April 28, 2023/CSL Research

In its recently released Q1 2022 results, BUA Cement Plc reported a 9.7% y/y Revenue growth to N106.35bn in Q1 2023 from N96.99bn in the prior period (Q1 2022). Similarly, on a q/q basis, Revenue was up by 8.1% from N98.39bn in Q4 2022. While no information has been provided on the Revenue breakdown, we attribute the company’s topline growth to a price-volume mix.

Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 16.1% y/y (vs. Revenue growth of 9.7%) to N52.75bn in Q1 2023 from N45.44bn in Q1 2022. We observed that most of the cost increases came from materials (+35.1% y/y) and consumables (+48% y/y). We attribute the cost growth to inflationary pressures, FX depreciation and high energy prices. Given the Revenue growth, Gross profit still grew 4.0% y/y to N53.60bn in Q1 2023 while Gross margin contracted by 274bps y/y to 50.4% in Q1 2023.

Operating Expenses (adjusted for depreciation) jumped significantly, up 123.4% y/y to N11.84bn in Q1 2023 from N5.3bn in Q1 2022. The astronomical increase was driven by both Administrative Expenses adjusted for depreciation (up 75.3% y/y to N4.58bn) and Selling & Distribution Expenses (up 124% y/y to N7.26bn). Other Income was down by 75.3% to N45m. Driven by the cost pressures, EBITDA decreased by 8.9% to N41.80bn in Q1 2023.  Consequently, EBITDA margin decreased by 799bps to 39.3% in Q1 2023 from 47.3% in Q1 2022. Given a 93% y/y increase in Depreciation and Amortisation to N6.59bn, Operating Profit declined by 17.1% y/y to N35.21bn from N42.46bn in Q1 2022.

BUA Cement recorded a significant increase in Net Finance Costs y/y to N2.65bn in Q1 2023 from N30m in the prior period (Q1 2022). The significant increase reflects a 1157.1% y/y rise in Interest Expense to N4.4bn in Q1 2023, further supported by a significant y/y decline in Interest Income to N60.69bn in Q1 2023.  Consequently, Pre-Tax profit declined significantly, down by 23.2% y/y to N32.57bn in Q1 2023.

Effective Tax Rate up by 5.7ppts to 27.4% y/y in Q1 2023 from 21.7% in Q1 2022. Consequently, Net Income declined by 19.1% y/y to N26.80bn in Q1 2023 from N33.14bn in Q1 2022. Earnings per share was down by 19.1% y/y to N0.79/s for Q1 2023 from N0.98/s in Q1 2022.

Our estimates are under review. Current Price; N97.85/s.

Source: Company data, CSL Research