Bua Foods has more cash than they know how to spend it, and of course, a strong balance sheet provides them the firepower to ward off any macroeconomic headwinds.
According to BusinessDay research, BUA Foods Plc’s recorded a 15,053 percent increase in net cash generated from operating activities, indicating that the firm grew its ability to generate enough cash to cover its short-term obligations.
The firm’s net cash from operations spiked to N132.13 billion in 2022, up from N872 million in 2021, thereby bringing the operating cash flow margin to 31.62 percent, 3,136 basis points higher than 0.26 percent in 2021.
The operating cash flow margin is a trusted metric of a company’s profitability, efficiency, and earnings quality, that measures cash from operating activities as a percentage of total sales revenue in a given period.
A cash pile provides sufficient funds for companies to honour both short- and long-term obligations to creditors, magnify the earnings of owners by way of steady dividend payment, and pursue expansion plans such as making an inroad into other countries and acquiring entities.
BUA Foods total revenue in 2022 stood at N417.82 billion, 25.37 percent higher than N333.27 percent in 2021, with the sale of sugar (fortified and non-fortified) accounting for 53.48 percent of the total revenue generated during the period
The sale of sugar (fortified and non-fortified) generated the sum of N223.45 billion in 2022, 6.92 percent up from the N208.99 billion generated in 2021. “This was driven by price adjustments and export sales within the period. Volume sold increased slightly by 1 percent to 607,218 tons within the period from 600,551 tons in 2021,” the company stated.
The firm also generated revenue from the sale of molasses which grew by 69.24 percent to N743 million, the sale of bakery flour amounting to N79.86 billion, the sale of pasta totaling N57.4 billion, and the sale of white bran which stood at N6.26 billion in 2022.
The flour division was driven by adjustments in pricing and redesigned route to market distribution across the supply value chain. However, the volume sold declined by 16 percent to 170,820 tons within the period from 203,985 tons in 2021. The decline in production is attributable to energy challenges in Q2 2022.
On a quarterly basis, the firm reported its highest revenue in the fourth quarter of 2022 totaling N127.64 billion, up 5.95 percent from N120.47 billion in the third quarter of 2022.
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Consequently, profit after tax deductions and earnings before interest, taxes, amortisation, and depreciation (EBITDA) grew by 29.57 percent and 32.76 percent respectively in 2022 despite the cost of sales and operating expenses growing in tandem with revenue.
Profit grew to N90.40 billion in 2022 from N69.77 billion in 2021, while EBITDA grew to N115.89 billion in 2022 from N87.29 billion in 2021.
The firm’s total cost of sales claimed 67.57 percent of the total revenue in 2022 and grew by 22.58 percent to N282.31 billion from N230.31 billion in the corresponding year.
Growth in the cost of sales was on the back of a 28 percent and 21 percent increase in energy costs and the cost of raw materials, indicating the impact of supply chain disruptions brought on by the Russian-Ukrainian war during the year.
“The high input cost environment and further devaluation of the Naira against the US Dollar weighed heavily on prices for raw materials. This resulted in a higher cost of production,” BUA Foods stated in an earnings release statement.
Consequently, the profit margin was severely pressured, growing by a steep 71 bps to 21.64 percent in 2022 from 20.93 percent in 2021.
In the same vein, operating expenses grew by 14.82 percent to N28.43 billion in 2022 from N24.76 billion last year, on the back of a 68.57 percent increase in selling and distribution expenses during the period.
Selling and distribution expenses grew due to a huge increase in the cost of diesel within the period.
Net finance costs grew on the back of rising interest rates during the period to N8.12 billion, 275.93 percent up from N2.16 billion in the corresponding year. As a result, the EBITDA margin grew by 155 bps to 27.74 percent in 2022 from 26.19 billion in 2021.
BUA Foods total assets increased by 3.14 percent to N612 billion in 2022 from N593 billion in 2021 driven largely by strategic transactions in trade and other receivables (+172 percent at N142.1 billion) which are all short-term at reasonable fair value, while total shareholder’s equity grew by 22.17 percent to N245.21 billion in 2022 from N200.72 billion in 2021.
The firm’s net debt stood at N167.89 billion in 2022, 23.18 percent down from N218.56 billion in 2021, while total borrowings declined by 20.65 percent in 2022 to N195.23 billion from N246.05 billion in the corresponding year, thereby bringing debt to equity down to 79.62 percent in 2022 from 122.58 percent in 2021.
BUA Foods engaged in investing activities during the period, however, reported negative cash flow from investing activities totaling N10.30 billion largely due to the acquisition of property, plant, equipment, and biological assets in 2022.
As part of financing activities, the firm repaid borrowings and paid dividends amounting to N106.67 billion and N63 billion respectively during the period. It also received proceeds from borrowings amounting to N56 billion in 2022, bringing net cash flow from financing activities to N-121.78 billion in 2022.
Consequently, cash and cash equivalents increased slightly to N27.53 billion in 2022 from N27.49 billion in 2021.
BUA Foods reported earnings per share of N5.02 per share in 2022 from N3.88 per share in 2021.
Commenting on the results, Ayodele Abioye, the managing director of BUA Foods Plc said, “this result is a testament to our commitment to creating sustainable value for all stakeholders in our journey of creating a food value chain that promotes African food security while nourishing lives.
Despite the challenging business environment, we strive to navigate the numerous headwinds to deliver double-digit growth by expanding our market reach and sustaining our market share across our product portfolio. We also achieved significant progress in the backward integration programme for the sugar business and our capacity expansion plans for the flour, rice, and pasta divisions.”
