FSDH Initial Reaction: BUA Cement 3Q23 results 
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November 2, 2023/FSDH Research

Key Performance Highlights:

• BUA Cement reported robust operating performance in 3Q23 as its revenue jumped 55.1% YoY to N114.8 billion while operating profit vaulted 52.2% YoY to N32.7 billion in 3Q23. Moreover, the cost of sales grew relatively higher at 57.7% YoY to N71.5 billion in 3Q23 from N45.3 billion reported in 3Q22. Consequently, the gross profit stood at N43.3 billion in 3Q23, up 50.8% YoY, while the gross margin contracted 106 bps YoY to 37.7% compared to 38.8% in 3Q22. The increase in the cost of sales was primarily driven by a 123.3% YoY spurt in operations, maintenance and technical fees (13% of the cost of sales), along with a 65.6% YoY growth in Materials cost (34% of the cost of sales) and a 60.7% rise in the Energy cost (48% of the cost of sales) in 3Q23.
   
• The selling and distribution expenses soared 51.4% YoY to N6.9 billion in 3Q23, mainly due to a 59.7% YoY rise in distribution costs, while administrative expenses increased 39.5% YoY to N3.8 billion in 3Q23. The administrative expenses surged primarily due to a 107.1% YoY hike in staff costs. Consequently, BUA Cement recorded a 52.2% YoY increase in operating profit to N32.7 billion in 3Q23, compared to N21.5 billion in 3Q22, and the Company’s operating margin contracted 53 bps YoY to 28.5% in 3Q23 compared to 29.1% in 3Q22.
   
• The Company recorded a net finance income of N1.4 billion in 3Q23 against a net finance cost of N2.7 billion in 3Q22. However, the Company reported a 5.9x YoY spike in net exchange loss to N24.8 billion in 3Q23. The significant increase in the exchange loss resulted in a 35.4% YoY fall in profit before tax to N9.3 billion in 3Q23. After the Company recorded an income tax credit of N3.1 billion in 3Q23 (vs. N1.8 billion income tax charge in 3Q22), BUA Cement reported a mere 1.6% drop in the net profit to N12.5 billion in 3Q23. The earnings per share came in at N0.37, almost in-line with N0.37 reported in the prior year period.
   
• Looking at sequential performance, the revenue increased marginally by 0.1% QoQ to N114.8 billion in 3Q23, with a 21.2% QoQ increase in the cost of sales to N71.5 billion, resulting in a 22.3% QoQ fall in the gross profit to N43.3 billion in 3Q23 (2Q23: N55.7 billion). The administration expenses zoomed 178.5% QoQ to N3.8 billion in 3Q23 (2Q23: N1.4 billion), while selling and distribution expenses were up 1.9% QoQ to N6.9 billion in 3Q23 (2Q23: N6.8 billion). The Company reported a tax expense of N4.1 billion in the prior quarter versus the tax credit of N3.1 billion this quarter. Consequently, the Company reported a profit after taxes of N12.4 billion in 3Q23 compared to N36.8 billion in 2Q22, a 66.2% QoQ drop.

Market Reaction: The investor reaction to the 3Q23 results was positive as the BUA Cement stock rose 1.13% to N107.00 versus a 1.65% rise for the All-Share Index (31/10).

Bua Cement Earnings Highlights 3Q23

Source: Company Financials, FSDH