UACN cuts stake in logistics business in quest to boost cash flow, profitability

UAC of Nigeria, one of the leading diversified companies in Nigeria, has announced that it has entered into an agreement to sell 8 percent of its 51 percent stake in its logistics subsidiary, MDS Logistics (MDS), to South Africa-based Imperial Logistics as the company looks to boost its profitability as well as its liquidity.

The deal which is worth $2.4 million, will see UACN lose its control and influence in MDS as Imperial Logistics will see their stake increase to 57 percent.

Although it is not yet clear when this transaction is likely to be concluded, however, the move by UACN does not come as a total surprise given that it appears to be in line with the new management’s restructuring agenda as the company looks to intensify its revenue surge and cut loose of some deadweight investment portfolios.

In the past few years, the company has exited from its pension business (UNICO CPFA) and its Water processing activities (WSWNL). The company’s real estate subsidiary has also opted to sell-off a hotel, UPDC Hotel Limited (UHL).

In its unaudited first quarter results for the period ended March 31, 2019, UACN grew its revenue by 12.64 percent to N20.62 billion from N18.31 billion. It also recorded an outstanding profit after tax growth of 66.52 percent to N995.98 million

Speaking on the deal and what lies in stock for UACN in the nearest future, Fola Abimbola of FBNQuest stated that the transaction will see a boost in the cash flow and profitability of the company in the short-to-medium term and he anticipates more restructuring activities going forward.

Abimbola said, we expect profitability and cash flow to receive a boost from net sales proceeds in the near-to-medium term. Looking ahead, we expect to see more restructuring initiatives coming from management, particularly in the struggling real estate business.