
The increase in 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, Forportal, 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 Shs320 billion , but the streamlining of the purchase and supply system saw this reduced to an average of Shs160 shillings billion .
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 waste, which stood at 20 percent in 2020 at both the Kajjansi and Kamonkoli factories, to around 5 percent.
This will also be dependent on the stability of the region in order for the company to increase its export sales, as well as the stability of husk prices, which rise dramatically during the coffee off-season.