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Food processor Unga Group’s share price has fallen to a nine-year low of Sh21.85, at a time when the milling sector has been experiencing high input prices and increased competition that threatens sales growth.


The miller’s share on Thursday closed at its lowest level since February 13, 2014 (Sh21.75), having shed 29.5 percent of its valuation since the start of this month.


On a year-to-date basis, the stock has retreated by 31.7 percent.


Analysts said the sector has been hit by uncertainty over planned duty-free maize imports amid a biting drought that has affected grain supply, with high input prices also eating into the margins of millers.



In the animal feed segment, high input costs that are passed on to farmers have forced many to turn to alternative feeds for their livestock, hurting the formal millers.


“Millers make money from volumes. It is a low-margin business,” said Genghis Capital analyst Wesley Manambo.


In the year ending June 2022, Unga’s sales rose 1.2 percent to Sh18 billion, but higher costs saw the company report an operating loss of Sh502 million, reversing an operating profit of Sh616.2 million a year earlier.


Unga, however, saw its net profit grow to Sh311.3 million from Sh293.4 million, benefitting from a one-time gain of Sh802.5 million from the sale of its Ennsvalley bakery business.


For investors, the stock has also had a dividend drought, with the company last paying out a share of profits to its shareholders in 2019 (Sh0.50).


At the Nairobi Securities Exchange (NSE), dividends have become a key consideration for investors due to a lack of capital gains on most stocks on the back of a prolonged bear run.


Covid-19 in 2020 and 2021, and the Russia-Ukraine conflict have weighed negatively on the stock market.


Over the past one year, high inflation which has been partly caused by the Ukraine war and constrained supply chains has forced key economies such as the US to raise interest rates, in turn drawing capital from smaller markets that are deemed less safe in times of global economic difficulties.


Business Daily Africa

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