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April 26, 2022/FSDH Research

Key Performance Highlights:

• BUA Cement reported solid YoY results, with revenue jumping 58.5% YoY, while profit after tax surged 48.2% YoY in 1Q22, outperforming its competitor Lafarge Africa (revenue up +26.8% YoY) comprehensively. However, the 1Q22 performance was boosted by the 3MTPA line 4 Sokoto plant that was commissioned in January 2022. The company also recorded a solid performance on a sequential basis in terms of topline as the revenue grew by 37.7% QoQ, the profit increased by 28.3% QoQ to N33.1 billion, primarily due to an increase in sales revenue and lower finance cost.
• Bua Cement’s revenue shot up by 58.5% YoY to N97.0 billion in 1Q22, primarily due to the new plant commissioned this quarter, lifting the company’s cement production by 3 million metric tonnes per annum. This increase was partially offset by a 52.2% YoY jump in the cost of sales to N48.8 billion, resulting in a 208 bps YoY expansion in the gross margin to 49.7% in 1Q22. The increase in the cost of sales was primarily due to the rising inflationary pressures in the economy, resulting in a 70.5% YoY jump in energy cost, coupled with a 66.1% YoY increase in material cost.
• Bua Cement recorded a massive 715.4% YoY increase in the other income to N186 million in 1Q22 (1Q21:N23 million), riding on insurance claims because of an isolated fire incident at a diesel storage tank in the vicinity of their factory in Sokoto on 18th March 2022. The selling and distribution expenses climbed 108.0% YoY to N3.2 billion in 1Q22, along with a 41.5% YoY rise in the administrative expenses to N2.8 billion in this quarter. Consequently, Bua Cement recorded a 65.2% YoY rise in operating profit to N42.4 billion, a 178 bps YoY increase in operating margin to 43.7% in 1Q22. The company reported a net finance income of N30 million this year against net finance costs of N879 million in 1Q21, owing to increased interest income to N316 million in 1Q22 compared to N2 million in 1Q21 and a 60.7% drop in the interest expenses to N345.9 million in 1Q22. The company recorded a higher effective income tax rate of 21.7% this quarter against 9.7% in 1Q21. Bua Cement reported a 48.2% YoY jump (+28.3% QoQ) in the net profit to N33.1 billion in 1Q22. The earnings per share came in at N0.98 compared to N0.66 in the prior period (N0.76/share in 4Q21).
• Looking at sequential performance, Bua Cement reported a solid first quarter, with the revenue climbing up 37.7% QoQ to N97.0 billion in 1Q22, partially offset by the rise in the Cost of Sales by 29.8% YoY, settling at N48.8 billion, resulting in 46.8% YoY increase in the gross profit to N48.2 billion in 1Q22. Other Income dropped 85.3% YoY to N186 million. Selling and distribution expenses jumped by 33.8% to N3.2 billion, and the administration expenses inched 6.0% to N2.8 billion in 1Q22. The profit after taxes shot up 28.3% to N33.1 billion in 1Q22, as the solid revenue and increase in net finance income percolated down.
• In January 2022, BUA Cement commissioned its new 3 million metric tonnes Sokoto Line 4 cement plant, significantly expanding its cement production. BUA’s total production capacity now stands at 11 million tonnes with the completion of this plant. The Sokoto plant continues to be the largest private-sector employer in the North-Western part of Nigeria. Addressing the guests Abdul Samad Rabiu, Chairman of BUA Cement, commented that BUA Cement will continue to invest more in the cement industry until Nigeria is self-sufficient and cement is made available, accessible, and affordable for all Nigerians.

Market Reaction: The investor reaction to 1Q22 performance was muted as the stock closed 3.89% lower at N68.00 versus a 0.17% gain for the All-Share Index on Monday (25/4).

Bua Cement Earnings Highlights 1Q22