The National Social Security Fund-NSSF has taken a decision to save Uganda Clays limited. In 2007, Uganda Clays borrowed from Standard Chartered Bank and the East African Development to expand operations and put up a 36 billion Uganda Shillings plant in Kamonkoli, Budaka District.
The loans weighed heavily on Uganda Clays that it was failing to meet the obligations. In 2010, NSSF, the largest shareholder in Uganda Clays lent 11 billion Uganda Shillings to clear part of the debt to the commercial, but according to the fund, they have failed to pay back this loan. Uganda Clays currently owes NSSF 15 billion Uganda Shillings.
On Friday, shareholders of the 64 year Uganda Clays sighed with disbelief when the auditors remarked that Uganda Clays future was uncertain. Uganda Clays posted a 3.22 billion loss in 2013. “The conditions, along with other matters…indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern,” Ernst and Young, the auditors remarked to shareholders.
This is partly due to debts totaling 21.7 biliion Uganda Shillings, according to the financial statements of Uganda Clays. As a result of this, NSSF has moved to convert the debt into equity and increase its stake in the clay products to the manufacturer to about 66 percent.
Dr Martin Aliker, the Chairman Uganda Clays told stakeholders the move is aimed at saving the company from the current debt burden.
This decision was confirmed to other shareholders by the Geraldine Ssali, the Acting Managing Director NSSF.
To the relief of shareholders, they were mostly positive about the move by NSSF and are willing to take the hit as NSSF increases its stake. In the last four years, shareholders have hardly received a dividend for their shares due to losses because of debt, high costs of production and competition.
In fact, George Inholo, the Managing Director admitted to shareholders that “competition has been a reality.” Adding, “Partially, our results were depressed by aggressive competition where price wars are the order of the day.”
In order to bring the costs down, the company has also moved from using heavy fuel oil at the Kamonkoli Plant to the use of coffee husks. This, the company management believes will reduce costs of production in Kamonkoli by almost 50percent. Company financial statements show that Uganda Clays had revenue of 5.7billion Uganda Shillings in 2013, but made losses of 7.4billion Uganda Shillings.
Further overhaul in the business has been the appointment of a new CEO, George Inholo to lead the company into the profit zone again. Other new appointments in the management team include a marketing director, finance director and human resource.
Richard Byarugaba, the former NSSF Managing Director and a shareholder in Uganda Clays has also been appointed to the board. Byarugaba was the NSSF MD in 2009 when Uganda Clays received the loan from the fund. According to shareholders like Abel Rwendaire, Byarugaba’s experience will be needed in the transition process Uganda Clays is going through.
Most shareholders attended the AGM to get answers on why their company wasn’t performing well, and they left the meeting with a glimmer of hope that the latest developments will bring dividends back to their pockets. The Uganda Clays share price has been largely depressed, falling from 120 Uganda Shillings in 2010 to 20 Uganda Shillings currently.