BUA Cement’s non-core earnings surge 311% on insurance claims

BUA Cement’s other income has increased by 311 percent on the back of insurance claims in the nine months of 2023.

The cement maker’s other income grew to N1.12 billion in 9M’2023 from N271.86 million in the same period of 2022.

Insurance claims contributed N893.66 million (80%) while sundry income contributed N223.07 million (20%) to BUA Cement’s total other income during the period reviewed.

BUA Cement’s revenue obtained from cement sales grew to 335.86 billion in 9M’2023 from N262.6 billion in the same period of 2022.

“BUA Cement’s 27.92 percent revenue growth in 9M 2023 was primarily driven by an increase in price and sales volumes. BUA Cement reported increases in prices in 9M 2023 with average cement price rising by 21.4 percent to N68,540/ton from N56,468/ton in 9M 2022 while sales volumes closed 9M 2023 at 4.90 million MT from 4.65 MT in 9M 2022, indicating a 6.52 percent increase,” analysts at CSL Research said in a note.

“Overall, we expect revenue from the Nigerian operations to increase by 25 percent year on year to N451.89 billion in FY 2023 from the N360.99 billion recorded in FY 2022,” CSL Research analysts said, adding that they believe costs associated with its production capacity expansion drive will impact profitability negatively in the short to medium term.

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Cost of sales increased to N186.44 billion in 9M’2023 from N142.83 billion in the similar period of 2022.

The firm spent N119.36 million on marketing expenses and other overheads in 9M’2023 from N62.33 million in the same period of 2022.

BUA Cement spent N9.37 billion on repair and maintenance from N6.92 billion while energy costs grew to N82.34 billion from N65.01 billion.

Profit after tax surged to N76.07 billion in 9M’2023 from N74.01 billion in the same period of 2022 while profit before tax dropped to N85.75 billion from N88.81 billion.

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CSL Research analysts stated that the constrained purchasing power of private players and low CAPEX expenditure by the government amidst the challenging macroeconomic environment have continued to affect volume growth in the industry.

“To aid volume growth, BUA Cement reduced ex-factory price in Q3. We estimate a 20 percent year-on-year (19% year to date) growth in price per tonne for the year while projecting a 10% y/y volume growth,” analysts at CSL Research said.

The cement maker’s net interest expense surged to N7 billion in 9M’2023 from N4.46 billion in the same period of 2022.

BUA Cement’s net exchange loss stood at N26.93 billion in 9M’2023 from N5.26 billion in 2022.

“The company is embarking on an expansion drive with the construction of lines 3 and 5 at the Obu and Sokoto plants in a bid to increase volume capacity to 17 million metric tonnes from the existing 11 million metric tonnes. We believe that the reduction in ex-factory price was done in a bid to boost the company’s demand and improve its market share,” CSL Research analysts said.