August 10, 2026/InvestmentOne Report
BUA Cement Plc delivered revenue of NGN728.93bn in H1:2026, up 25.61% YoY, extending the earnings momentum recorded in FY:2025 and Q1:2026. Bagged cement remained the core product, rising 18.74% YoY to NGN688.77bn, while bulk-cement sales increased to NGN40.15bn from NGN236.29mn and contributed about 26.9% of the absolute YoY revenue increase. Although bulk cement represented only 5.51% of revenue, its emergence broadens the topline mix and gives BUA Cement greater exposure to project-led demand.
Stronger domestic volume growth across industry peers, alongside Nigeria’s 3.89% Q1:2026 GDP growth, points to a supportive demand backdrop and suggests that cement demand remained resilient during the period. More importantly, revenue growth was achieved without a corresponding escalation in production costs, cost of sales rose by only 2.70% YoY to NGN301.89bn, as the 22.17% decline in operation and maintenance service charges to NGN66.22bn cushioned increases in energy (+6.25% YoY to NGN135.35bn), materials (+20.66% YoY to NGN44.56bn) and repairs and maintenance (+38.70% YoY to NGN17.49bn).
This shows that cost pressures were not broad-based, as the moderation in O&M charges absorbed a significant portion of the increases across key production inputs, keeping overall production-cost growth well below the pace of revenue expansion and providing further support to margin growth. Consequently, gross profit rose 49.12% to NGN427.03bn and gross margin expanded by 924bps to 58.58%. The trend strengthened in Q2, with revenue up 5.34% QoQ and cost of sales down 2.79%, lifting gross margin to 60.20% from 56.88% in Q1.
Despite selling and distribution costs rising 35.66% YoY and administrative expenses increasing 29.62%, operating profit advanced 51.30% to NGN371.27bn and operating margin widened to 50.93%. The further improvement in Q2 suggests that this cost efficiency is gaining traction; however, sustaining margins around current levels will depend on continued moderation in O&M charges and the company’s ability to absorb rising input costs, particularly as the NGN1.23bn decommissioning credit provided some additional support to H1 cost of sales.
Lower Net Finance Burden Lifts Earnings, while Q2 PAT Normalizes: BUACEMENT’s strong operating performance translated more efficiently into pre-tax earnings in H1:2026, as the financing burden eased materially. Finance income rose 176.90% YoY to NGN18.73bn, while reported finance costs declined 41.95% to NGN22.14bn, reducing net finance cost to NGN3.41bn from NGN31.37bn in H1:2025. The moderation reflected lower interest expense on borrowings of NGN21.89bn versus NGN29.43bn in the prior period, alongside NGN3.39bn of borrowing costs capitalized on qualifying projects.
However, the improvement was not driven by deleveraging, as bank borrowings increased 32.15% to NGN620.28bn, reflecting the company’s continued investment programme. Earnings received further support from a NGN16.57bn net FX gain, significantly higher than NGN782.82mn in H1:2025. Consequently, Profit Before Tax (PBT) advanced 78.97% YoY to NGN384.44bn, while Profit After Tax (PAT) rose 79.59% to NGN324.88bn, translating to EPS of NGN9.59.
However, the Q2 performance provides a clearer indication of the likely H2 earnings mix, as the FX gain moderated sharply to NGN3.56bn from NGN13.01bn in Q1, while a higher tax charge weighed on bottom-line growth. As a result, PAT declined 15.80% QoQ despite stronger operating margins, suggesting that earnings growth going forward may rely increasingly on the underlying cement operation as the sizeable below-the-line support recorded in H1 begins to normalize. Q2 confirmed that core earnings remained strong, with the PAT decline driven mainly by weaker FX support and a higher tax charge rather than softer operations.
Expansion and Distributions Keep Leverage in Focus: Cash flow remains supportive, but the company’s capitalallocation requirements have become more demanding. Cash generated from operations stood at NGN308.35bn and net operating cash flow at NGN278.45bn, representing about 85.7% conversion of PAT despite working-capital outflows.
BUA Cement spent NGN60.67bn on PPE, with construction work-in-progress rising 45.98% to NGN183.86bn, reflecting continued investment in expansion projects. Bank borrowings increased 32.15% to NGN620.28bn following NGN233.27bn of additional drawdowns, while the non-current portion of the International Finance Corporation (IFC)-syndicated loan rose to NGN470.27bn. Despite the higher leverage, cash and shortterm deposits of NGN303.56bn provide a sizeable liquidity buffer, partly cushioning the near-term balance-sheet pressure from the company’s ongoing investment programme. BUA Cement’s expansion programme is increasingly debt-funded, although strong liquidity and cash generation provide some cushion. The balancesheet outlook will therefore depend on sustained cash conversion and disciplined execution of ongoing capex
OUTLOOK: Looking ahead, we expect H2:2026 earnings to become increasingly dependent on core cement operations as the sizeable FX and tax-related support recorded in H1 normalizes. Revenue growth should remain supported by project-led demand, improving product mix and ongoing capacity initiatives, while maintaining current margins will require continued cost discipline amid rising materials, distribution and maintenance expenses. We also expect cash-flow management to become more important as capex execution continues alongside a higher debt burden.
At NGN316.00, BUACEMENT trades at a trailing P/E of about 21.40x, above Dangote Cement and HBM Nigeria at approximately 15.50x and 18.01x, respectively. Thus, while the operating outlook remains positive, the current price already reflects a substantial portion of the earnings improvement and leaves limited protection against margin normalisation, slower volume growth or execution risk. We retain our NGN254.00 target price, implying 19.6% downside, and place a SELL rating on BUACEMENT.
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