October 29, 2024/Cordros Report

BUA Cement Plc (BUACEMENT) published Q3-24 unaudited financials yesterday (28 October) after COB, reporting a standalone EPS of NGN0.43 (+18.2% y/y), bringing the 9M-24 EPS to NGN1.45 (9M-23: NGN2.25). The higher EPS print was driven by a 91.2% y/y surge in revenue.

Revenue surged by 91.2% y/y in Q3-24 (9M-24: +73.7% y/y). Although management has not disclosed details about the substantial growth, we attribute the strong topline performance to a notable price increase in Q3-24, up c.62.5% y/y from Q3-23. However, q/q revenue grew at a more moderate pace of 8.2%, likely impacted by lower sales volumes due to the heavy rainfall experienced during the quarter.

Gross margin contracted by 605bps y/y in Q3-24 to 35.9%, as the cost of sales ex-depreciation (+111.1% y/y) outpaced revenue growth (+91.2% y/y). The elevated cost of goods sold was primarily driven by substantial increases in raw material costs (+100.3% y/y), energy expenses (+93.1% y/y), and maintenance service charges (+152.8% y/y), reflecting ongoing inflationary pressures, currency depreciation, and high energy prices. Sequentially, EBITDA margin declined by 371bps y/y to 30.3%, while EBIT margin fell by 306bps y/y to 25.5%, further impacted by a 47.7% y/y rise in operating expenses (ex-depreciation).

Further down, BUACEMENT posted a 44.1% y/y increase in net finance cost (9M-24: +120.5% y/y) driven by higher interest expenses (+349.9% y/y), reflecting the high interest rate environment and a 45.7% year-to-date increase in borrowings.

Despite these pressures, profit before tax (PBT) increased by 132.0% y/y to NGN21.63 billion in Q3-24. Finally, after deducting a tax charge of NGN6.91 billion (compared to a tax credit of NGN3.13 billion in Q3-23), profit after tax (PAT) grew by 18.2% y/y to NGN14.72 billion.

Comment: BUACEMENT delivered modestly improved earnings in Q3-24, largely underpinned by robust revenue growth. Nevertheless, significant cost and currency pressures persist, weighing on profit margins. Looking ahead to Q4-24, we anticipate continued revenue growth driven by price increases; however, ongoing cost pressures are expected to remain a challenge, exerting further pressure on margins. Our estimates are under review.