UAC of Nigeria Plc last week held an earnings call following the release of its audited FY 2024 results.

Management provided some colour on its FY 2024 dividend (which was quite small), plans for the QSR unit (Mr Biggs) among other topics.

All quotes are by Group CEO Fola Aiyesimoju

On the dividend policy 

In trying to decide on a dividend to propose to shareholders for approval, it was a difficult discussion .
We tried not to shy away from difficult decisions if they are in the best long term interest of the company, even where these may be unpopular in the short term. In hindsight, some of these decisions have proven to be correct. 
Those who have followed us for a bit longer, will recall  that In evaluating dividends we consider stability. We don’t want to have dividends moving up and down the place.

We previously shared our approach to maintain 22 kobo. Unless a change was justifiable and sustainable. In looking at 2024 performance, we are very confident that a higher dividend can be established and maintained 
Where we see compelling opportunities to reinvest at attractive returns  we will pursue them. Current conditions may present such opportunities and preserving cash gives us the ability to act decisively should this emerge. 

In essence, the firm is sitting on dry powder. Dry powder represents the liquid assets and cash reserves that investors, companies, or funds set aside for future investment purposes

Paints business and FX revenue opportunities

Opportunities to generate foreign exchange are Marine and protective business. 5% of CAP business ,but its growing

Regionally choose Cameroun as first port of entry. Started exporting from Nigeria. In the process of putting up an entity there.

Work is moving at speed, perhaps a bit slower than we would have liked given the need to set up properly in the country. The nearer term opportunity will come from scaling the marine and protective business. 

Could there be an interim dividend?  

The short answer is we don’t know. We strike a balance between returning cash to shareholders and investing…. we feel there are a number of opportunities that are emerging and we need to preserve maximum optionality to exploit should they come through.

We hope we are successful. If we are not, we would have to reevaluate our cash needs to investment opportunities and make a decision then. Nothing has been decided around what we may or may not do around dividends in the future. 

Nigerian consumer demand 

Nigerian consumer demand is changing. Depends on the timeframe you frame the question. If you take a 5 year view. The first 3, 3.5 years, consumer purchasing power was declining…..

Over the last 12 to 18 months, we have seen a reflating of consumer spending power. This is a positive trend that we hope to see going forward over the medium term. 

Capex requirements

We have 3 big segments: Edibles Food , Agro allied, Paints

All growing fast  both topline and profitability. They have different characteristics

• Food and agro allied have much bigger market opportunities. 

• Paints more profitability  and Return on Invested Capital (ROIC) 

They also behave differently under different economic circumstances. We like the diversification that they bring. All performing well and have exciting opportunities. 

Regular or steady state capex. Rolling out colour centres. Replacing equipment. Adding packing lines. That happens almost relatively evenly across businesses. 

The one based on its growth, that’s demanding a disproportionate share of capex is our food business. Given how fast the volumes there are growing. 

On the restaurant business (Mr Biggs)

Restaurant business remains challenging and loss making due to its subscale nature. Expansion has been slower than planned. We continue to strengthen the leadership of the business and be thoughtful around new location rollouts and shutting down underperforming ones. We are mindful not to devote too much executive time to this business. 

Where will it be in the next 4 years?

The answer will depend  very much on our ability to execute our strategy. We found that when you get an individual store right, the economics are quite attractive for that individual store.
Given our view that the decline in consumer purchasing power has at least stopped and perhaps turned. We expect to see a bit of a tailwind in that unit of the business that’s more on the discretionary side. 

We have funding. We we are being very thoughtful about where will put those stores and they perform.