25th Feb, 2006: Nairobi - Unga Group Limited is set to announce a lower than expected performance due to the prevailing drought that has pushed grain prices up, according to a leading stockbroker.
At the same time, Dyer and Blair says that the threat of Bird flu will eat into the group's revenues.
"We are downgrading Unga from a market performer to under performer," a report by the broker said.
The reduced consumption of poultry feed, according to the analysis, due to bird flu scares has led to a sharp drop in sales. Already, players in the poultry sector have reported poor business as chicken dealers and consumers shy away from poultry.
Kenchic has so far made losses amounting to Sh35 million in the past four months as fears over the possible outbreak of the disease ravaged its sales.
Veterinary experts have warned that the country is vulnerable to the deadly virus due the presence of migratory birds in the country.
The report says animal death resulting from the biting drought has led to lower demands for diary feeds as farmers shift to low cost feeds such as hay, molasses and bran instead of dairy feeds and calf feeds.
The report warns that increased price of grains due to low crop yield is likely to increase the millers production cost.
This, Dyer and Blair adds, is likely to translate to reduced profits as Unga is not likely to transfer the extra costs to the consumer due to heightened competition that in the food processing industry.
The sector has close to 15 millers, including United Millers, Kenya milling company, Pembe Flour millers and a raft of small-scale millers who are all locked in the battle for consumers.