BUA Cement, Nigeria’s second-largest cement producer reported a 49.7 percent increase in earnings before interest, taxes, depreciation, and amortization (EBITDA) to N87.50 billion in the first half (H1) of 2022 from N58.45 billion reported in the first half of 2021.
The boost in EBITDA can be attributed to the 175.8 percent increase in other income which amounted to N200.14 million in the first half of 2022 from N72.58 million recorded in the corresponding period of 2021.
A breakdown of the unaudited financial statement showed a significant surge in insurance claims by a whopping 706.8 percent to N170.40 million in H1 2022 from N21.12 million in H1 2021 was the major driver for the increase in other income.
The cement manufacturer also reported an increase in revenue by 51.7 percent to N188.56 billion in the first half of 2022 from N124.28 billion in the corresponding period of 2021.
However, on a quarter-on-quarter basis, revenue was down by 5.6 percent to N91.57 billion in the second quarter (Q2) of 2022 from N96.98 billion in the first quarter (Q1) of 2022.
Oluwasesan Adeyeye, an analyst at CSL Stockbrokers Limited said “we believe the torrential rainfall seen in Q2 2022 may have limited cement demand in Q2 2022.”
The EBITDA margin which gauges the effectiveness of the company’s cost-cutting efforts declined by 63 basis points to N46.4 percent in H1 2022 from N47 percent in H1 2021.
The cost of sales grew by 47.37 percent in the first half of 2022 to N97.50 billion from N66.16 billion in the corresponding period of 2021.
Adeyeye said, “we note that apart from the year-on-year increase in volume produced that may have necessitated cost increment, the company is also facing inflationary pressures and the impact of FX depreciation on energy prices.”
Energy costs and materials were the major drivers of the increase in the cost of sales, as energy costs grew by 64.6 percent to N43.58 billion and materials grew by 48.20 percent to N28.02 billion in the first half of 2022.
Despite a 23.2 percent year-on-year increase in depreciation and amortisation to N9.8 billion, operating profit accelerated, rising by 53.9 percent to N77.74 billion in H1 2022 from N50.52 billion in H1 2021.
BUA Cement recorded an increase in net finance costs by 245.3 percent to N2.8bn in the first half of 2022 from N824 million in the prior period (H1 2021).
Adeyeye attributed the increase in finance costs to a steep increase in interest expense and exchange loss despite the increase in interest income to N1.43 billion in H1 2022 from N402.01 million in H1 2021.
Interest expenses grew by 246.1 percent to N3.22 billion in the first half of 2022 from N931.12 million in the corresponding period of 2021. The company noted that “no more capitalization of bond and loan interest on Sokoto line 4 accounted for interest expenses increase.”
Similarly, exchange loss increased by 257.2 percent to N1.1 billion in the first half of 2022 from N295 million in the prior period (H1 2021), an increase the company attributed to the wide margin between auction bid rates and the I & E rates.
BUA Cement recorded a 41.4 percent increase in profit after tax to N61.36 billion in the first half of 2022 from N43.4 billion in the corresponding period of 2021.
Total assets recorded by the company grew by 29.31 percent to N861.04 billion in the first half of 2022 from N665.86 billion in the first half of 2021.
The cement producer reported total borrowings of N82.25 billion in the first half of 2022, a 16.30 percent increase from N70.72 billion reported in the first half of 2021.
BUA Cement’s shareholder’s equity in the period under review amounted to N459.48 billion, a 31.52 percent increase from N349.35 billion in H1 2021.
The cement company’s cash and cash equivalent which shows the value of a company’s assets that are cash or can be converted into cash immediately amounted to N128.24 billion in the first half of 2022, a 105.71 percent increase from N62.34 billion in the first half of the prior year.
The company generated N136.44 billion from operating activities in the first half of 2022, an 11.41 percent decline from the N154.01 billion it generated in the first half of 2021.
The cement manufacturer reported a negative cash flow used in investing activities of N-61.47 in the first half of 2022 due to the large cash outflow in the period.
A breakdown of the cash flow used in investing activities shows that BUA Cement invested in the purchase of property, plant, and equipment amounting to N61.64 billion in the first half of 2022. Its cash inflow from investing activities during the period was from the interest it received which amounted to N1.43 billion.
Similarly, its net cash flow used in financing activities was negative, amounting to N9.06 billion in the first half of 2022 due to repayment of loans, interest payment during the period, and lease liabilities which amounted to N6.48 billion, 6.63 billion, and N33.09 million respectively.
Analysis by Businessday shows a debt-to-equity ratio of 17.90 percent and a return on equity (ROE) of 14.31 percent in the first half of 2022.
The cement manufacturer reported earnings per share (EPS) of N1.81 per share in H1 2022, up 41.4 percent from N1.28 per share in H1 2021.
BUA Cement PLC is a Nigeria-based cement manufacturing company primarily engaged in operating its cement manufacturing business through its subsidiaries and has its plants located in Northern and Southern Nigeria.
Its subsidiaries are Kalambaina Cement Company Ltd, which has a manufacturing capacity of 1.5 million metric tons (MT), OBU & EDO Cement Company Ltd has a combined installed capacity of manufacturing 3.5 million MT, and Cement Company of Northern Nigeria has an installed capacity of manufacturing 500,000 MT of cement.