July 30, 2024/CSL Research
In its recently released unaudited H1 2024 results, BUA Cement reported a 64.6% y/y Revenue growth to N363.94bn in H1 2024 from N221.07bn in the prior period (H1 2023). Similarly, on a q/q basis, Revenue was up by 25.9% to N202.81bn in Q2 2024 from N161.13bn in Q1 2024. 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.
In H1 2024, the Cost of Sales (adjusted for depreciation) increased by 131.8% y/y, reaching N244.20bn, up from N105.36bn in H1 2023. This surge was primarily driven by significant growth in operation and maintenance service charges (+278.44% y/y), energy costs (+171.68% y/y), and materials (+140.75% y/y). We attribute these cost increases to elevated inflationary pressures and a sharp devaluation of the currency, both of which have substantially raised the company’s expenses. Despite the significant rise in Cost of Sales, the Gross Profit saw a slight increase of 3.5% y/y to N119.74bn in H1 2024. However, the Gross Margin contracted markedly by 1,944 basis points y/y, falling to 32.9% in H1 2024 from 52.3% in H1 2023.
BUA Cement H1 2024
Source: Company Data, CSL Research |
Operating Expenses (adjusted for depreciation) increased significantly by 44.74% y/y to N24.41bn in H1 2024 from N16.86bn in H1 2023. The rise was driven by increases in both Administrative Expenses adjusted for depreciation (up 88.5% y/y to N10.53bn) and Selling & Distribution Expenses adjusted for depreciation (up 23.1% y/y to N13.87bn).
Other Income, which includes insurance claims, government grants, and sundry income, declined by 86.1% y/y, dropping to N137m in H1 2024 from N983m in H1 2023. EBITDA decreased by 4.4%, down to N95.47bn in H1 2024 from N99.83bn in H1 2023 while the EBITDA margin also contracted significantly, decreasing by 1,893 basis points to 26.2% in H1 2024 from 45.2% in H1 2023. Depreciation and amortisation increased by 4.9%, reaching N13.52bn in H1 2024. Consequently, the company’s Operating Profit declined by 5.7% y/y to N81.96bn in H1 2024, down from N86.94bn in H1 2023.
Net Finance Cost for BUA Cement decreased by 87.1% to N1.08bn in H1 2024 from N8.38bn in H1 2023 reflecting a significant y/y rise in Finance Income to N9.80bn in H1 2024 from N2.22bn recorded in H1 2023. Finance Cost also rose to N10.88bn from the N10.59bn recorded in H1 2023. The company FX losses increased significantly to N39.98bn in H1 2024 compared with N2.14bn recorded in H1 2023 due to the continuous devaluation of the Naira. Consequently, Pre-Tax profit was down by 47.5% y/y to N40.13bn in H1 2024 from N76.43bn in H1 2023.
Net Income declined by 46.2% to N34.25bn in H1 2024 from N63.62bn in H1 2023. Earnings per share declined by 46.3% y/y to N1.01/s for H1 2024 from N1.88/s in H1 2023.
We have a target price of N77.52/s for BUA Cement with a SELL recommendation. Current Price; N143.20/s
Kindly click on the below link to download the full report.
CSL Bua Cement Nigeria Earnings Quick Take H1 2024.pdf
