October 30, 2023/CSL Research

In its recently released 9M 2023 results, BUA Cement reported a 27.9% y/y Revenue growth to N335.86bn in 9M 2023 from N262.60bn in the prior period (9M 2022). Similarly, on a q/q basis, Revenue was up by 0.1% to N114.8bn in Q3 2023 from N114.71bn in Q2 2023. While no information has been provided on the Revenue breakdown, we attribute the company’s top line growth to increases in both price and volume.

Cost of Sales (adjusted for depreciation) was up 31.8% y/y to N172.05bn in 9M 2023 from N130.5bn in 9M 2023. We observed that most of the cost increases came from materials (47.35% y/y) and energy cost (+26.67% y/y). We believe that inflationary pressures continue to raise cost. Given the increase in Revenue growth, Gross profit grew by 24% y/y to N163.82bn in 9M 2023 while Gross margin contracted by 152bps y/y to 48.8% in 9M 2023 impacted by elevated cost pressures.

Operating Expenses (adjusted for depreciation) increased by 50% y/y to N26.08bn in 9M 2023 from N17.38bn in 9M 2022. The increase was driven by both Administrative Expenses adjusted for depreciation (up 21.4% y/y to N9.11bn) and Selling & Distribution Expenses (up 71.7% y/y to N16.97bn). Other Income which comprises of Insurance claims, Government grants, and Sundry income was also up significantly by 312.1% to N1.1bn. Despite the cost pressures, EBITDA increased by 20.8% to N138.86bn in 9M 2023. However, EBITDA margin decreased by 243bps to 41.3% in 9M 2023 from 43.8% in 9M 2022. Depreciation and Amortisation was up to N19.17bn, while Operating Profit grew by 20.6% y/y to N119.68bn from N99.25bn in 9M 2022.

BUA Cement recorded a 249% increase in Net Finance Costs to N33.94bn in 9M 2023 from N9.72bn in the prior period (H1 2022). The significant increase reflects a 56.9% y/y rise in Interest Expense to N6.99bn in 9M 2023 and a 411.77% rise in Net Exchange Loss to N26.93bn from N5.26bn in 9M 2022. Pre-Tax profit was down by 3.4% y/y to N85.75bn in 9M 2023.

Tax expense declined by 34.6% in 9M 2023 to 9.68bn from 14.8bn in 9M 2022. Consequently, Net Income increased by 2.8% y/y to N76.07bn in 9M 2023 from N74.02bn in 9M 2022. Earnings per share was up by 2.6% y/y to N2.25/s for 9M 2023 from N2.19/s in 9M 2022.

We have a target price of N80.5/s for BUA Cement with a Sell recommendation. Current Price; N105.8/s.

BUA CEMENT 9M 2023

Source: Company data, CSL Research

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