UAC of Nigeria PLC (UACN) Earnings Call Transcript & Summary

Good morning and good afternoon, ladies and gentlemen. Welcome to UAC of Nigeria PLC Half Year 2025 Results Conference Call. Please note that this call is being recorded. This conference call will be hosted by: Fola Aiyesimoju, the Group Managing Director of UAC of Nigeria PLC; and Funke Ijaiya-Oladipo, the Group Finance Director. Following prepared remarks by UAC's management team, there will be an interactive Q&A session. I will now hand the call over to Fola Aiyesimoju. Please go ahead.

Thank you, Cynthia. Good day, and thank you for making time to participate in our half year results call. Funke and I will go through prepared remarks and leave sufficient time for questions. On Wednesday, 30th July, we announced the acquisition of Chivita/Hollandia, CHI Limited from the Coca-Cola Company. On account of this important milestone, our prepared remarks will be longer than usual as we will recap our strategy and provide context to this acquisition. Please turn to Page 5. At the beginning of our journey at UAC, we set out 3 phases of value creation: people, structure and growth. While we have by no means progressed neatly from one phase to the next, the acquisition is an account of our having made good progress on the first 2 foundational phases being people and structure. Slide 6 provides an overview of some of the leaders across our group. We have amazing talent to [ fit and pick ] on one page, and this is by far our greatest strength. We continue to devote time and energy to attracting, developing, retaining and incentivizing the most talented individuals we can find. To my colleagues, thank you. It's wonderful to work with and grow with you every day. You may also recall that we set out to accomplish a number of things under the structure pillar with the main focus areas being to simplify our group, revamp our IT architecture, institutionalize management tools and processes and to strengthen risk management, governance and controls. Here again, we are by no means done, but we've made decent progress. Slide 7 depicts the group structure a few years ago. On Slide 8, our progress towards simplification. Our work here is not done, and we'll continue to find ways to further simplify our structure. Slide 9 provides a brief outline of our investments in technology. We started with the foundations, implementing SAP S/4HANA as our enterprise resource planning tool and move to the cloud-based Office 365. We established a technology hub to develop bespoke solutions to meet our business needs, and we're excited by early results. We are developing a set of tools, which once completed, will be a guide for how to run the UAC company. There are too many to touch on individually. However, they include how we run our talent reviews, performance reviews, buying committees, pricing meetings and the like. It is crucial to note that we do not mandate these to our chief executives. We provide the tools and they can adopt them as they deem fit. Some of these are briefly outlined on Slide 10. Finally, and extremely importantly, under the structure pillar has been our work strengthening risk management and controls across our businesses. Highlights of our efforts are briefly summarized on Slide 11. We have strong risk and compliance teams across our companies as well as strong internal strong internal audit team centrally that focus on creating frameworks to prevent risk events versus reporting them when they occur. Of course, we make several mistakes, and we aim to learn fast from them and prevent recurrence. We are fortunate that our efforts have begun to yield results. Slide 8 shows the naira devalue at a compounded annual growth rate of almost 30% -- I guess not a growth rate, it's a compounded annual decline rate of almost 30% over the course of our leadership. And in this time, we've grown our operating earnings at a compounded annual rate in dollars of 11%. It's much, much higher naira. We are thankful to you, our investors, for your support and backing through this journey, which was anything but straightforward. This support has resulted in our share price meaningfully outperforming the indices as outlined on Page 14. This brings us to the announcement of 30th July. Please turn to Slide 15. A few years ago, probably in 2022, we spent time reflecting on the parameters for acquisitions, which we knew would form in addition to organic growth, the third phase of our value creation journey after people and structure. We're certainly not ready at the time, but we felt it was important to plan ahead. And this slide is a simplification of our thinking at the time. We mapped opportunities essentially by familiarity and there are 2 broad dimensions, familiarity of geography and familiarity of the business model. And we decided that we would focus on the familiar and as such, we narrowed ourselves to seek acquisitions in Nigeria in sectors we are familiar with. In this slide, the acquisition of CHI Limited, as described briefly on Slide 16, fits perfectly with strategy. The acquisition is subject to regulatory approval, and as such, we cannot provide additional comments at this stage aside from what has been included in the announcement and in these materials. And CHI Limited owns amazing brands with market-leading positions in the value-added dairy, juices, nectars and still drinks segments as well as in the snack segment. Brands in the CHI family include Hollandia, Chivita and Super Bite. We at UAC are very grateful to the Coca-Cola Company and the management of CHI Limited for entrusting us as custodians of this wonderful company. Working with the Coca-Cola Company on this gave us a glimpse of what world-class looks like, and we strive to aspire to the standard one day. The wonderful brands in the CHI family will fit very well with UAC's existing family of brands shown on Slide 17 and meaningfully deepen our distribution capabilities. There's a lot of work ahead, but we're excited and ready. Now briefly on the operating environment in the first half of the year. Please turn to Slide 19. I will not bore you with specific detail. However, the summary is that the operating environment is improving. Growth is steadily picking up. The exchange rate is stable. Inflation remains high, but is moderating. And whilst borrowing costs remain painfully high, we understand this to be the cost of orthodox monetary policy, and we look forward to reaping benefits in the future. Slide 20 reflects prices of key raw material inputs for our businesses. And while there was still broad inflation, it was nowhere near the pace of what we experienced last year. It is important to call out the sharp declines in prices of certain agricultural commodities, notably maize, which posed a different set of challenges to our businesses this year, and we'll spend a bit of time on this on Slide 21. Those familiar with the animal feeds and edible sector know that the practice is to purchase a meaningful portion of agricultural raw material inputs during the harvest season, which is typically in the fourth quarter of each year, extending into early in the first quarter of the subsequent year. Prices typically rise following the end of the buying season. We experienced a reversal of this trend in 2025 with meaningful declines in prices following the buying season. This put downward pressure on margins and constrained volumes for companies with higher-priced inventory than competitors. Two of our businesses, brand sales and livestock feeds are impacted. We have for the large part of the first half of the year, managed this risk, focusing on striking a balance between appropriate pricing to support volumes without unduly compromising margin. The challenge was compounded by the fact that these businesses borrowed at high interest rates to fund the inventory. We are approaching a new buy season. Interest rates are moderating, which will provide a much needed relief. Finally, we would aim to outline our view or our thinking on Nigeria over the medium term, which influenced again our decisions around the acquisition. Slide 22 shows Nigeria's GDP per capita going back to the return to democracy in 1999 until last year, and this is a 25-year period. So it gives a decent data set. And we focus on GDP per capita because although it's highly imperfect, and it does give a good proxy for consumer spending power. You will note that GDP per capita increased almost sevenfold from 1999 to 2014 through different administrations. And those who followed Nigeria or the Nigerian economy for a while may also recall that this was a time of positive reform, including banking recapitalization, telecom stabilization, pension reform and the like. We then had 8 or so very challenging years in which a meaningful portion of the gains were reversed. Slide 23 outlines a metric that we can forecast with reasonable accuracy, which is Nigeria population. We have a lot of people, a lot of young people, and we'll have even more people going forward. And the question is, with this you will be richer or poorer and it will have profound implications for a business like ours that is largely focused on the consumer. President Tinubu's reforms are reminiscent of what happened in the early 2000s. He tackled decades old challenges, including: petrol subsidy; foreign exchange subsidy; minimum wage has been increased; orthodox monetary policy has been adopted; although painful, the tax landscape has been revamped; the Central Bank has embarked on efforts to recapitalize the banks and so on and so forth. And the country is fortunate that Dangote Industries happened to have built a refinery in the country at the time of petrol liberalization. And then for those who paid any attention to the data on Slide 20, you will see that the price of petrol has actually dropped. And we don't have a crystal ball, but our bet is that on balance, the future, the next few years will be much better than what we experienced in the preceding date. And this we think will provide an additional tailwind to the economy and to businesses like ourselves. Now on to UAC in the first half of 2025 and then Slide 26 outlines the tactical moves we made. We continue to focus on disciplined pricing and adapting our product portfolios to meet consumer needs. We are laser focused on attracting and incentivizing talent. It's a big priority for us. And we increasingly spend time developing our leaders. We entered into a program with Oxford University and the Nigerian University of Technology and Management. It was designed for us, and it's aimed at developing the next cadre of UAC's leadership and improving the leadership capabilities of UAC's existing senior leaders. And Funke and our team have also worked hard to manage finance costs, leveraging our banking relationships and the capital markets. We are thankful to our bankers who have been very supportive of us through this phase of our growth. On Slide 27, we just show a few new products launched over the course of the year. We launched Gala Odogwu, again, broadening the portfolio in the Snack segment. We expanded our Paints segment with Plaster Primer and the exciting things we have planned in the Paints space for later this year. And we broadened our Feed offering with Laysmart, the pelletized feed produced by Livestock Feeds. Our Paints business continued to deepen distribution, establishing 51 new points of presence across the country over the course of the year, and this is reflected on Slide 28. And Grand Cereals deepened its presence in the [ Southwestern NUTM ] arrangement to produce feed in this region of the country. Slide 29 provides a brief summary of financial performance, which Funke will spend a lot more time on in the next section. But overall, we recorded 33% growth in revenue. Our revenue growth was constrained by the challenges with the animal feeds businesses I discussed earlier. We did, however, see margins improve meaningfully on account of our focus to drive operational efficiency, and also a shift in mix of the contributors to revenues and profitability in the group. So we saw margins go from 8% in the preceding year to just over 11% this year. And for those who followed us for a while, you know that we're quite focused on operating profit given its impact on return on invested capital and cash generation. I will now hand over to Funke to take us through the detail of our financial performance starting on Slide 31.

Good afternoon, ladies and gentlemen. Please turn to Page 31, and this provides an overview of the group's financial performance comparing the half year results for 2025 with 2024. UAC Group recorded a consolidated revenue of NGN 110 billion in the first half of the year, 33% higher than the NGN 83 billion recorded in last year. Operating profit was NGN 13 billion, 90% higher than the prior year. Earnings per share was 238 kobo. We generated NGN 8.8 billion in free cash flow and recorded 40% return on invested capital compared to 28% in the prior year. Please turn to Page 32, which shows an overview of the group's income statement. Supporting the 33% increase in top line growth were our core operating segments. Our Packaged Food and Beverages business grew 43% to NGN 40 billion, driven by volume growth across 2 categories, snacks and dairy. And this was supported by existing brands, the launch of new snacks and dairy products as well as price reviews. Our Edibles and Feed businesses grew by 24% to NGN 49 billion, and the growth was primarily due to price increases implemented over the course of the period. Our Paints business revenue grew by 29% to NGN 20 billion, driven by volume growth from investments in the retail expansion and the company's strategy of protecting margins through pricing. The Quick Service Restaurant segment revenue declined by 12% to NGN 1.3 billion, and the performance is reflective of 2 things. The first is our strategy to rationalize on profitable stores and the second is the impact of high inflation on the discretionary income of consumers. Gross profit increased by 51% to NGN 28 billion, and our gross profit margin expanded 312 basis points to 25.6%. The improvement in gross profit was supported by the proactive pricing approach adopted across the group and production efficiency, cost optimization initiatives launched in 2024 as well as the stability of the naira contributed to a slower rate of input cost [ average ] in the period. Across the group, operating expenses were NGN 17 billion, which is 33% higher than the NGN 13 billion recorded in the prior year, and this increase reflects the impact of inflation on operating costs. The most significant increases were personnel costs driven by the cost of living adjustments made to employees; and electricity and power costs, which rose to the higher tariffs and diesel prices. Despite inflationary pressure and the higher absolute operating expenses, the group's operating expense to sales ratio was flat at 15.4%, and this reflects the sustained cost discipline and operational efficiency across the group. We recorded NGN 12.6 billion in operating profit, 89% higher than the prior year, and our operating profit margin expanded by 341 basis points to 11.4%, driven by the Packaged Food and Beverage segment and the Paint segment. Our net finance cost was NGN 3.6 billion in the first half of the year compared to a net finance income of NGN 7.8 billion last year. It's important to note that last year, there was a NGN 9.4 billion foreign exchange revaluation gain, which affects the year-on-year comparison. The share of profit from our associate companies was NGN 2 billion, and this is up 4.5x from last year due to improved profitability at UPDC Plc and supported by gains from disposal of noncore properties at MDS Logistics. Our profit before tax was NGN 11 billion compared to NGN 15 billion in the prior period. And when we look at our underlying profitability, that is when you exclude the NGN 9.4 billion foreign exchange gain recorded last year, our underlying profit before tax was 91% higher year-on-year. Please turn to Page 33, which shows the split of our operating profit and reflects that our earnings are well diversified across our businesses, and we have meaningful contributions from core segments. Please turn to Page 34, and this shows an overview of the group's financial position as at 30 June 2025. We closed the period with a net cash position of NGN 3.5 billion compared to net debt of NGN 887 million at the year-end. Capital expenditure was NGN 2.5 billion incurred across the group, and the spend was broadly evenly split across our businesses. It was largely focused on maintenance and efficiency enhancing projects aimed at replacing and upgrading existing assets to support continuity and cost management. The cash cycle of the group improved to 89 days from 106 days recorded at the end of last year. This is the end of the financial highlights. So I will now hand over to Fola to take us through the next section of the presentation.

Thank you, Funke. Please turn to Slide 36. A big focus for the rest of the year will naturally be on CHI and working with the management there to continue the excellent job they're doing on value creation. It's a very well-run company and as such, our primary focus will be to first do no harm. We will continue to focus on driving profitable growth to deliver shareholder returns. And our people will remain front and center of mind and we'd all aim to build on our early work as regards technology adoption. And thank you, and we'll now take questions.

[Operator Instructions] Your first question is from Williams.

My name is [ Williams Sarapathi. ] I'm an analyst with Standard Bank from -- Group. My question -- I have 2 questions. One is on the performance of the segment. You mentioned in the segment where the Feed segment that distribution cost, IT cost were responsible for the negative performance recorded there. I just want to ask what is the relationship or the arrangement that you have with MDS Logistics, the logistics associates of UAC -- and how does that -- how do they work or partner with you in terms of distribution? And my second question is on your QSR segment that has not been performing very well. What are the immediate actions that you plan to take perhaps to address some of the challenges in that segment?

Thank you, William. I have 2 questions. How do we work with MDS Logistics and QSR? What is the plan? Does that capture your questions?

Correct. Yes, you did.

Okay. So as with MDS, I would say it's the same with the relationship between any of the companies in the group. The managing directors know each other, they like each other and they work together when they choose to work together. So we do not compel any companies to work with the other and MDS is the same. So where Managing Director looking for logistics services sees value and they work with MDS. Thankfully, the team at MDS offer excellent service. So it's done on an [ on-demand ] basis versus mandated by the group. On QSR, we had crafted a plan to meaningfully reduce the company's operating cost base and then just focus on the basics, which is ensuring we had consistent product quality and availability and excellent service in an expanding number of stores. However, given the amount of -- and we also brought on board a relatively young and talented team to drive this. They've put in a lot of hard work, but the degree of support they received from us has been, I would admit, meaningfully impacted by our efforts on getting the CHI acquisition over the line. So we -- our expectation is that some of that work will begin to pay off in the coming months and quarters.

[Operator Instructions] Your next question is from [indiscernible]

This is [indiscernible], and I'm an analyst with [ Green Street Capital ] My question will be around the CHI transaction. Do you have a time line within which you expect you get all the necessary regulatory approvals? That's one. And then two, would you be -- would you -- how do you anticipate you finance this transaction? Is it going to be solely financed from your reserves? Or would you be raising any kind of equity or debt capital?

Thank you, [indiscernible]. The time lines, we want to do it as quickly as possible, but we need to engage with the regulators and hear from them. It's difficult for us to commit or put words in the regulators' mouth, but the defined time lines, I think between 2 and 4 months are the prescribed time lines, but the regulator has the liberty to review as they deem fit, but we want to get this done as quickly as possible. It's fully financed already on a combination of our internal resources and support from our bank, as well as a fully financed transaction.

Your next question is from [ Osazee Osaro from Access ARM Pension ]. He asks, what has been the revenue trajectory of CHI over the last 5 years? And what is its historical growth rates as well as its EBITDA? Could you shed more light on the current leverage position of and any material liabilities that may be assumed? The third one, how is UACN funding this acquisition? Will it be through internal cash, debt or a combination of both? And lastly, could you elaborate on the expected synergies from the acquisition and how this deal is strategically beneficial to UACN's long-term growth and profitability?

Okay. So many questions there. I think one of them I've already addressed, which is the funding, so I won't repeat. Unfortunately, some I cannot respond to. It's a transaction that is subject to regulatory approval and it's a private company. So I cannot comment. It's a very well-run company. It's what I would say to give an indicator of its historical trajectory, but it's a private business. We're a public company. So we're at liberty to speak freely about our numbers, but we're not at liberty to speak freely about the private company's numbers until we complete and then it becomes part of our group. But I can say it's a very well-run company. And expected synergies, I think I spent a bit of time when we talked about our strategy. So this was not opportunistic. We set out 6 years ago that if we built the right foundations of people, IT infrastructure, risk controls, processes, we will be able to run businesses that were bigger than what we had and to fit very well into strategy. Now there will naturally be some market synergies. It's a food and beverage company. So there will be some distribution synergies. There will be synergies in terms of trade, leveraging of the trade partners. And depending on very long-term production plans, there will be synergies there. But this was not opportunistic where we sought synergies. It was strategic and we sought out the opportunity. And if we are successful in continuing the good trajectory of the company, it should be very accretive to UAC's profitability.

[Operator Instructions] Your next question is from Segun from CSL Stockbrokers. He asks, from the split of the EBIT contribution of the various segments to the overall, the Edibles and Feed segment seems to be a drag on group's performance. What are the specific challenges faced by the segments and what measures are being taken to mitigate this? He also has a second question on CHI's acquisition, and he wants to get some insights on the funding mix being adopted by UACN.

Yes, I spent some time talking about the challenges faced by the Feed sector. It's a very unusual year, and I think it's the year impacted by some of the economic challenges that we saw last year. And I'll just recap. So as we typically do in the Feed industry in the fourth quarter of last year and a little bit of the first quarter of this year, Feeds businesses went into the market and procured a meaningful portion of the agricultural raw materials required for the season and maize being the big one. Very unusually, the prices of those commodities dropped. And what it meant is that the more informal players that didn't have the resources to stockpile inventory as we call it, are able to compete at much cheaper replacement cost than the larger established players. Now instead of just simply attempting to match the pricing of these players, we've had to play this juggling act, by pricing sufficiently tightly to sell, to maintain volumes whilst still protecting margins. So it's a sector issue that really impacted those Feeds businesses than anything unduly specific to us. And I had mentioned on the second question that the transaction is fully funded by a combination of internal resources and then support from our bankers.

[Operator Instructions] Your next question is from Williams.

[ Sarapathi Williams ] here again from Standard Bank Group. I just want to ask a question around your new product, the Gala Odogwu. What's the thinking around this [ refill ] Gala product? You talked earlier in your presentation in terms of the [ initial ] purchasing power that is currently challenged. But then the new product seems to be a premium to the classic Gala that we know. Is there a strategy around that, that you hope to leverage?

Thank you. You may recall that one of the things we say we attempt to do is to have a product portfolio that meets the need of a wide range of consumers. And we got demand or request for a larger [ refill ] Gala and that was what triggered the desire to meet a real consumer need and that triggered the design and development of Gala Odogwu, and it's gone very well, which I guess validates the decision to respond to that need.

And [ Omeya ] has a question in the chat box. He wants to get an update on export plans for the Paints segment.

Yes. I think we mentioned our desire to diversify our earnings mix. And I think we spent some time on CAP. And there are 2 initiatives there. One is trying to sell more into the upstream oil and gas industry. And the second is we mentioned opening point of presence in the region, notably in [ Ogun ]. So we've opened 3 point of presence there. It's still a small fraction of Nigeria, where we had about over 280. We'll open 3 in a relative short period of time, and we aim to build on this initial start to grow that segment of the business.

Your next question is from [ Omer. ] There is a question from Osazee in the chat box and he asks, post-acquisition of CHI, what would be the debt-to-equity ratio for UACN? He also wants to know if UACN has a higher EBITDA than CHI?

Osazee , unfortunately, as I mentioned, it's a private company, and we cannot comment on anything that will give any hint or direction around CHI. It's not... At the appropriate time, push regulatory approvals. If it becomes part of our group, these numbers will be public as we consolidate. But at this time, we cannot give any information on CHI's financials, it's a private company.

Your next question is from [ Jolayemi ] from Cornerstone. Who wants you to give guidance on the cost of this acquisition? And also wants to know if this is a full buyout of the business or a sizable portion?

Thank you, Jolayemi. I can comment on the second part. It's an acquisition of all of CHI, the 100% of CHI, but I cannot comment on the acquisition cost.

Your next question is from [ Wuama ]

Can you hear me? Sorry about that. I was having a few issues earlier. So I have a couple of questions. I just wanted to possibly get an update on your current Paints business capacity expansion as well as your current utilization. I remember that some time back you had guided on an aggressive expansion plan there. Just it would be nice to know where you are currently and whether are you still continuing with that? That's my first question. Second question is on some of the new products that you rolled out in the F&B business, particularly Kingsway and Gala Chin Chin. Could you comment on the volume growth there and maybe the revenue contribution to that particular segment? Third question is on the UPDC sales that have showed in your associate profits. Is that something that we're likely to see continue into the second half of the year? Or is that sort of just a one-off that we're seeing in the first half? And then the last question is on the Chivita transaction. And I understand that you can't comment too much on the transaction details, but would it be possible to share what the possible revenue contribution or the margins for the group or the leverage for the group would look like after the transaction is done once Civitas joined the group?

Okay. On Paints, I think at the time we commented on expansion, we were probably at about 70 or so percent capacity utilization. We've expanded probably maybe 50 or so percent, my math may be wrong, but now we're around 50% capacity utilization, so we can produce meaningfully more paint. And expanding Paint capacity utilization is not necessarily a straight line because there are various things you can do from a process perspective that allows you more capacity, whether you tint in-store in factory, do you tint manually or do you tint automatically and so on and so forth. But we were able to produce probably double the volume of paint we're doing now given the work we've done following that comment. On the new product launches, they're doing very well. They're still probably about 10% of portfolio combined, Kingsway and Chin Chin, with Kingsway being a bigger contributor, but we're happy with where they're tracking in their journey. And I think it's important to note that the heavyweight in that portfolio of Gala is also growing very fast. but they are tracking and we're quite happy with those products. UPDC, I'm not sure if you're referencing UPDC's profit contribution or the sale of UPDC shares. I'm not sure which of the 2 you were referring to.

It's both. Both.

Both. Do I think UPDC will continue to be profitable? Yes. It has a simple, very well-executed business model. So as long as we own shares in the business, I think it will be a contributor to our earnings as an associate. I think our long-term plan is to, over time, divest from this company as part of our overall thinking to simplify the group. It's gone well. But as part of our long-term approach to simplify the group, we will divest from this over time. And as regards to -- I honestly cannot comment on that opportunity subject to regulatory approval, so I cannot provide any more detail aside from what has been told in the announcement.

Your next question is from [ Ikea Emeka ]

Congratulations on your numbers and the acquisition. My question is around your core business, the edibles and feeds and paints, packaged foods and beverages. On the presentation, the top line did quite well, very healthy growth. Now with inflation moderating and interest rates also coming down, perhaps one would expect that prices will also come down and the growth has been explained is a combination of volume and price increases. How do you think this possible change in the market environment will affect your top line? And what do you intend to do to sustain the kind of growth that you have.

I think a very, very helpful question, and we think about growth in real terms and then sort of nominal terms. So if inflation comes down or as inflation comes down, we would expect to see nominal growth rates come down, but our real growth rate will still be high. And so we're quite pleased. It won't trouble us at all. And from an interest rate reduction perspective, I think it will be quite positive in terms of reducing the borrowing costs for those of our businesses that rely on debt to fund the short-term working capital. And in terms of how we drive growth, it's largely the same. It's product quality availability, trying to deepen our distribution, make sure we have the widest possible product offering that meet consumer needs and to deliver value to make sure that when the consumers chose to make product delivers value to them, and this has worked consistently for us in terms of delivering growth.

Your next question is from [indiscernible], who wants you to provide guidance on the time line to complete the acquisition? He also asks what the rationale for the acquisition is given that UAC has diverse product line that is all related to CHI's primary product lines.

I mentioned we want to get this done as quickly as possible. The time line is dependent on the speed of regulatory approval. I think the stated guidance from regulators is between 2 and 4 months, but it's entirely dependent on the speed of regulatory approval. But our focus is on getting it done as quickly as possible. And I've spent some time at the beginning explaining the rationale. We set out many years ago acquisition as a pillar for our growth. We identified doing things in Nigeria in sectors that we knew, and this is a food and beverage company. Those drinking yoghurt juices, nectars, still drinks and sauced rolls. So it's a perfect strategic fit with what we do.

Your next question is from [indiscernible], who asks what strategic plans -- actually what are the strategic plans you have for the Animal Feeds business post-acquisition?

Abuka, are you referring to the CHI acquisition tied to the Animal Feeds question.

Yes.

The CHI acquisition will not affect the -- we don't have a correlation or a connection between the CHI acquisition and the Animal Feeds businesses. Our focus there is on navigating the rest of this -- of the past buying season and position the businesses to go strong into the next buying season and into next year. The 2 are not unrelated. And whatever you make around the Animal Feeds businesses will be related to CHI.

Your next question is from [ Maxo, ] who mentioned that at some point last year or the year before, you had spoken about considering some investments in the technology space. That box we haven't yet since then. Is this still in the cards? Or if yes, what areas of technology space are you looking?

Yes, it's very much in the cut and we've made good progress. We actually have a tech hub. They have their own separate offices and their own separate team. And what we do is build bespoke applications that help us run our businesses better. So we have loading management systems for trucks coming in our factories. We have bridges integrated with SAP. We have talent management systems. We have vendor management systems. We have operations Compass. We have applicant tracking systems. So it's an area we're very excited about, and we've launched the initiative. It's called 1879 Tech Hub. It's an in-house tech team to develop tools to help us run more efficiently and hopefully deliver value to the consumer.

[Operator Instructions] Your next question is from Osazee. Who said, you previously indicated that pricing was a major driver of revenue growth in H1 2025. Looking ahead to the second half of the year, do you anticipate that pricing will remain a key lever for top line performance? Or are you seeing signs that volume growth may begin to play a significant role?

Osazee, I think very, very good question. I think as inflation moderates and the consumer inflation recovers, I think we'll begin to see a mix of volume growth playing a more important role. So I think it's a very good observation.

[Operator Instructions] Your next question is from [indiscernible] and he asks, your subsidiary, Livestock Feeds PLC appears to be growing its turnover or its latest reports suggest that it is quite leveraged in terms of borrowing. What are we to expect by year-end?

Livestock Feeds borrows only to fund the purchase of agricultural raw materials in each buying season. And it's probably not run off that borrowing as quickly as it would normally have because of the slowdown in the pace of revenues on account of the challenges I mentioned with the Animal Feed sector. I think we'll see that leverage continue to come down, and would only be changed, go up again if depend on the buying decision that we make for the 2026 year. But all the leverage in Livestock Feeds is to buy -- is backed by agricultural commodities maize, soya, rice brand and so on.

[Operator Instructions] You have a question from Hendrick in the chat box. Hendrick says congrats on the decent operational performance. For Paint segment, he says as you continue expanding the distribution network in the paint segment at a considerable pace, could you provide more color on what share of the existing store network is still operating at immature productivity level? Additionally, what has your recent experience been regarding the time it takes for new stores to mature from a profitability standpoint? He also asks what's the pace of the net store additions you think can be sustainable over the medium-term? And he asks on M&A referring to Slide 15 in the H1 2025 presentation, what areas in the service sector do you think could be worthwhile entering from a growth runway and the business economic standpoint?

Thank you. For the Paint segment, I think the first thing to understand is that there are different formats of the paint stores. So I think you then need to sort of break down and I would attempt from memory to give a sense of what those numbers are, but you need to break down. So the big ones are what you call it Dulux Color Center, and I would say that's probably 1/4 or just under 1/3 of the number of stores. And I would say more than 90, 95 of those would be economically profitable. The next tier would be the Dulux Color Centers. I'll also say by far, the majority -- Dulux color stores, sorry, the color center are the bigger ones. The Dulux color stores are smaller versions, also by far, the majority will be profitable. And then you have Sandtex stores, and I would say probably maybe about half of those. They would comprise 15% of the total store count. And a lot of the recent growth has been much smaller formats, attaching almost distributor stores, so much smaller formats to existing hubs. So you could attach 7, 8 distributors to a single store. And those being the newest, I would say, maybe 50-50. And what we do is we track every month and we pull because you -- I would say it will take about 18, 24 months for a store to be fully -- to be mature and not all of them will get to maturity and there we manage quite actively. So the bigger, more established, I would say more than 90% of those will be -- but they are also older, quite granted. And then the smaller newer drivers of growth are the ones that I would say maybe 50-50 in terms of a maturity perspective. And I would say 18, 24 months is what it will take for them to mature, but we have to actively manage the portfolio. In terms of what is the pace of net store additions, for the distributors, the way we think about it is we look at the existing stores and we look at the smaller distributor stores attached to these stores, and that's what is going to drive the additions. And I think it's still going to be quite high going forward. We haven't slowed down. And when we look at markets that we feel we can draw insights from, I think the density of the paint retail footprint is much higher than we have here. M&A, we don't have any, as we say, immediate plans. We don't have any plans to go into services. And the reasons are -- we spent a bit of time at the very beginning, and I don't know whether Cynthia you can go to the slide that had the sort of metrics for acquisitions. We decided to focus on things we already do in Nigeria and you see services is an attractive sector, but we don't do it currently to the right. And so it's not a focus area for us.

There are some questions on the chat box. The first one is from Osazee who wants to know if there have been any shift in your stance on dividend policy. There is also a question [indiscernible] who asks, given the relative size of UACN compared to CHI Limited, can you shed light on the financial structure behind the acquisition? And also asks, was the deal backed by external financing, strategic partners or internal group restructuring? Then the final question is from Brad, who asks, your margin in UAC Foods are significantly higher than in the past. What is driving this? And is it sustainable?

So conservative dividend payout, you may recall that I mentioned that we had started making plans for potential acquisitions as far back as 2022. And so we had to find the balance between returning capital to shareholders via dividends and building internal reserves to put us in a position for an opportunity of this nature. So that is what explains the past. And going forward, we will continue to try to strike this balance. We would try to maximize value creation for shareholders. We would return capital where it is in excess of need. But where we feel the opportunities that we feel will create even more value for shareholders, we would like to seize those opportunities as they come due. So it's the same mindset we adopted historically that we take going forward. Where there's excess capital, we will give it back to shareholders where we see opportunities to create even more value for shareholders, we'll try to take advantage of those opportunities. I think it was [ Tony, ] I unfortunately cannot comment on anything about the size, nothing about CHI. And on the financing, it's fully funded from our internal resources and our banking partners. Brad, I think if you look at the margin trajectory for UAC Foods, what you would note is that it's been steadily increasing. And it's not one thing. I think, first of all, the revenues of the company are much bigger than they were, say, 2 years ago even. So that's a much bigger revenue and thankfully not commensurately increasing cost base. So you get some operating leverage there. We've done a lot of work around things like energy efficiency, reducing rework and tracking yields of every input. And those have also contributed towards improving our naked margins, revenue minus material costs. We've been very, very thoughtful around distribution. So we don't -- we're very targeted in the markets we serve. In the past, we sometimes try to serve every single corner even if doing so was not necessarily profitable. And we've been very disciplined around pricing to make sure we protect margin. And we have also been careful about reviewing the portfolio because we sometimes find in companies with many SKUs, some relatively small and marginal SKUs generating meaningful sub economic returns. So not one thing, I will say, a combination of things. In H1, UAC Foods had, I think, a NGN 450 million exceptional. So let's say, if you adjust for that, you'll be maybe closer to 15% and 17%, I -- we would aim to sustain this level of margins in the business.

There are no more questions. I will now hand the call back to Fola Aiyesimoju for his closing remarks.

Thank you, Cynthia. Thanks, Funke. And I think I thank participants for their questions and their participation, and I wish everyone a wonderful rest of the day.

That concludes the UAC of Nigeria PLC Half Year 2025 Results Conference Call. Thank you for your participation. You may now hang up.