Milling & Distribution Issues: While wheat is now being milled at 100%, it tends to fluctuate in other months as they compete with other buyers for grain especially during the festive season.Maize mis being milled at 60-65% of capacity as more and more, maize is moving to the informal sector, and small Chinese mills.
Tax Status: What is the effect of the tax reclassification of the company’s products from exempt to zero status? Unga products are now exempt (no longer zero-rated) which means they can no longer reclaim the tax back from the government - so they have to pass it on to consumers (higher prices)
Uganda: The companybought the 40% balance of the business in Uganda they did not own, as the minority shareholders was not willing to put in anymore money while the business was struggling. Since takeover, they've been trying to add value to products, but this is more difficult since July 1 when the Uganda government imposed a 10% duty on wheat imports (all wheat is imported), also have also imposed 18% VAT. The results is that wheat flour is informally imported to Uganda, and big millers are downsizing staff and cutting back on grain procurement.
Breakdown of Other Income: Other operating income was Kshs 281 million, of which 189M was revaluation of pension assets (thanks to a good the stock market. Directors saidsale of gunny bugs (collected over time) accounted for most of the balance, they will provide a detailed breakdown from next year.
Finance Costs:Why increased borrowings and why the low returns on investments? A new wheat mill was commission on November 2 and is producing quality wheat meaning fewer stock outs. Also the fixed deposits which were earning 6% in 2012, are now getting 12% this year.
Swag: As usual, shareholders asked about increase of dividends, but also for the company to give bales of flour as a Christmas gift to shareholder. The chairlady said that this had been done in past years when the company did not have ample cash for dividends, and the board’s current preference was to work to increase the cash dividend paid out.