What to know about BUA Foods, its listing by introduction

BUA Foods Plc recently listed its shares by introduction on the Nigerian Exchange Limited (NGX). The purpose of the shares-listing was to create liquidity for BUA Foods ordinary shares in the secondary market. It also makes the company have access to a platform for raising long-term capital in the future from a wide range of domestic and international investors if and when required, amongst others.

Listing by introduction

When a company lists shares by way of introduction, it means that it neither issues new shares nor seeks to relinquish some of the existing shares of its majority shareholders to raise equity capital in the immediate term, but existing shareholders are provided with the opportunity to sell to the public leveraging the platform of the Nigerian Exchange Limited.

Historical/business overview of BUA Foods Plc

On November 25, 2021 the was restructuring implemented by way of a scheme under Section 711 of Companies and Allied Matter Act (CAMA), among BUA Sugar Refinery Limited, IRS Flour Mills Limited, IRS Pasta Limited, BUA Rice Limited, BUA Oil Mills Limited, and BUA Foods Limited.

BUA Sugar Refinery Limited emerged as the surviving entity of the restructuring and subsequently, its name was changed to BUA Foods Plc. The “Rice Division” is now the rice business of BUA Food.

As part of the Restructuring, the name of the enlarged entity was changed to BUA Foods with its operations reorganised into five business divisions: Sugar, Flour, Pasta, Rice and Edible Oils. In December 2021, the Company was converted into a public limited liability (PLC) company. BUA Foods is affiliated with diverse group companies under the BUA brand that span the food and infrastructure sectors.

BUA Foods is a leading food and fast-moving consumer goods (FMCG) business, which processes, manufactures, produces and distributes food materials such as sugar, flour, pasta, rice, and edible oils as well as packaged foods.

The Company’s products currently include fortified and non-fortified sugar, flour for large and small scale use, and pasta. In addition, the Company expects to commence the processing, manufacturing, production and distribution of rice by 2022 and edible oils by 2024.

Chaired by Abdulsamadu Isyaku Rabiu, BUA Foods BUA Foods business operations comprise of five divisions, which include Sugar, Flour, Pasta, Rice, and Edible Oils. BUA Foods’ products are distributed to customers across Nigeria with a strong potential for expansion into West Africa.

The Company currently owns mills, plants, refineries, and plantations across different regions in Nigeria – they are Oil Mill, Rice Mill; Bassa Sugar Plantation; Lafiagi Sugar Plantation, Sugar Refinery; Sugar Refinery, Oil Mill; and Flour Mill, Pasta Plant, Sugar Refinery.

Shareholding structure as at December 31, 2021

The shareholding structure as at December 31, 2021 as indicated in its Listing Memorandum shows that its 18 billion ordinary shares in the share capital of the company were beneficially held as follows: Abdulsamadu Isyaku Rabiu (16,172,851,967 units or 89.849percent), Abdulsamadu Isyaku Rabiu (Jnr) (1,792,096,099 units or 9.956percent), CardinalStone Trustees Limited (31,910,000 units or 0.177percent), Kabiru Isyaku Rabiu (1,101,654 units or 0.006percent), BUA Group Limited (971,475units or 0.005percent), BUA International Limited (583,372 units or 0.003percent), and BUA Industries Limited (485,433 units or 0.003percent).

Creating company visibility through the listing

BUA Foods recently listed by introduction on the Main Board of the Nigerian Exchange Limited (NGX) a total of 18 billion ordinary shares at N40 per share. BUA Foods Plc listed under the Consumer Goods sector of NGX trades with a symbol BUAFOODS.

Read also: BUA Foods to commence Rice business operations in 2022

As expected, since its listing, BUA Foods has increased the visibility of the food manufacturing, processing and distribution company to investors on the African continent and across the globe. The listing of BUA Foods’ shares had added N720billion to the market capitalisation of NGX, further boosting liquidity in the Nigerian capital market and providing opportunities for wealth creation.

Leading the year-to-date rally on Nigerian Exchange

Since its listing on the Nigerian Exchange, BUA Foods Plc has risen most on the Bourse by 54.5percent, as its share price stood at N61.80 as at close of trading on Monday January 17.

The five business divisions…

The Sugar Division currently operates the second-largest sugar refinery in West Africa, with a total refining capacity of 1.5 million MT per annum. The Company is a leading producer of fortified and nonfortified sugar in West Africa. The Sugar Division operates across the value chain of the sugar industry, including the production, processing, refining, and distribution of raw sugar and its by-products such as bagasse, molasses and mud cakes. The division operates two ultramodern and automated sugar refineries, one in Apapa, Lagos State, and the other in Port Harcourt, Rivers State. Over the years, the Company also acquired two plantations, in Lafiagi, Kwara State, and in Bassa, Kogi State.

The Flour Division is involved in the processing, manufacturing and distribution of flour and bran and produces them for large-scale and small-scale use. BUA Foods owns a state-of-the-art flour mill equipped with high efficiency specifications for energy saving and waste reduction. This flour mill commenced production in 2019 with a capacity of 500,000 MT per annum.

The mill’s capacity utilization is approximately 84percent. The flour mill currently produces 315,000 MT of flour and 105,000 MT of bran, with sales revenue split of 91.3percent and 8.7percent respectively as at 31 December 2020. As flour is one of the staple foods contributing to the development of Nigeria and in order to cater for the growing flour demand in the country, BUA Foods is currently expanding the milling facility by 720,000 MT per annum to over 1.2 million MT per annum. The facility expansion is expected to be completed in 2022. The Flour Division operates from BUA Foods’ Industrial Complex, Port Harcourt, Rivers State.

The Pasta Division is involved with processing, manufacturing and distributing pasta. The Pasta Division operates from BUA Foods’ Industrial Complex, Port Harcourt, Rivers State with a capacity to produce 250,000 MT of pasta per annum. The Pasta plant capacity utilisation is approximately 54percent impacted largely by frequent natural gas (power) supply disruptions.

To achieve BUA Foods’ drive to expand its product portfolio and create capacity ahead of demand and increase its Pasta market share beyond the North and the South-South of Nigeria, the Company has invested in the construction of a second pasta processing plant with a capacity of 250,000 MT per annum.

Following the combination of these two plants and upon the commencement of operation of the second plant, the Company expects the plant to yield a total capacity of 500,000 MT per annum, positioning the Company to become the second-largest pasta producer in Nigeria. In addition, the Company is developing its retail pasta brand and broadening its product range to satisfy varying consumer needs. The Company is also addressing the gas supply constraint through a strategic partnership with a downstream energy company.

The Rice Division has a rice milling facility with a capacity of 200,000 MT per annum. The Company expects that the rice mill will be operational in 2022 and expects it to be the biggest single-line rice mill in Nigeria. The Company also expects that the rice mill will produce quality parboiled rice, with a very strong brand identity that will be identifiable to target customers.

It will leverage the existing strong brand name and consumer loyalty with which BUA brand is already renowned. The Company currently has one rice mill and plans to expand its rice milling business to a combined capacity of 1 million MT per annum, by installing new rice mill facilities in Gujungu, Jigawa State and establishing a rice mill and plantation in Agaie, Niger State.

The Company’s other assets are largely the parboiling plant which has two boilers (weighing 8 MT each) and milling machines. Other assets include storage tanks, soaking tanks, driers, elevators and conveyors, paddy de-stoners and cleaners. With respect to milling machines, constituent parts include huskers, paddy separators, brown rice de-stoners, whiteners, polishers, length graders, sortex machines and bagging machines.

The Edible Oils Division specialises in the conversion of crude oil palm into high-quality oil products including palm olein, stearin, and distilled fatty acid, amongst others, for direct and industrial uses such as soap manufacturing. BUA Foods’ oil mills, located in Kano and Lagos, have a total capacity of 250,000 MT per annum and are expected to become operational in 2024. The Company plans to resuscitate its edible oils operations with the establishment of a new milling and packaging plant, with an annual capacity of 300,000 MT. Pack offerings are expected to be in bulk and retail, with retail sizes ranging between 0.5litres – 6.0litres.

Capacity utilization

As at December 31, 2021 date of the company’s Listing Memorandum the capacity utilisation of BUA Foods Plc business divisions are as follows: Sugar Division 75percent, Flour Division 84percent, and Pasta Division 54percent.

What BUA Foods management said at The Facts Behind the Listing

The management said BUA Foods Plc will in this year 2022 commence operations of its Rice business, noting that its rice milling plant has the capacity to produce 200,000 metric tons yearly. This commencement of operations of its rice business is in addition to a total of 1.4million tons of flour milling and 500,000 tons of pasta also expected this year. This disclosure comes on the heels of the company showcasing its robust history even as it repositions for further growth in an attractive sector.

The “Facts Behind the Listing” event was an interactive session with capital market stakeholders as it created a forum for discourse and dissemination of information. Given that the market is driven by timely, relevant, and accurate information, interactions such as the Facts Behind the Listing remains critical in the decision-making for all investors.

“We are partners and key players in Nigeria’s rice revolution,” the acting Managing Director, BUA Foods Plc, Ayodele Abioye said on Tuesday at the company’s Facts Behind the Listing presentation on the Exchange.

“Nigeria’s favourable demographic parameters propel on going and future growth of its consumer markets. The question is: how does the company tap into this opportunity? It will leverage sustainable, efficient and scalable platforms supported by a well-defined strategy to ensure leading market positions”, Abioye said.

He noted that BUA Foods Plc is committed to environmental sustainability and providing support and investment in the host communities. “Completion and operation of additional capacity is expected to drive growth in revenue from 2022 and beyond,” he added.

Abdulrasheed Olayiwola, chief financial officer, BUA Foods Plc who spoke on the company’s historical performance noted that the consolidated financial statements are reflective of upside potentials.

Financial statements are reflective of upside potentials

In eleven-month to November 2021, BUA Foods Plc revenue grew by 58 percent from N193billion in 2020 to N304billion in November 2021. “Our revenue growth is simply due to our product market acceptability,” Olayiwola said. Also in the review eleven months to November 2021, BUA Foods Plc gross profit grew from N64.9billion in 2020 to N96.2billion in 2021; while Pre-tax profit (PBT) rose from N49.6billion in 2020 to N78.8billion in November 2021.

NGX says listing requires commitment to high standards of disclosure, corporate governance

In his remark, Olumide Bolumole, Divisional Head, Listing Business, NGX, who represented Temi Poopola, CEO, NGX during the Facts Behind the Listing noted, “We recognize the efforts made by the Board and Management of BUA Foods towards this listing and the roles played by all the professional parties to this transaction – Stanbic IBTC Capital Limited – the Lead Financial Adviser, Rand Merchant Bank Nigeria Limited and UCML Capital Limited- the Joint Financial Advisers, APT Securities Limited and CardinalStone Securities Limited – the Stockbrokers to the transaction as well as other transaction parties for their hard work and dedicated efforts towards the actualization of a successful listing.”

He said, “Listing on the NGX Main Board requires a commitment to high standards of disclosure and corporate governance and companies listed on the exchange benefit from being able to leverage on the deep pool of local and international investors to access capital.

Following the admission of BUA Foods’ shares on the Main Board of the Exchange on Wednesday, January 5th, 2022, the company has experienced an upward trend in share price, market capitalization along with trading activity. This communicates the markets appetite and investors alignment with the company’s strategic goal and a willingness to participate in the growth story.

Additionally, as at Friday 14th January, BUA Foods became the largest company by market capitalization in the consumer goods sector, increasing the total equity market capitalization by over 4percent.

This listing marks a new beginning for BUA Foods Plc who plays a critical role in the FMCG industry as the company can also leverage other Capital Market Products and services the Exchange offers to achieve their strategic objectives.”

Last year, the Food, Beverage, and Tobacco sub-sector accounted for 37percent of the total manufacturing sector output in Nigeria, and 5percent of the country’s GDP. The sector expanded by 5percent year-on-year (YoY) and 14.6percent quarter-on-quarter (QoQ) respectively in Q3 2021, with 4.3percent average growth every quarter since Q1 2020. Driven largely by the country’s favorable demographics and the consumption behaviour of Nigerians, the sector holds great potential for job creation.”

“As part of BUA Group’s strategic thrust to optimize its processes and to maintain market leadership in consumer goods sector, The Group deemed the consolidation of its food-related operations into a single entity “BUA Foods Plc” necessary to take full advantage of the growth opportunities in the economy.

Furthermore, BUA Foods have also invested heavily in the backward integration program of the Federal Government under the supervision of the National Sugar Development Council (NSDC) to ensure its operations are optimized and to also benefit from the positive growth in the Agriculture Sector,” the NGX CEO stated further.

“We encourage BUA Foods Plc to continue to strive for excellence by adhering to the highest standards of disclosure and corporate governance. The NGX is dedicated to being a trusted partner to BUA Foods on its journey even as we implore all our issuers to take advantage of our platform to interact with the market,” NGX CEO added.