BUA Cement’s Profit Wilts on OPEX, Interest Expenses 

Kayode Tokede

With a significant increase in operating expenses and interest on loans, BUA Cement Plc’s profit before tax slowdown in half year (H1) ended June 30, 2023 unaudited result and accounts.

The cement maker grew its revenue but the double-dight inflation rate and unstable foreign exchange that has trigged cost of production impacted on its profit before tax in the period under review.

BUA Cement reported N221.07 billion revenue in H1 2023, a 17.2 per cent increase from N188.56 billion in H1 2022, driven by sales of cement.

Revenue per ton stood at N67,192/ton, an increase of 19 per cent from N56,454/ton, as of H1’2022, as a result of price adjustments.

Cost of sales stood at N114.94billion in H1 2023, a growth of 18 per cent from N97.5 billion, primarily driven by 38.09 per cent increase in cost of materials to N39.42billion in H1 2023 from N28.54billion in H1 2022 and 26 per cent increase in operations, maintenance and technical fees that stood at N10.71billion in H1 2023 from N8.49billion reported in H1 2022.

Cost of sales per ton rose by 19.7per cent to N34,936/ton from N29,192/ton, as of H1 2022. This was due to increases in raw materials costs, energy product costs, depreciation charges and repair & maintenance costs.

Energy cost

Energy cost per ton closed H1 2023 at N14,561/ton, an increase of 11.6 per cent from N13,048/ton during the corresponding quarter ended H1’2022, which resulted from a combination of energy price increases and fuel mix during the quarter.

The interplay between revenue and cost of sales brings gross profit to N106.12 billion in H1 2023 from N91.06billion reported in H1 2022 as gross profit margin dropped to 48 per cent in H1 2023 from 48.29 per cent in H1 2022.

One of the key financial parameters of BUA Cement’s result and accounts for half year under review was total operating expenses (OPEX), which stood at N20.17 billion in H1 2023, an increase of 49per cent from N13.5 billion reported in H1 2022.

The breakdown showed selling and distribution Costs to N14.03 billion in H1 2023, 74per cent growth from N8.06 billion in H1 2022, while administrative cost closed H1 2023 at N6.13billion, an increase of 12.3 per cent from N5.46billion in H1 2022.

Major factors attributable for the increase were: distribution costs resulting from an increased fleet size, depreciation charges and other administrative expenses.  –

Selling, distribution & administration cost (net) per ton increased by 46.2per cent to N5,830/ton from N3,988/ton H1 2022.

This brings operating profit to N86.94billion in H1 2023, an increase of 11.8 per cent from N77.7billion in H1 2022. 

Another key financial parameter of BUA Cement was N10.52billion net finance cost in H1 2023 from N2.8billion in H1 2022.

The company declared N10.59billion interest expenses on loans in H1 2023 from N3.22billion in H1 2022, while foreign exchange gain stood at N2.14billion in H1 2023 from N1.05billion reported in H1 2022.

As the company witnessed significant increase in finance cost and OPEX, its profit before tax closed N1 2023 at N76.42 billion, an increase of 2.75per cent from N74.37 billion reported in H1 2022.

The management of BUA Cement announced N12.81 billion income and deferred taxes in H1 2023, a decline of 1.58per cent from N13.01billion in H1 2022. 

With nearly two per cent drop in income and deferred taxes, BUA Cement reported N63.62billion profit after tax in H1 2022 from N61.35billion in H1 2022.

Earning Per Share, however, stood at N1.88 per share as of June 30, 2023 from N1.81 per share reported in corresponding June 30, 2022.

Loans, cash & short-term deposits 

The growth in BUA Cement’s finance cost can be attributable to its significant increase in long term and short-term borrowings as the company in the period reported N232.34 billion in total borrowings as of June 30, 2023 from N125.44billion reported in 2022 financial year.

Long-term borrowings stood at N197.95billion as of June 30, 2023, an increase of 342 per cent from N44.74billion in 2022, while short-term borrowings closed June 30, 2023 at N34.39billion a decline of 57.4per cent from N80.7 billion reported in 2022.

BUA Cement had secured loans from First Bank of Nigeria – Term Loans and overdraft, Union Bank of Nigeria Plc, Fidelity Bank Plc, Series 1 Bond and International Finance Corporation (IFC).

The company secured a $500million loan from IFC approved in September 2022. The tenure of the loan is 10 years, 2.5 years grace period, interest: 6 months SOFR + 5.5per cent and the first tranche of $300million was disbursed in April 2023.

The Company issued a N115 billion semi-annual coupon bond at the rate of 7.5% per annum. The effective date of the bond is December 30, 2020. The Bond proceeds were used to reimburse the shareholder loan and for working capital finance.

However, the company declared N1.04 trillion in total assets as of June 30, 2023, an increase of 18.7per cent from N874.01 billion in 2022.

BUA Cement’s total non-current assets stood at N707.75billion as of June 30, 2023, an increase of 4.66 per cent from N676.2billion reported in 2022. Total current assets nearly doubled, closing June 30, 2023 at N330.08billion, a 67 per cent growth from N197.77billion in 2022 financial year.

Cash and short-term deposits contributed 65.85per cent to overall short-term assets as of June 30, 2023 from 24.29per cent in 2022.

BUA Cement in the total short-term assets declared cash and short-term deposits stood at N217.35billion as of June 30, 2023, an increase of 352 per cent from N48.05billion in 2022. 

Total liabilities

Aside assets, BUA Cement declared N563.09 billion total liabilities as of June 30, 2023, a growth of 21.6 per cent from N462.9billion in 2022.

The company declared total non-current liabilities of about N365.5billion as of June 30, 2023, a growth of 78 per cent from N205.34billion in 2022, while total current liabilities dropped to N197.61billion as of June 30, 2023 from N257.56billion reported in 2022 financial year. 

At N563.09 billion total liabilities, BUA Cement’s total liabilities/total assets increased to 54.3 per cent as of June 30, 2023 from 52.96 per cent reported in 2022.

Its total equity closed June 30, 2023 at N474.73 billion from N411.11billion in 2022, representing an increase of 15.5 per cent.

The MD/CEO, BUA Cement, Mr. Yusuf Binji recently said cement producer aimed at driving continued revenue and cost synergies across revenue and margin lines; harmonization of sales and marketing strategy across the two plants and construction of lines 3 & 5 at Obu and Sokoto plants, respectively.

On sustainability strategic priorities, he said BUA Cement is transiting from Heavy Fuel Oil (HFO) to Liquefied Natural Gas (LNG) in Sokoto, commencing work on the 70MW gas power plant at Obu and 70MW gas power plant at Sokoto.