BUA Cement Plc recorded a 233 percent surge in its bank borrowings last year, a BusinessDay analysis shows.
The firm’s latest financial statement shows that bank borrowings rose to N418.16 billion from N125.44 billion in 2022.
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“The borrowing spike is largely attributed to the company’s expansion efforts, with most of the foreign exchange losses stemming from these borrowings,” a Lagos-based research analyst said.
Further analysis of the statement shows that of the total borrowings, current bank loans stood at N122.68 billion, up from N80.69 billion, while non-current loans grew to N295.46 billion from N44.74 billion.
The company recorded a net foreign exchange loss of N69.95 billion, higher than the N5.5 billion in 2022. Of this, N52.5 billion was attributed to finance costs associated with the construction of additional capacity at its Obu and Sokoto facilities, while N17.47 billion was linked to foreign trade payables.
“The FX loss capitalised relates to the portion of the exchange losses arising from foreign currency borrowings eligible to be capitalised as part of the borrowing costs for capital projects under construction,” the company said in a statement.
Despite a decline in after-tax profit to N69.45 billion from N101.01 billion in 2022, there was a notable revenue growth of 27.4 percent, reaching N460 billion from N360.9 billion in the previous year, owing to an increase in price.
However, with the naira devaluation and ongoing depreciation, coupled with rising inflation, the company faced increasing price pressures, leading to a 39.5 percent increase in production costs to N276 billion compared to N197.9 billion in 2022.
Administrative expenses rose to N12.29 billion from N10.5 billion, while distribution and selling expenses increased to N29.06 billion from N19.68 billion.
Despite the cost pressures, Earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 7.8 percent to N169.72 billion in 2023. However, the EBITDA margin decreased by 6.7ppts to 36.90 percent in 2023 from 43.61 percent in 2022.
Depreciation and Amortisation were up by 12.9 percent to N25.06 billion. Other income declined to N2.06 billion from N2.78 billion, mainly due to the absence of modification grants recorded in 2023.
Operating profit, impacted by foreign exchange losses, decreased to N74.69 billion from N129.72 billion in 2022.
Finance income recorded a growth of 563.9 percent to N12.88 billion, attributed to an increase in interest income.
Finance costs also rose by 89 percent to N19.94 billion due to higher interest expenses on lease liability, benefit obligation, borrowing, and an overdraft.
In its financial statement, the company noted that all interest expenses were calculated using the effective interest rate, except for interest expenses on defined benefit obligations.
“The capitalisation rate used to determine the amount of general borrowing costs to be capitalised is the weighted average rate applicable to the company’s general borrowings. The determined effective interest rates are First Bank LC (15.36 percent), Fidelity Bank -12 percent, and Union Bank RSSF loan – 12.29 percent (2022: 11.9 percent).
“The specific borrowing costs were capitalised using the actual costs that are directly attributable to the acquisition, construction, or production of the qualifying assets. The determined effective interest rate of the specific borrowing cost is IFC Loan – 12.06 percent” the company added.
The company’s total equity decreased to N385.22 billion from N411.11 billion.
Net cash from operating activities saw a marginal increase to N147.60 billion from N147.46 billion, while net cash from investing activities reported a negative of N104.12 billion from a negative of N101.43 billion.
Net cash flows generated/(used in) from financing activities turned positive to N89.66 billion from a negative of N60.36 billion.
Cash and cash equivalents as of December 31, 2023, amounted to N225.07 billion, up from N48.05 billion.
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