FX Unification, OPEX Plods BUA Cement’s Profit

Kayode Tokede

With the Central Bank of Nigeria (CBN) foreign exchange unification and hike in operating expenses, BUA Plc this year may report a slowdown in profit before tax.

The cement maker in unaudited nine months result and accounts for period ended September 30, 2023 announced N335.86 billion in revenue, representing an increase of 28per cent from N262.6 billion in nine months of 2022, from price increases and volume growth.

Revenue per ton increased by 21.4 per cent to N68,540/ton from N56,468/ton, as at nine months of 2023, as a result of price adjustments.

The cement maker’s Sokoto Plant has a capacity of 0.5 Million Metric Tonnes per Annum  (MMTPA) in line 2, 1.5 MMTPA in line, 3MMTPA in line 4 and to commence 3MMTPA in first quarter of 2024.

The Obu’s Plant in Edo state has a capacity of 3MMTPA in line 1, 3MMTPA in line 2 and 3MMPA to commence in first quarter of 2024.

However, a N26.9 billion net foreign exchange loss in nine months of 2023 from N5.26 billion reported in nine months of 2022 and N30.86 billion total operating expenses in nine months of 2023 from N20.8 billion in nine months of 2022 impacted on profit.

Cost of sales stood at N186.4 billion in nine months of 2023, an increase of 30.5per cent or N43.6 billion from N142.8 billion in nine months of 2022), primarily from increases in raw material costs, energy costs and operations & maintenance fees.

Administrative costs

Selling, Distribution and Administrative costs (net) increased to N20.93 billion in nine months of 2023 from N12.6 billion in nine months of 2022, while administrative expenses closed nine months of 2023 at N9.93 billion, representing an increase of 21.3 per cent from N8.18 billlion in nine months of 2022.

Major factors attributed for the increase were: distribution costs resulting from higher fueling costs and increased fleet size (trucks), alongside repair and maintenance costs; depreciation charges, staff costs and advertisement & promotion expenses.

Cost of sales per ton rose by 23.9 per cent to N38,047/ton from N30,713/ton, as at nine months of 2022. This was due to increases in raw materials costs, energy product costs, operations, maintenance & technical fees, repair & maintenance costs and depreciations charges.

Energy cost per ton increased by 20.2 per cent to N16,803/ton from N13,978/ton during the corresponding period ended nine months of 2022. This resulted from energy price increases and depreciation effect of the Naira.

Selling, Distribution & Administration cost (net) per ton increased by 37.5 per cent to N6,069/ton from N4,413/ton for the nine months ended 2022.

The drivers of the increase were distribution costs, led by an increase in fueling costs and larger number of trucks, alongside repair & maintenance costs; depreciation charges; staff costs and advertisement & promotion costs.

 BUA cement’s Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 20.8 per cent to N138.9 billion in nine months off 2023 from N115 billion in nine months of 2022, resulting from growth in reported net revenues, which increased by 27.9 per cent to N335.9 billion from N262.6 billion but partly offset by increases in raw materials and energy costs, operations & maintenance and distribution costs.

EBITDA margin for the reporting period contracted by 2.4pp to 41.3per cent from 43.8 per cent in nine months of 2022.

Profit before tax closed nine months of 2023 at N85.75 billion, a decline of 3.4 per cent from N88.81 billion reported in nine months of 2022.

BUA Cement in 2022 full financial year declared N120.15 billion profit before tax, representing an increase of nearly 17 per cent from N102.87 billion in 2021.

BUA Cement’s income and deferred taxes dropped to N9.68 billion in nine months of 2023 from N14.8 billion in nine months of 2022 to push profit after tax to N76.07 billion in nine months of 2023 from N74.01 billion in nine months of 2022.

The company’s Earnings per Share (EPS) up by 2.8 per cent to 225 kobo from 219 kobo, as at nine months of 2022.

Total borrowing and overall assets

BUA Cement reported N1.02trillion in total assets as of September 2023 from N874.01billion in 2022 full year with total borrowing (short-long) contributing 25.4 per cent as of September 2023 from 14.35 per cent reported in 2022.

The company declared N197billion long-term borrowing as of September 30, 2023 from N44.74billion in 2022, while short-term borrowing dropped to N60.95billion as of September 30, 2023 from N80.7billion in 2022.

In a total, total liabilities moved to N624.54billion as of September 30, 2023 from N462.9billion in 2022.

The breakdown of BUA Cement’s total liabilities include: N359.17billion total non-current liabilities as of September 30, 2023 from N205.34billion in 2022x, while current liabilities  stood at N265.38billion as of September 30, 2023 from N257.56billion reported in 2022.

YtD Performance

The stock price of BUA Cement has appreciated by per cent Year-till-Date performance to N107.00 per share from N97.75 per share it opened for trading.  

The Managing Director/Chief Executive Officer, BUA Cement, Mr. Yusuf Binji during the company’s presentation to investors and analysts for the nine months 2023 said, “We are committed to minimizing the impact of our activities on people and the environment, engagement with stakeholders and implementing community development initiatives through tangible investments into communities.”

On sustaining profitable growth, priorities, Binji highlighted that the company, “Drive continued revenue and cost synergies across revenue and margin lines and harmonisation of sales and marketing strategy across the two plants.”

On sustaining innovation, he said BUA Cement would deploy solutions that enhance customer experience and further drives internal efficiencies, sales automation, payment integration, and fuel management system.