BUA Cement Plc Reports Decline in EPS for 2023FY Amid Rising Costs and FX Losses, Proposes Final Dividend

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BUA Cement Plc (BUACEMENT) released its audited financial results for the fiscal year 2023 on February 29th, disclosing an earnings per share (EPS) of NGN2.05, a notable decline from NGN2.98 recorded in 2022FY. This decline in EPS was primarily attributed to significant increases in cost of goods sold (COGS) excluding depreciation (+42.1% y/y) and operating expenses (OPEX) excluding depreciation (+12.8% y/y), exacerbated by substantial foreign exchange (FX) losses, which surged by 12.7 times year-on-year to NGN69.96 billion. Despite the challenging financial performance, BUACEMENT’s board has proposed a final dividend of NGN2.00 per share, resulting in a dividend yield of 1.3% based on the closing price of NGN150.00 per share on February 29th.

The company reported a 27.4% year-on-year growth in revenue for 2023FY, driven by sales in the Nigerian market (+27.9% y/y), while export earnings experienced a contraction (-10.4% y/y). Management attributed this revenue growth to a favorable price/volume mix in the second quarter of 2023, supported by increased demand from the real estate and construction sectors. Despite a price slash implemented in October 2023, sales turnover sustained its growth momentum, settling higher at 8.1% quarter-on-quarter in Q4-23.

However, the gross margin declined by 575 basis points to 44.2% in 2023FY, primarily due to the increased cost of sales excluding depreciation. Notable cost increases were observed in energy consumption (+35.2% y/y) and operation and maintenance service charges (+40.8% y/y), reflecting the impact of rising energy costs and operating expenses during the period.

As a result, the group’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin contracted by 508 basis points to 37.0%, further affected by a growth in operating expenses excluding depreciation (+12.8% y/y).

Net finance costs surged by 794.2% year-on-year in 2023FY, driven by a marked increase in FX losses and interest expenses, despite a higher interest income balance. The substantial FX losses were mainly attributable to financing the group’s capacity expansion and losses on foreign trade payables.

Profit before tax (PBT) fell by 44.0% year-on-year to NGN67.23 billion in 2023FY, with profit after tax (PAT) settling lower at 31.2% year-on-year to NGN69.45 billion after accounting for a tax credit of NGN2.23 billion.

Looking ahead, management anticipates maintaining revenue growth as production volume ramps up from newly commissioned lines at the Sokoto and Obu Plants. Additionally, the activation of gas power plants at both locations is expected to reduce energy costs in the near term and provide relief for profit margins. The management call scheduled for March 14th aims to provide further insights into the company’s strategies amidst the prevailing market conditions.


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