April 25, 2022/CSL Research

BUA Cement Plc in its recently released Q1 2022 results recorded a decent performance, as it reported a 58.5% y/y Revenue growth to N96.99bn in Q1 2022 from N61.19bn in the prior period (Q1 2021). Similarly, on a q/q basis, Revenue was up by 37.7% from N70.4bn in Q4 2021.  Again, we find the q/q growth (Q1 2022 compared with Q4 2021) to be particularly impressive given that Q4 is usually the best quarter for the cement players as they take advantage of the strong demand for cement arising from favourable weather conditions and festive induced activities.  We believe the firm must have begun to see gains from its recently commissioned 3 million MTPA line 4 in its Kalambaina plant in Q1 2022. Though, the management is yet to provide details of the drivers of the solid revenue growth, we attribute the robust topline growth to  price-volume mix.

Cost of Sales (adjusted for depreciation) was in line with Revenue growth, up 58.7% y/y (vs. Revenue growth of 58.5% to N45.6bn in Q1 2022 from N28.7bn. We observed that most of the cost increases came from materials (+66.1% y/y) and energy cost (+70.5% y/y). We note that apart from the increase in volume produced that may have necessitated cost increment, the company appears to be facing inflationary pressures and the impact of FX depreciation on energy prices. Given the robust Revenue growth, Gross profit still grew 58.3% y/y to N51.4bn in Q1 2022 while Gross margin contracted by 6bps y/y to 53.0% in Q1 2022, impacted by elevated cost pressures.

Operating Expenses (adjusted for depreciation) significantly jumped by 88.8% y/y to N5.3bn in Q1 2022 from N2.8bn in Q1 2021. The astronomical increase was driven by both Administrative Expenses adjusted for depreciation (up 42.4% y/y to N2.6bn) and Selling & Distribution Expenses (up 171.3% y/y to N2.8bn). Despite the cost pressures, the firm remained resilient as EBITDA increased by 55.9% to N46.3bn in Q1 2022. EBITDA was also boosted by a 715.4% y/y increase in Other Income to N186m. EBITDA margin decreased by 79bps to 47.7% in Q1 2022 from 48.5% in Q1 2021. With a 3.3% y/y decline in Depreciation and Amortisation to N3.9bn, Operating Profit further rose by 65.2% y/y to N42.4bn from N29.6bn in Q1 2021.

BUA Cement recorded a steep decline in Net Finance Costs by 96.5% y/y to N30m in Q1 2022 from N879m in the prior period (Q1 2021). The steep decline reflects a 60.7% y/y fall in Interest Expense to N346m in Q1 2022, further supported by a significant y/y increase in Interest Income to N316m in Q1 2022.  Consequently, Pre-Tax profit grew significantly, up 71.0% y/y to N42.4bn in Q1 2022.

Effective Tax Rate increased significantly to 21.7% in Q1 2022 from 9.7% in Q1 2021 due to deferred tax expenses. As a result,  Net Income climbed slower, growing by 48.2% y/y to N33.1bn in Q1 2022 from N22.4bn in Q1 2021. Earnings per share was up 48.2% y/y to N0.98/s for Q1 2022 from N0.66/s in Q1 2021.

Our estimates are under review. Current Price; N68.00/s.

Source: Company data, CSL Research