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Uganda Clays draws new plan to repay NSSF’s Shs20.6b loan
Uganda Clays borrowed just Shs11b from NSSF but due to non-payment and interest accumulation, the loan ballooned to Shs20.6b. Photo / File
What you need to know:
- Uganda Clays says it has established a new production line that will allow it to make deposits on NSSF’s Shs20.6b loan every six months beginning 2025
Uganda Clays has said it has worked on a new repayment schedule that will allow it to repay a Shs20.6b loan due to National Social Security Fund.
The debt remains a huge burden on the company’s books, whose repayment has caused serious challenges for the building material maker.
However, Uganda Clays said during its annual general meeting that it had established a dedicated production line, whose revenue returns will partly go towards repayment of the loan between the next five and seven years.
The schedule is expected to start next year, with Uganda Clays saying repayments will at least be done every six months. Initially, the debt was Shs11b but due to default and interest accumulation, it blew to about Shs20.6b.
Speaking on the sidelines of the annual general meeting, Mr Martin Kasekende, the Uganda Clays chairman, said the ongoing installation of a new production line is projected to generate sufficient revenues that will be directed towards repayment of the NSSF debt.
NSSF remains Uganda Clays’ largest shareholder with a 40.5 percent stake.
The Shs20.6b has been a subject of debate. At one point NSSF had indicated it would turn the debt into equity. But the move has since stalled.
In 2016, NSSF had also indicated it would sell a part of its stake in Uganda Clays as an attempt to cut back on losses derived from unrealised income.
However, the partial sale failed to materialise for more than two years, after the search did not return any buyer.
The failure was linked to poor performance that had condemned Uganda Clays to years of losses, before it returned to profitability in 2020.
During the annual general meeting, NSSF was not represented but people familiar with the matter, said the Fund was okay with the new repayment schedule.
This is the first time Uganda Clays has offered a schedule and a source from which money will be generated to repay the more than 12-year loan. It was not immediately clear when the dedicated production line will start.
Uganda Clays has suffered years of losses resulting from a less than planned return from the Kamonkoli factory, which the company launched in the late 2000s.
However, due to a number of interventions, Uganda Clays has since returned to profitability even as returns continue to be low due to heightened competition, rising cost of production and dampened demand, among others.
During the annual general meeting, Uganda Clays indicated that for a third year in a row, it would pay out dividends, coming on the back of positive results during a difficult year.
During the period ended December 2022, Uganda Clays said, shareholders would receive a dividend payout of Shs0.5 per share, coming on the back a relatively profitable year in which the company posted a net profit of Shs2.4b.
However, the Shs0.5 payout would be a reduction from the Shs1.5 per share paid out in the same period in 2021.
