Uganda Clays wants investors to believe 2026 is the year the company stops falling and starts compounding.
The clay building materials manufacturer made Shs19.8b from sales in the first half of 2026, 32 percent more than the same period last year.
After paying for raw materials, wages, and everything else it takes to run the factories, what was left over, which is the operating profit, grew more than 20 times to Shs6.4b.
And once loan interest and tax were also paid, the company ended the six months with Shs3.05b in its pocket, compared to a loss of Shs1.4b over the same period a year before.
Board Chairman Martin Kasekende says the company achieved ‘a significant turnaround in its performance from years of decline or stagnation between 2022 and 2024, now to profitability.’
Uganda Clays’ revenues were 7 percent above target, and profit after tax was just half a percentage point ahead of plan.
Those are the more conservative numbers, since the eye-catching year-on-year growth rates (32 percent revenue, 322 percent profit) are measured against a first half of 2025 that was close to break-even to begin with.
Kasekende says that ‘although the company recorded net profit of Shs3.05b during the period, the board of directors has not proposed an interim dividend to preserve cash for the ongoing operational recovery and investment.’
In 2024, Uganda Clays posted a loss, so skipping a dividend was automatic.
In 2025, it actually returned to profit, posting a net income of Shs141.7m, and the board still chose not to pay anything out, opting instead to hold the cash for the turnaround already underway.
Inside the profit
The company did not just sell more. It also got much better at not spending money it didn’t have to.
This is the more important half of the story, because a factory can sell more tiles every year and still lose money if its costs rise even faster, which is what had been happening at Uganda Clays for years.
What changed this half-year is that costs grew slower than sales: total costs fell to Shs13.7b from Shs14.7b, even as the amount of product sold rose 52 percent.
Once a factory has paid for its machinery, its land, and its core staff, costs that stay the same whether it makes 10 tiles or 10,000, every additional tile sold becomes cheaper to make and more profitable to sell.
Economists call this operating leverage, and it is a large part of why a 32 percent rise in sales could turn into a profit swing of more than Shs4b.
Once the fixed costs were covered, most of the extra money coming in dropped straight to the bottom line.
Jones Muhumuza, the managing director, says the half-year is not a single win but several things pulling in the same direction at once.
‘What drove the turnaround,’ he says, was ‘strong operating performance and margin expansion, supported by disciplined cost management.’
The company, in essence, can cover all of its costs with what it made because its revenue in the half-year results was Shs19.8b while its total costs were Shs13.7b.
Most of the fall in costs is in administration. The average number of people the company employed fell to 221 in 2025 from 282 in 2024, a 22 percent cut, almost entirely in production, where staff numbers dropped from 190 to 105.
Over the same period, output per worker rose 52 percent, nearly matching the rise in production volumes exactly.
This means that the same jump in output was achieved with far fewer hands on the factory floor.
Muhumuza explains this, noting that: ‘It is being efficient and ensuring that each unit of cash that you have should be able to produce much more.’
The cost discipline is, in essence, a smaller workforce producing more.
Debt won’t quiet
Even as the core business improved, the interest the company pays on money it borrowed years ago grew faster than almost anything else.
Finance costs rose 21 percent to Shs2.06b in the first half.
This is old debt owed to NSSF, dating back to 2010, that financed the company’s Kamonkoli factory and now stands at Shs25.3b.
Economists sometimes call this a debt overhang where money is still being repaid for a decision made more than a decade ago, sitting on top of a business that has since moved on, eating into the profit that would otherwise stay with shareholders.
Muhumuza told investors the company plans to get ahead of it.
‘We are going to start paying NSSF beginning next quarter, which is October 2026, ahead of schedule,’ he said, adding that starting early would let the company finish paying by ‘2031 against 2034, as per the agreed schedule.’
Kamonkoli’s real fix
The Kamonkoli factory in eastern Uganda has long been treated internally as the company’s biggest headache because it was a half-finished plant that cost more to run than it earned.
The half-year results suggest the day-to-day running of the factory has genuinely improved.
But that is only half the picture because once the cost of servicing the factory’s debt is counted alongside its running costs, the full financial story becomes more complicated.
Kasekende says the factory’s kilns ‘were originally designed to be fired with petroleum gas,’ a fuel that became ‘very expensive’ as oil prices rose.
The company responded by ‘changing the source of fuels to biofuels,’ mainly coffee husks.
This is a good alternative but imperfect as well because there is rising demand for husks from cement makers, which is now making this material pricey.
Kasekende says the kiln itself had been left unfinished at 63 metres when the company ran out of construction money years earlier, and was extended to about 93 metres using the company’s own cash, letting more product bake through the same process and improving both output and quality.
Kamonkoli sold slightly less in 2025, but profit from running the factory jumped more than eightfold, from Shs176m to Shs1.47b.
Same output, lower cost, more profit, just what the fuel and kiln fix should do.
That combination matters because it means the improvement came from running the plant more cheaply, not from selling more, exactly as Kasekende described.
How market prices
Uganda Clays’ share price has moved up sharply this year, proof that the market believes in the turnaround.
Uganda Securities Exchange data shows that Airtel Uganda, NIC, Stanbic, and Uganda Clays are some of the counters that led the market’s gains, with Uganda Clays up 42 percent in terms of the price over the past 12 months.
The stock has moved from Shs5 per share at the start of 2026 to Shs7.7 by September 4, moving the company’s market valuation from Shs4.5b to Shs6.93b.
Uganda Clays’ price-to-earnings ratio, which is how many years of current profit it would take to earn back what you paid for a share, improved to 2.27 times, based on annualized half-year’s profit.
More importantly, this move happened on almost no trading.
Uganda Clays’ stock changed hands in just 65 deals over the period, worth Shs57.5m out of a market-wide Shs101.8b, 600th of 1 percent of everything traded on the exchange.
With so few buyers and sellers, a single trade can shift the price sharply, because there isn’t enough competing buying and selling activity to settle on a steadier number.
A 42 percent jump built on 65 trades says more about how rarely this stock changes hands than about how strongly the market as a whole believes in the turnaround.
Even after the rise, Uganda Clays trades at just 0.14 times its book value, meaning the market values the entire company at a small fraction of what its own assets are worth on paper once debts are subtracted, while trading at 49 times trailing earnings.
This is a very high multiple that mostly reflects how tiny last year’s profit was to begin with, rather than genuine excitement about future earnings.
The company’s market capitalization of Shs6.9b, the value of all its shares added together, is a sixth of its own shareholder equity of Shs41b.
That gap is the market’s way of saying it isn’t fully convinced this is a lasting recovery yet, even as the price moves in the right direction.
A watchlist stock
Uganda Clays is not the only stock on the exchange being watched for the same reason: a business whose true value looks held back by one specific, nameable problem, rather than by weak performance across the board.
In investing, these are sometimes called special-situation stocks.
These are companies where the price mainly reflects a single identifiable risk, and removing that risk is what could unlock the value the market is currently withholding.
DFCU Limited, one of Uganda’s largest banks, is a clear example.
It has just reported a half-year loss of Shs15.8b, reversing a Shs34.5b profit a year earlier, after legal costs tied to a long-running court case in London rose to Shs76.6b in 2025 from Shs42.3b the year before.
The case, brought by the defunct Crane Bank and its former shareholders, challenges the 2017 transfer of Crane Bank’s assets to DFCU after Bank of Uganda took over the failed lender.
It goes to trial in London starting in October 2026 and is expected to run into January 2027.
DFCU maintains its core banking business remains sound, and that the loss reflects an exceptional legal cost rather than any weakness in day-to-day operations.
NIC Holdings presents a different kind of overhang: ownership.
Cornerstone Asset Managers is acquiring 73 percent of the insurer through a vehicle called Twenty-One Ventures, taking over from its longtime Nigerian majority shareholder.
The move has already brought a new board and a new chief executive, Dan Musiime, who started in July, and Cornerstone has committed Shs50b toward rebuilding the company’s technology and operations.
As with Uganda Clays, shareholders have been asked to forgo dividends while the transition plays out.
Market analysts consulted for this article grouped all three stocks for the same reason.
Each carries a specific, disclosed problem like a legacy debt schedule, a foreign lawsuit, a change of controlling shareholder that has kept its share price lower than its underlying business might otherwise justify.
Should any of those problems be resolved, they argue, there is real room for the share prices to re-rate upward.
That all three stocks have already started moving before any of those resolutions are confirmed suggests the market is beginning to price in that possibility in advance, rather than waiting for certainty.
This is a pattern common to how markets treat unresolved risk generally, where prices start moving on the probability of good news well before the news itself arrives.