Bua Cement’s Solid Topline Growth Marred by FX Losses in FY23

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FSDH Initial Reaction: BUA Cement FY23 results 
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March 4, 2024/FSDH Research

Key Performance Highlights:

  • BUA Cement reported strong operating performance in FY23 as its revenue jumped 27.4% YoY to N460.0 billion, outperforming Lafarge Africa’s (closest peer) 8.6% YoY revenue growth in FY23. However, the Company’s cost of sales grew relatively higher (+39.5% YoY to N276.0 billion) than sales growth in FY23. Consequently, the gross profit stood at N184.0 billion in FY23, up 13.1% YoY, while the gross margin contracted 506 bps YoY to 40.0%. The increase in the cost of sales was majorly driven by a 35.2% YoY rise in energy costs to N123.3 billion (44.7% of the cost of sales) and an 88.2% jump in operation and maintenance service charges to N87.4 billion (31.7% of the cost of sales) in FY23.
  • The selling and distribution expenses soared 47.7% YoY to N29.1 billion in FY23, mainly due to a 58.3% YoY rise in distribution costs to N20.7 billion. Administrative expenses increased 17.2% YoY to N12.3 billion in FY23, primarily due to higher security expenses and staff salaries & allowances. The Company also reported a 12.7x YoY spike in net exchange loss to N70.0 billion in FY23, mainly attributable to losses arising from foreign currency borrowings. Consequently, BUA Cement reported a 42.4% YoY fall in operating profit to N74.7 billion in FY23, compared to N129.7 billion in FY22, and the Company’s operating margin contracted 1,970 bps YoY to 16.2% in FY23 compared to 35.9% in FY22.
  • In FY23, finance income increased to N12.9 billion in FY23 (FY22: N1.9 billion), while finance costs grew to N19.9 billion in FY23 (FY22: N10.6 billion), which resulted in net finance costs falling 18.1% YoY to N7.1 billion. Despite the Company recording an income tax credit of N2.2 billion in FY23 (vs. N19.1 billion income tax charge in FY22), BUA Cement reported a 31.2% YoY decline in the net profit to N69.5 billion in FY23. The earnings per share came in at N2.05 in FY23 compared to N2.98 in the prior year.
  • Looking at quarterly performance, BUA Cement reported a 26.2% YoY increase in revenue to N124.1 billion in 4Q23; however, the cost of sales surged 61.3% YoY, coming at N89.6 billion. As a result, the gross profit declined 19.4% YoY to N34.5 billion in 4Q23, while the gross margin declined by 1,572 bps YoY to 27.8% in 4Q23 (4Q22: 43.5%). Furthermore, the Company reported an operating loss of N20.2 billion (vs. N34.7 billion operating profit in 4Q22) owing to a foreign exchange loss of N45.2 billion in 4Q23. Ultimately, an income tax credit of N11.9 billion helped BUA Cement to lower its loss after taxes to N6.6 billion in 4Q23, compared to the profit after taxes of N27.0 billion in 4Q22.
  • The board has proposed a dividend of N2.00 per share (FY22: N2.80 per share), subject to appropriate withholding tax and shareholder approval. The dividend will be payable to all shareholders registered in the Company’s books at the close of business on 9 August 2024.

Market Reaction: The investor reaction to the FY23 results was muted as the BUA Cement stock remained unchanged at N150.00 versus a 0.72% gain for the All-Share Index (29/2). However, the stock declined 10.0% to close at N135.00 versus a 1.23% fall for the All-Share Index (1/3).

Bua Cement Earnings Highlights FY23

Source: Company Financials, FSDH

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