BY BAMIDELE FAMOOFO
The first quarter financial results of BUA Cement released to investors on April 22, on the floor of the Nigerian Exchange Limited indicated that profit after tax expanded by 48.2 percent year on year ( y/y) to N33.14 billion while earnings per share( EPS) settled at N0.98 (+48.2% y/y).
The growth in EPS was due to the double-digit topline growth and moderation in net finance cost.
BUA Cement delivered double-digit revenue growth of 58.5 percent y/y in Q1-22, akin to LAFARGE (+26.8% y/y). Though management is yet to provide details behind the increase in revenue, but Analysts believe the topline growth was price-driven, given the significant hike in prices implemented in the prior year. “In addition, we think resilient private sector demand for cement provided another layer of support,” Cordros Research noted.
EBITDA grew by 55.9 percent y/y in Q1-22, as revenue growth (+22.9%) was strong enough to neuter the increases in cost of sales ex-depreciation (+58.7% y/y) and operating expenses (OPEX) ex-depreciation (+88.8% y/y). The surge in OPEX was due to the sharp increases in admin expenses (+42.4% y/y) and selling and distribution expenses (+171.3% y/y).
On the latter, marketing expenses and overheads spiked by 338.1 percent y/y in Q1-22, suggesting management intensified spending on marketing to drive sales. As a result of cost pressures, the trickle-down impact of the revenue growth on margins was limited as the EBITDA margin weakened by 0.8ppts to 47.7 percent in Q1-22 (Q1-21; 48.5%).
Earnings were also lifted by the steep moderation in net finance cost (-96.5% y/y), supported mainly by the decline in finance cost (-60.7% y/y). The substantial reduction in finance cost was attributed to the positive impact of refinancing expensive debt with a cheaper source of finance in 2020. It will be recalled that BUA Cement issued a local bond of N115 billion in December 2020, which was partly utilised to settle expensive facilities.
