BUA Cement Pulls Back to 52-Week Low after Earnings Call
BUA Cement Plc has slipped back to its lowest market price in 52 weeks, according to trading data obtained from the trading platform of the Nigerian Exchange. The cement company lost 10% to settle at N83.70 last week due to sell pressure, days after investors’ conference with equities analysts.
The company’s 33.864 billion shares outstanding were priced at N2.834 trillion in the equities segment of the Nigerian Exchange by investors trading highs and lows.
The market value of BUA Cement is behind its 52-week high by about 42%, having peaked at N143.2, a strong distant from its lowest price of N83.70.
Investors’ sentiment on BUA Cement remains negative due to its weak earnings performance triggered by FX loss of about N93.9 billion in 2024. BUA said in 2024, the cement company dispatched 8,138,800 tons of cement compared to 6,712,210 tons of cement in 2023.
The company slowed down on expansion drive amidst uncertain demand outlook for cement. BUA is planning to boost export, told analysts conference last week that border closure in its African markets impacted its export revenue.
“Regarding our volume outlook for 2025, it all depends on the cement demand in Nigeria, but certainly I think it’s going to be about 11 to 12 million tons annual.
“We do not have much huge capex that will come up in 2025. As you know, we have completed two of our lines and all expenditure related to this are expensed”, Yusuf Binji, BUA Chief Executive Officer told analysts meeting attended by MarketForces Africa.
BUA official said the company has one ongoing project. “We are building a new Greenfield plant in Ososo in Edo State, but this is the plant that was moved from another place. And I think substantial payments have already been made.
“We do not have any plan to raise capital during this year, because I believe there will be need to go to the capital market, so to say. “As you are aware, we have a facility from the IFC, AFC, AFDB, and DEG of $500 million, of which we have thrown down about $300 million.
“The balance of the second tranche of $200 million will be drawn down as whenever we are able to meet the milestones and the conditions for the drawdown”, its CEO explained.
Speaking on the increase in borrowings and the forex losses expected in 2025, BUA Chief Finance Officer Chikezie Ajaero, said, “ I hope there won’t be any. That’s the hope, is if I have the crystal ball to predict where the forex will end this year that means I will be a superman”.
“So, it’s full of uncertainty that nobody can easily say that this is how, but based on government assurance that they are looking at budget figures, we are optimistic that if government keeps to the end of their own bargain, that the forex will be more stable in 2025 compared with the volatility that we had in 2024”, the CFO added.
According to him, BUA cement recorded some FX gain during the year, but at the end, it was a net foreign exchange loss. “If you remember or you recall that we had a $300 million loan from IFC, of which the cash was not fully committed as of 2024.
“So we had some cash that we have fixed in the bank, which we eventually used for the project. So for cash, it will attract exchange gain, while liability will attract exchange loss.
“if you now look at the magnitude of the cash compared to the exposure to the loan, you see that the exposure is higher than the cash that is available.
“The gain is actually coming from the cash that have not been spent from the loan that we had from our lenders”, the CFO told analysts meeting.
He also said the spike in trade payable is a reflection of the devaluation of our currency. Its trade payable surged, which some analysts misconstrued to be sign of weak working capital.
However, BUA explained that the cement company commissioned two new lines in 2024. Its official told analysts conference that part of the agreement with the contractor is that a certain percentage of the contract sum will be paid about 12 months after commissioning of the plants.
“And based on accounting, we are capitalizing. You have to accrue for all expected expenditure and all commitments that are known.
“So for accruing for the retention that will be payable in the next 12 months after the commissioning is what actually gave rise to the increase that we had in trade and other payables”, BUA CFO explained.
Speaking about BUA reduced loan book, Ajaero said the cement company paid down on all foreign denominated liabilities, especially import finance facility.
He explained that the plan started in 2024, of which the company is able to achieve a significant reduction. BUA CFO said the company $115 billion bond repayments kicked in in June, 2024.
“… we have already done two repayments, June 2024 and December 2024. Those repayments and the reduction in our import finance facilities are what accounted for the drop that we had on our exposure to loan”.
I hope this explanation is enough for the questions that you have asked. Thank you.
Speaking on the company tax exposure, BUA said it has pioneer status on two of its lines, the Line 5 and Line 3, and it’s to run for three years, commencing in May 2024.
On drive to curtail energy costs, BUA officials said the company plans to switch over to cheaper source of energy as long as they are available and readily affordable everywhere within Nigeria.
“Right now our fleet of vehicles are using diesel, which you know is a deregulated product and the price even though has sort of moderated sometime last year”. #BUA Cement Pulls Back to 52-Week Low after Earnings Call#
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