Uchumi supermarkets files for liquidation of its Uganda operations

Uchumi troubles deepened yesterday after the supermarket chain filed for bankruptcy in the Ugandan High Court in a bid to protect its remaining assets from creditors and suppliers.

The Kenya-listed firm petitioned the Ugandan High Court to wind up its operations in Uganda following several lawsuits filed by creditors, landlords and suppliers who are demanding payment for services and goods rendered.

According to Ugandan media reports, several creditors have execution orders, while a number of cases are pending before different courts.

If the liquidation applied for last month is granted, the company’s assets would be placed in the custody of the Attorney General as the official receiver.

“Your petitioner has had working capital constraints that have resulted in delayed payments to suppliers. As of July 31, 2015, your petitioner had outstanding payables amounting to Sh8.8b ($2.62m),” said company secretary John K. Wambugu, in an affidavit to the court.

The High Court invited all interested creditors to reply to Uchumi’s petition within 15 days from December 10, 2015, the date they were notified through a court directive. The submissions will be heard from February 22, according to the report.

Uchumi supermarkets in October last year closed its loss-making Tanzanian and Ugandan businesses as part of a turnaround plan to try to return to profitability.

CEO Julius Kipng’etich then said that the company would reorganise the management of underperforming branches or could close or relocate the worst performers.

“Our outlets in Uganda and Tanzania make up only 4.75 per cent of our operations yet they account for over 25 per cent of our operating costs,” Kipng’etich was quoted as saying.

“The two subsidiaries have not made any profit over the last five years, which means they have been draining the parent operations.”

Uchumi Supermarkets has been spending nearly Sh200 million every month to support the Uganda and Tanzania operations, the firm said yesterday, revealing for the first time the cost of retaining the two subsidiaries.

The exit from the two markets involved shutting down the branches and subsequent disposal of inventories. Kipng’etich said in a public notice that the Uganda operations had been about four times as loss-making as Tanzania’s, over the past two years.

“Uchumi has been providing approximately Sh200 million every month to Uchumi Uganda and Uchumi Tanzania to enable the two entities meet the financial obligations. Unfortunately, efforts to turn these businesses around have proved futile and the board considers that it is no longer tenable to continue support,” the retailer said in the notice.

Uchumi Uganda had reported a net loss amounting to Sh209 million in the past two financial years, while the Tanzanian business lost Sh53 million between June 2012 and June 2014. Tanzania was the bigger of the two operations – in terms of branch network, with six shops compared to Uganda’s five.

Creditors, including suppliers, have raided one of the Uganda branches and carted away inventories over unpaid deliveries worth an estimated Sh5.2 million, as a pointer to how badly the stores were doing.