Human and animal feed processor Unga Group #ticker:UNGA did not pay management service fees to US conglomerate Seaboard Corporation in the year ended June 2021 as it started recovering previous overpayments to the multinational.
The company’s latest annual report shows that Seaboard did not earn the fees in the review period, having received more than Sh600 million cumulatively since it started offering the management services in 2000. Unga last paid Seaboard Sh53.4 million in the year ended June 2020.
“We received a credit note from Seaboard and that is why there was no payment in the year,” James Nyutu, the finance director at Unga, told Business Daily.
A credit note is a document issued to a customer to correct a mistake on an order or an invoice, or to refund an amount paid for products or services.
Mr Nyutu said that the miller still has a balance that will be utilised to defray future obligations to the American firm without specifying the amounts.
He added that Unga’s original contract with Seaboard for management services had ended, noting that the current transactions involve payment for technical services and part compensation of senior managers seconded from the multinational.
The cessation of payments to the conglomerate came ahead of retirement of Unga’s long-serving managing director Nicholas Hutchinson who was assigned to lead the miller as part of the original management services contract.
Part of Mr Hutchinson’s compensation came from the American company which would in turn get reimbursements from Unga. Mr Hutchinson was replaced by Joseph Malel Choge.
The original management service contract was part of the deal struck between Unga and Seaboard in 2000 that was aimed at rescuing the miller from years of losses.
Seaboard paid a reported Sh1.1 billion to acquire a 35 percent stake in Unga Holdings and also got the right to manage the subsidiary’s operating units including Unga Limited.
The agreement was for an initial term of five years and could be extended for a further five-year term at the option of Seaboard.The basic management fee per annum for the first three years was determined on the basis of Unga’s profitability but capped at $450,000 (about Sh35 million using the exchange rates at the time).The miller continues to restructure its business, selling unprofitable units and seeking new joint ventures. vjuma@ke.nationmedia.com