How high costs slowed BUA cement’s nine months profit growth
BUA Cement, Nigeria’s second-largest cement producer, saw its profit wilt in the first nine months of 2023 due to high operating expenses and finance costs.
BUA Cement Plc, Nigeria’s second-largest cement producer, recorded a marginal growth of 2.8 percent in profit to N76 billion in the first nine months of 2023 from N74 billion.
The firm’s revenue grew by 27.8 percent to N333.8 billion in the period under review from N262.6 billion recorded in the same period of 2022 due to strong industry-wide growth in price per tonne and volume growth, according to analysts.
“While no information has been provided on the Revenue breakdown, we attribute the company’s top-line growth to increases in both price and volume,” CSL said in a note.
The cost of sales which claimed 56 percent of its total revenue, was up by 30.5 percent to N186.4 billion in the nine-month period of 2023 from N142.8 billion recorded in 2022.
Energy cost claimed 44 percent of the cost of sales, during the period which reflects the sustained hike in prices of alternative energy sources, and the cost of materials increased by 47.3 percent to N63.4 billion.
“Cost of Sales (adjusted for depreciation) was up 31.8% y/y to N172.05bn in 9M 2023 from N130.5bn in 9M 2023. We observed that most of the cost increases came from materials (47.35% y/y) and energy costs (+26.67% y/y). We believe that inflationary pressures continue to raise cost,” CSL added.
Operating expenses increased by 48 percent to N30.8 billion in the nine-month period of 2023 from N20.8 billion recorded in the same period of 2022, with selling and distribution being the primary culprit of the growth.
Selling and distribution increased by 65.9 percent to N20.93 billion in the period under review from N12.61 billion recorded in the same period of 2022.
Despite the cost pressures, EBITDA increased by 20.8 percent to N138.86 billion in the nine months period of 2023. However, the EBITDA margin decreased by 243 bps to 41.3 percent from 43.8 percent in the same period of 2022.
However, other income which comprises insurance claims, government grants, and sundry income was also up significantly by 312.1 percent to N1.1 billion.
Riding on the high-interest rate environment, BUA Cement recorded a 249 percent increase in net finance costs to N33.94 billion in the nine months period of 2023 from N9.72 billion in the prior period.
The significant increase reflects a 56.9 percent rise in interest expense to N6.99 billion in the period under review and a 411.77 percent rise in Net Exchange Loss to N26.93 billion from N5.26 billion recorded in 2022.
Bua Cement’s cash flow for the period includes; net cash flow from operating activities amounted to N137.7 billion, net cash flow from used in investing activities recorded negative amounting to N44.4 billion, net cash flows used in financing activities amounted to N17.1 billion.
Cash and cash equivalent amounted to N158.4 billion in the nine-month period of 2022.
