BUSINESS ENVIRONMENT

The business environment in 2006 was challenging though Nigerian economy witnessed improvement in both Gross Domestic Products (GDP) and Real Gross Domestic product (RDGP). The country also achieved a single digit inflation rate of 8.5% as against the rate of 1.5% for last year.

There were stability in foreign exchange and interest rates during the year under review. The official Naira exchange rate to the US dollar remained fairly stable during the year. The Central Bank of Nigeria (CBN) introduced a new interest rate regime called "Monetary Policy Rate" (MPR) in 2006 to replace the Minimum Rediscount Rate (MRR).

Social unrest in the Niger Delta has continued to affect business and economic activities in the area as a result crude oil prices rose in the International Market. The prices of petroleum products were relatively stable though there" was acute shortage of the products towards the end of the year. The lack of improvement in the Electricity supply situation, basic infrastructure and high cost of Petroleum products resulted in higher production costs and lower customer's purchasing power.

FINANCIAL PERFORMANCE

The company achieved a turnover of N1.7b (21% above 2005) and an operational profit of N62.4m i.e. an increase of 3% when compared with operational profit of N60.5m in 2005. The company achieved profit before taxation of N1.3b which included an exceptional item of N1.2b made from the disposal of our property in Apapa.

DIVIDEND

Due to the improved performance in both Turnover and Profit over the previous year, the Directors have recommended a dividend of N500m amounting to 417kobo per share.

BOARD CHANGE

The Chairman Dr. Joshua Ayodele Ajayi resigned from the Board following his retirement as the Managing Director/Chief Executive Officer of UAC of Nigeria PIc after about 35 years meritorious service. I wish to deeply appreciate him for his immense contribution to the company and wish him a successful life in retirement. In his place, I was appointed the Group Managing Director/Chief Executive Officer of UACN PIc and took over as the Chairman of the company.

YEAR 2007 OUTLOOK

In view of the amendment to ECOW AS Common External Tariff (CET) which favoured importation of Completely Built Units (CBU), the company carried out a total restructure of its business which resulted to our exiting CKD assembly of pickups and outsourcing of body building activities. The restructuring also led to relocation from our former Head office in Creek road Apapa to Oregun. The restructuring will be fully implemented within the year and is expected to result in improved profit performance.

Management will continue her drive towards efficiencies in cost reduction, invest in people, improve our relationship with customers and dealers and ensure the business translate into a world class dealer.

We are hopeful for an improved business climate by the continued influx of foreign investments and investors into the country and the sustenance of the reform in the banking sector. The improvement in capital base of banks coupled with their expansion drive is expected to influence our performance in 2007 and the years ahead.

CONCLUSION

Finally, I wish to express my appreciation to the Management and staff of our company for their commitment and loyalty in making 2006 a success. It is hoped that they will continue to give their best to ensure improved performance in 2007.

To our esteemed customers, we thank you for your patronage and our shareholders, for their continued valuable support and understanding. I also wish to appreciate the support of my colleagues on the Board for their interest and support to the company.

Thank you and God bless you all.

Larry E. Ettah
Chairman