Umeme issues warning to shareholders over 60% profit decline

Umeme Limited has issued a profit warning to shareholders, cautioning that it expects a net profit decline of up to 60% for the year ending 31 December 2020

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Umeme issues warning to shareholders over 60% profit decline www.financialstand.com

Shareholders of Uganda Umeme Limited have been asked to exercise caution while dealing with the shares of the company.

On Monday, Umeme said its profits for the year ended December 31 2020 will decline by more than 60 percent compared to the year ended December 31, 2019.

The reduction in profit is attributed to the effects of the Covid-19 pandemic, regulatory lag, and suspension of the government’s free connection policy.

“Shareholders and potential investors are advised to exercise caution while trading in the Company’s shares,” read a notice in local dailies. “The company is optimistic that the recovery in the business environment as governments respond to the pandemic will support stronger operational and financial performance in the year ahead.

Umeme Limited is Uganda’s main electricity distribution company, listed on the Uganda Securities Exchange and cross-listed on the Nairobi Securities Exchange.

In a 2019 report, the company said customers connected to the electricity grid within the Umeme footprint increased by 14 percent to 1.47 million. Of these 178,152 were financed by the Government and development partners under the Electricity Connections Policy.

Uganda’s installed generation capacity increased in 2019 by 15 percent to 1,134 MW from 984 MW mainly as a result of the commissioning of Isimba HPP Dam (183 MW). The peak system demand increased from 645.4 MW at the end of 2018 to 723.76 MW as of 31 December 2019.

Electricity sales (GWh) increased by 6 percent to 3,183 GWh from 3,011 GWh in 2018.

The industrial segment recorded an average growth of 7 percent in 2019. The growth was in tandem with the general regional economic conditions and deliberate government strategy to further industrial growth.

During the year, Umeme invested Ushs 104 billion in the distribution network, for projects related to growth, supply reliability, and loss reduction; and Ushs 185 billion in last-mile connections (under a GoU access program) bringing the total capital investment for 2019 to Ushs 289 billion compared to Ushs 230 billion in 2018.

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