..reports N460 billion revenues for 2023
AbdulSamad Rabiu, chairman of BUA Cement on Thursday said that the company’s earlier plan to crash cement price to N3,500 (per bag) was frustrated by greedy middlemen (dealers) as well as lack of cooperation from other producers.
Rabiu who spoke during the company’s 8th Annual General Meeting (AGM) in Abuja also lamented how high energy costs, enabled by naira devaluation, and removal of fuel subsidy have elevated cost of cement production and inflated price of the commodity.
Consequently, the price of cement has increased significantly, from between N3,500 and N4,000 as at last year, to N11,000 at some point, although it has moderated to about N6,000 per bag recently. According to Rabiu, the costs reflect the doubling of the exchange rate from N700 to about N1,600 per dollar.
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He said energy costs, primarily gas from NNPC which are invoiced in naira but paid at the prevailing exchange rate has been a major contributor to rising costs, despite the company’s efforts to make cement more affordable and available to Nigerians.
The company had announced the construction of its own mini Liquified Natural Gas (LNG) to reduce reliance on external suppliers, aiming to complete it next year.
Rabiu, however, noted that even though these two government policies have had a toll on production and affordability, they were necessary at the time. He also expressed optimism that the policies will eventually stabilize the exchange rate and reduce prices.
Speaking further at the AGM, he disclosed that the company’s management has resolved to dedicate about 400 truck load of cement supplies to South West region to address scarcity of the product in that region.
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In addition, the company’s new cement line of 3 million per metric tons at Obu in Edo state will be able to supply about 150,000 tons solely dedicated to serve the South West when operational, Rabiu also noted.
As contained in its financial statement presented at the meeting., the company recorded a strong revenue growth of 27.4% to N460 billion, up from N361 billion in 2022, resulting from its increasing market share.
However, with the devaluation of the Naira in June 2023, and its continued depreciation, as well as growing inflation, the Company experienced increasing price pressures which affected production costs, which increased by 39.5% to N276 billion as against N197.9 billion the previous year.
The company recorded a net foreign exchange loss of N70 billion, significantly higher than N5.5 billion in 2022, with N52.5 billion attributed to finance costs.
This was associated with the construction of an additional 3mmtpa lines at Obu and Sokoto, and the sum of N17.5 billion was attributed to foreign trade payables.
Despite these challenges, the Company reported a net profit after tax of N69.5 billion.
“Despite the reduction in our bottom line, our unwavering commitment to shareholder value, together with the strength and confidence in the business and its outlook inspired the Board to recommend a dividend of ₦2 per share for the year ended 31 December 2023,” Rabiu told the shareholders.
While the chairman reiterated the commitment of the company to making cement accessible and affordable, he listed various strategic moves being taken to address this, including the LNG project to power the production lines and the ongoing construction of Obu Line 4 in Ososo, Edo State.
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Yusuf Binji, the Managing Director/ CEO, also emphasised several headwinds in 2023, beginning with currency devaluation which affected the purchasing power of most Nigerians, their business and consequently consumption of cement.
“Year 2023 was very turbulent. And for most companies like ours that are energy dependent such that even though they pay in naira, they are costed in dollar terms, we witnessed lower margins because we could not pass on the cost directly to the consumers.
“And in October 2023, out of our patriotic zeal, we reduced the price of cement to a factory price of N3,500 per bag, with the hope that other consumers will also follow suit to lessen the burden on Nigerians but unfortunately the benefit did not pass directly to consumers and middlemen and retailers had a field day.
“Subsequently, we had to look back at that decision, and adjusted our prices upwards in line with the value of the naira,” he explained.
He said the company, however achieved a 7.3% increase in dispatch volumes to 6.7 million metric tons per annum. This is from 6.3 million metric tons per annum in 2022.
“This led to the growth of our market share to 24% from 21% during the prior year,” he stated.
The company also cold-commissioned the new 3mmtpa lines at the Sokoto and Obu Plants and activated a new 70MW gas power plant in Sokoto.
“We eagerly await the activation of the 70MW gas power plant at Obu during the first quarter of 2025. Also, over 500 new trucks were procured to support our distribution activities, which further deepened our market presence.
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“We believe these investments further ‘Reinforces our Purpose,’ which is to be a “highly competitive leader in Nigeria”, as we address not only the housing and infrastructure needs in a sustainable manner but also seek out innovative ways to make cement affordable.
He was also hopeful that as exchange rate moderates, the outlook remains positive and will enable the industry the room to adjust prices in favour of consumers.
