FSDH Initial Reaction: BUA Cement 1Q23 results 
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May 2, 2023/FSDH Research

Key Performance Highlights:

• BUA Cement reported a mixed set of numbers in 1Q23 as its revenue increased 9.7% YoY to N106.4 billion, while net profit declined 19.1% YoY to N26.8 billion in 1Q23. Moreover, the cost of sales grew relatively higher at 14.7% YoY to N56.0 billion in 1Q23 from N48.8 billion reported in 1Q22 due to rising inflationary pressures in the economy. Consequently, the gross profit stood at N50.4 billion in 1Q23, up 4.5% YoY, while the gross margin contracted 233 bps YoY to 47.4% compared to 49.7% in 1Q22.
   
• The selling and distribution expenses soared 124.0% YoY to N7.3 billion in 1Q23 mainly due to higher marketing and distribution costs, while administrative expenses surged 72.9% YoY to N4.8 billion in 1Q23 primarily due to debt issue expenses of N1.7 billion. The company recorded a 75.2% YoY decrease in the other income to N46 million in 1Q23 (1Q22: N186 million) due to lower insurance claims, partially offset by higher sundry income. Consequently, BUA Cement recorded a 9.4% YoY decline in operating profit to N38.4 billion in 1Q23, compared to N42.4 billion in 1Q22, and the company’s operating margin declined 760 bps to 36.1% in 1Q22 compared to 43.7% in 1Q2.
   
• In 1Q23, the company’s net finance cost spiralled to N2.6 billion against N30 million in 1Q23, owing to increased interest expense to N4.4 billion in 1Q23 (1Q22: N345.9 million), partially offset by FX exchange gain of N1.7 billion in 1Q23. Although the company’s tax expenses marginally declined by 2.2% YoY to N8.7 billion, BUA Cement reported a 19.1% YoY decline in the net profit to N26.8 billion in 1Q23 due to rising costs. The earnings per share came in at N0.79 in 1Q23 compared to N0.98 in the prior period.
   
• Looking at sequential performance, the revenue increased 8.1% QoQ to N106.4 billion in 1Q23, with a marginal 1.6% QoQ increase in the cost of sales to N56.0 billion, resulting in 16.4% QoQ surge in the gross profit to N50.4 billion in 1Q23 (4Q22: N43.3). Selling and distribution expenses vaulted 17.2% QoQ to N7.3 billion (4Q22: N6.2), while administration expenses dropped 47.7% QoQ to N4.8 billion in 1Q23 (4Q22: N9.1). The company’s tax expenses jumped 99.3% QoQ to N8.7 billion in 1Q23 against N4.3 billion in 4Q22. Consequently, the company reported a profit after taxes of N26.8 billion in 1Q23 compared to N27.0 billion in 4Q22, a marginal 0.7% QoQ decline.
   
• On 10 March 2023, the Board of Directors proposed a final dividend of N2.80 per every share for the period ended on 31 December 2022, subject to appropriate withholding tax to shareholders whose names appear in the Register of Members as at the close of business on Tuesday, 11 August 2023. The dividend will be paid on 24 August 2023.

Market Reaction: The investor reaction to the mixed 1Q23 results was muted as the BUA Cement stock remained unchanged at N97.85, versus a 0.32% gain for the All-Share Index (28/4).

BUA Cement Earnings Highlights 1Q23

Source: Company Financials, FSDH