Renewed Interest in BUA Cement Boosts Valuation
Interested investors can now buy the entire 33.864 billion outstanding shares of BUA Cement Plc. for less than N3 trillion from N1.8 trillion in September 2022, except that Abdul Samad, the chairman of one of the cement oligarchs has not indicated a plan to sell.
The cement company which is one of the top five market movers on the Nigerian Exchange was popular among value hunters after strong earnings release in the third quarter of 2022.
BUA Cement Plc was among those stocks that were attractive to investors in the Nigerian Exchange in the just concluded week. The stock market rally that spanned the entire week pushed the market index up by 5.4%. However, BUA Cement gained 9.7%.
As of Friday’s close, the cement company share was quoted at N79. Providing a better entry price, sometime in September, the stock hit a low of N47.85 before it started creating 52 weeks high when it broke above N70.
BUA ended the financial year 2021 at N67.05 per share, meaning the company has added value to investors’ portfolios as earnings position and market share in the cement industry improved.
The company’s performance has been healthy, though it has not always been a smooth sail amidst rough waters in the Nigerian macroeconomic space.
BUA Cement’s growing performance has been supported by increased output capacity and an excellent business model. Its earnings result was offset by an increase in energy products costs and distribution costs due to diesel or AGO price increase.
Rising inflation and falling naira are pressure points for most manufacturers and BUA was not excluded in the margin-dilutive situation that affected results – generally. READ: Equity Analysts Adjust Flour Mills of Nigeria Valuation
In its earnings release, the cement company’s net revenue jumped up 40.5% to N262.6 billion from N186.9 billion in the corresponding period in the financial year 2021. READ: Dangote Cement Boosts Earnings on Strong Pan-African Demand
Cost of sales rose by 43.3% or N43.2 billion to N142.8 billion from N99.6 billion in the comparable period in 2021, primarily from increases in energy products and raw materials costs.
The cost of sales per ton rose by 24.6% to N30,713/ton from N24,646/ton, as of 9month result in 2021. This was attributed mainly to increases in energy production costs and raw materials costs. A review of the company results show that energy cost per ton increased by 36.6% to N13,978/ton from N10,230/ton during the corresponding period ended 9m-2021.
The company said its selling, distribution and administrative costs increased by N5 billion to N 4.8 billion. “Some of the factors accounting for the increase were: distribution costs, led by increased volume dispatched & AGO prices; CSR activities; other administrative expenses and depreciation charges”, management told investors conference.
Higher topline filtered into the bottom line, with earnings before interest tax depreciation and amortization (EBITDA) increases by 31.5% to N115 billion from N87.4 billion as of 9m’2021. But, the EBITDA margin fell to 43.8% from 46.8%, as of 9M’2021.
At the end of the period, the company settled with a 12.3% increase in profit after tax to N74 billion from N65.9 billion, as of 9M-2021, the period when Dangote cement’s profit dropped by 23%. # Renewed Interest in BUA Cement Boosts Valuation