BUA Cement, Nigeria’s second largest cement maker, recorded a 47.5 percent spike in revenue in its just released 2019 full-year financial result.
Revenue rose from N119.01 billion in 2018 to N175.52 billion in 2019, according to the company’s financial statement.
The company’s profits before tax also rose by 69.1 percent, from N39.17 billion in 2018 to N66.24 billion in 2019. However, profit after tax declined by 5.40 percent, from N64.07 billion in 2018 to N60.61 billion in 2019.
BUA Cement plc is a business combination of CCNN Plc (Sokoto Cement) and BUA Cement Manufacturing Company’s Obu Cement Company, which was completed in January 2020 and is currently listed on the Nigerian Stock Exchange (NSE), with a market capitalisation of N1.18 trillion ($3.3 billion), making it the third most capitalised company on the floor of the Exchange.
Speaking on the result, Yusuf Binji, managing director of BUA Cement said, ”Through the adoption of a focused and disciplined approach, we continue to record strong revenue growth, even as we derive revenue and cost synergies from the merger across: pricing, scale and operational efficiencies; all supported by a sustainable business model and a value-oriented strategy, which have translated to growing market acceptance and is reflective in our margins.”
He explained that despite the complexities and uncertainty of the economy in 2019, the company delivered on important strategic priorities, including the commissioning of the 3 million metric tons (mtpa) Line-2 at our Obu Plant in March, 2019; the merger completion between CCNN Plc and Obu Cement Company Limited, and its listing process on the floor of the Nigeria Stock Exchange (NSE), with the eventual delisting of CCNN Plc.
He disclosed that the company’s focus was to further harness the full benefits of the merger while making further in-roads into ‘new markets’ both locally and outside Nigeria.
“We understand that the local and indeed the global economy would experience more uncertainties, yet we expect continued strong showing across the business, spurred-on by continued recovery across the global economy,” he further said.
However, BUA’s margins show the immense opportunity in Nigeria’s cement industry dominated by Dangote Cement, BUA and Lafarge Africa.
The opportunity stems from the low level of infrastructure development in Africa’s biggest economy. There have been conflicting numbers about how much Nigeria needs to fix its infrastructure, but the federal government says the country should spend three to five percent of its GDP on infrastructure annually, which amounts to about $12 billion to $20 billion. Several roads and bridges in the country are in terrible states and require the services of cement makers. Also, cement makers produce concrete used in repairing or building roads and bridges. Some of the roads in Lagos, Ogun and several parts of the country are built or repaired with concrete.
Apart from roads, the country is facing acute housing shortage estimated at 17 million to 20 million, according to official data.
The World Bank 2014 data said 50.2 percent of the Nigerian population live in slums and shanties. Some urban dwellers in top-notch cities of Lagos, Abuja and Port Harcourt are homeless. Some unofficial data say over 100 million Nigerians are homes. A World Bank 2016 report said the country required N60 trillion to fix the housing deficit.
But it is not all gloom as cement makers’ output is required to build houses for a population growing at 2.6 percent per annum.
Dangote Cement reported N901.213 billion and N891.671 billion in revenue in 2018 and 2019 respectively. Profits before tax in 2018 and 2019 were N300.806 billion and N250.479billion respectively. Though the fundamentals declined in 2019, the size of the revenue shows the enormity of the opportunity in the industry. It is also an indication of intense competition and poor economy.
But cement makers in Nigeria are making their mark on the African market, with Dangote Cement in many countries across the continent.BUA has also stepped out to Nigeria’s neighbours. A 2019 United Capital report on the Nigerian cement industry said public sector demand remained one of the strongest due to need for capital expenditure, but tapped that dwindling government revenues had been a clog in the wheel.
“Juxtaposing this with the level of infrastructure and housing deficit, especially in terms of demand for roads, real estate and construction activities, the headroom for growth is clearly compelling,” the report further said.
