BUA Hits N3.58T as Rivals Fail to Compete on Price
BUA Cement Plc market valuation continues to make an uptrend by breaking bears’ heads with buying sticks, inched near N3.6 trillion on Friday, according to data from the Nigerian Exchange. There are indicators that the cement company would be ignored by its immediate rival following a price cut.
A number of analysts had predicted a price war, though with consideration that the war may be bent due to rising production costs profile in the industries. A number of analysts told MarketForces Africa that macroeconomic pressure which has filed into companies’ costs profile may prevent immediate reactions from Dangote and Lafarge Cement.
Worsening exchange rate, inflation and increased energy costs are downsides to price cuts especially when there is no excess volume capacity to leverage with, LSintelligence Associates said in a statement.
In a statement, Dangote Cement Plc denied that the company reduced its price following a number of online news reports that the company is now running promotions in response to the subtle price war in the industry.
Asking if Lafarge Africa is planning to retaliate, “We remain committed to ensuring our products are available for our customers at the right price. We maintain our promise of ensuring the consistent quality of all our products and solutions, Ginikanwa Frank-Durugbor Communications, Head of Corporate Communications told MarketForces Africa.
“If BUA cement can control its variable costs, or manage it effectively, its price cut could win the company more sales – not necessarily profit”, research analysts at LSintelligence Associates said in an email correspondence.
The cement company has been on a mission to deepen its footprint by increasing capital spending to boost capacity. Its extra capacity, according to analysts would create excess volume which could affect other players in the industry.
Data from the Nigerian Exchange showed the cement company valuation has increased to N3.58 trillion, recovering from the previous slump. Last week, the company share price rose from N94 to N105.5, translating to a 13% weekly gain.
Early in October, BUA Cement announced a reduction in its ex-factory cement prices to N3,500 per bag effective October 2, 2023.
“We refer to our previous pronouncements regarding our intent to reduce cement prices upon the completion of our new lines at the end of the year, in order to spur development in the building materials and infrastructure sectors”, the company said.
“BUA Cement would now be sold at an ex-factory* price of 3,500 Naira per bag so that Nigerians can begin to enjoy the benefits of the price reduction before the completion of our plants”.
Upon completion of the ongoing construction of our new plants, which would increase our production volumes to 17 million metric tonnes per annum, BUA Cement PLC intends to review these prices further in line with our earlier pronouncements by the first quarter of 2024.
Dangote, Lafarge Africa however remained unfazed about the cement company price cut as the two members of the oligarchy failed to react to the price slash last week. #BUA Hits N3.58T as Rivals Fail to Compete on Price Investors Stake N653bn on Nigerian Sukuk -DMO