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BUA Cement grows profit by 48% in Q3’20

EFCC did not visit our office – BUA

BUA, Nigeria’s second largest cement maker by market value nearly doubled its net profit to N18.75 billion in Q3 2020 up from N12.64 billion in Q3 2019.

That was a 48 percent increase within the 1-year period and a 26 percent increase from N14.87 billion in Q2 2020.

Similarly, on a 9-month basis, net profit increased to N53.57 billion in 2020 from N43.25 billion in 2019, representing a 23.8 percent hike. Mustapha Wahab, an infrastructure analyst at Chapel Hill Denham, noted that BUA is not alone in experiencing higher profit within cement industry.

“Cement demand which is private sector led is on the rise due to increased infrastructure spend

Wahab noted that another crucial aspect responsible for BUA’S higher profit is that the pricing environment is favourable compared to 2- years ago especially since demand favours profitability ahead of volume”.

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BUA has been able to increase price at a steady and slow pace, triggered by the VAT increase from 5 to 7.5 percent. Although cost increased to N30.3 billion in Q3 2020 from N20.74 billion in Q3 2019, revenue rose to N55.29 billion from N39.57 billion, a 39.7 increase within the period.

When compared with Q2 2020, cost increased by 21 percent from N25 billion while revenue rose by 16.9 percent from N47.29 billion.

On a much larger scale, within the first 9- months, cost rose to N84.82 billion in 2020, a 27.9 percent increase from N66.31 billion in 2019 whereas revenue increased to N156.5 billion, a 21 percent rise from N129.4 billion within this timeframe.

Meanwhile, the cost increase on all fronts in Q3 2020 whether on a quarterly, 9-month or yearly basis mainly stemmed from currency devaluation that increased input costs.

“At least 70 percent of BUA’S coal for energy consumption is imported which is more expensive and increases its import price”, mentioned Wahab.

In answering whether this trend of rising cost will persist into the future, Wahab stated that “this trend will likely not continue for a long time.”

“This is because the management is building a coal mining depot to enable them produce their own coal rather than importing and this is projected to reduce energy cost by 30 percent”, said Wahab.

Gross profit also rose to N24.98 billion in Q3 2020 from N18.83 billion in Q3 2019, a 32.7 percent increase alongside profit before tax (PBT) which increased to N20.32 billion from N14.53 billion within this timeframe.

This was despite the 7.3 percent rise in administrative expenses to N2.28 billion in Q3 2020 from N2.13 billion in Q3 2019 coupled with the 29.9 percent increase in selling and distribution expenses to N3.28 billion from N2.53 billion within this period.