UGANDA Clays recorded a sh3.8b loss last year due to a rise in the cost of production and financing, the company’s 2010 audited financial results indicate.
The report attributes the rise in losses to the high cost of commercial bank loans used to fund the firm’s expansion at Kamonkoli in Mbale.
The delay in realising income to counter the costs put a strain on the company’s cash flow needed to meet the financiers’ obligations, resulting into higher financing costs.
The losses after tax rose by 82% to sh3.8b, from sh707m in 2009 despite a 6% rise in turnover to sh17.8b, from sh16.7b in 2009.
To counter the losses, the company management has secured a long-term loan from the National Social Security Fund (NSSF), its biggest shareholders partly to re-finance the relatively high-cost loans from commercial banks.
New Vision reported in August last year, that the clay moulder was seeking a sh11b loan from NSSF at 13-15% annual interest.
The report revealed that part of the loan was used to purchase machinery for increasing kiln output at Kamonkoli, and purchase spares for the Kajjansi factory.
“The required overhaul of the clay preparation line at Kajjansi factory was not carried out due to the aforementioned strain on working capital, negatively affecting product output,” the report explains.
Earlier this year, Charles Rubaijaniza, the chief executive officer, announced plans to lay off some 189 “unproductive staff” to save the company some sh1b per annum. He said 89 workers had already been laid off.