BUA Plc Faces Potential Profit Slowdown Amid Forex Challenges and Increased Operating Expenses
Nigeria’s BUA Plc, a cement maker, may experience a slowdown in profit before tax due to factors such as the Central Bank of Nigeria’s foreign exchange unification and rising operating expenses. The company reported N335.86 billion in revenue for the unaudited nine months ended September 30, 2023, reflecting a 28% increase from the same period in 2022. However, a net foreign exchange loss of N26.9 billion and higher total operating expenses impacted the profit. BUA Cement’s Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 20.8% to N138.9 billion, but the EBITDA margin contracted.
Key Points:
- Revenue Growth:
- BUA Plc reported N335.86 billion in revenue for the first nine months of 2023, representing a 28% increase from N262.6 billion in the same period in 2022.
- Revenue per ton increased by 21.4% to N68,540/ton, attributed to price adjustments.
- Cost Challenges:
- BUA faced challenges from a net foreign exchange loss of N26.9 billion in nine months of 2023, compared to N5.26 billion in the same period in 2022.
- Total operating expenses increased to N30.86 billion in nine months of 2023 from N20.8 billion in the corresponding period in 2022.
- Cost of Sales:
- Cost of sales stood at N186.4 billion, increasing by 30.5%, primarily due to higher raw material costs, energy costs, and operations and maintenance fees.
- Profit Metrics:
- Profit before tax closed at N85.75 billion in nine months of 2023, reflecting a 3.4% decline from N88.81 billion in the same period in 2022.
- Earnings per Share (EPS) increased by 2.8% to 225 kobo from 219 kobo in nine months of 2022.
- EBITDA and Margin:
- BUA Cement’s EBITDA increased by 20.8% to N138.9 billion, with a margin contraction to 41.3% from 43.8% in nine months of 2022.
- Total Assets and Liabilities:
- BUA Cement reported N1.02 trillion in total assets as of September 2023, with total liabilities increasing to N624.54 billion.
- Total borrowing (short and long term) contributed 25.4% to total assets in September 2023, up from 14.35% in 2022.
- Stock Performance:
- BUA Cement’s stock price appreciated by a certain percentage Year-to-Date, reaching N107.00 per share from N97.75 per share at the opening of trading.
- Future Priorities:
- BUA Cement emphasized a commitment to minimizing the impact of its activities on people and the environment, engaging with stakeholders, and implementing community development initiatives.
Conclusion:
BUA Plc, a major cement maker in Nigeria, faces potential headwinds impacting its profit before tax, including challenges from foreign exchange losses and increased operating expenses. While the company has reported revenue growth driven by price adjustments and volume growth, the impact of cost challenges has affected its profitability metrics. The focus on minimizing environmental impact and engaging with stakeholders indicates a commitment to sustainable business practices. BUA Cement will likely continue to navigate market dynamics and prioritize strategies for sustained growth amid evolving industry conditions.
