BUA Cement Plc (BUACEMENT) unveiled its unaudited financial results for Q3-23 on October 30th, revealing a standalone earnings per share (EPS) of NGN0.37, representing a 1.6% year-on-year decrease. This brought the 9-month EPS to NGN2.25, showing a modest 2.8% year-on-year growth.

The drop in EPS was primarily attributed to a significant 240.4% year-on-year surge in net finance costs, alongside notable increases in the cost of goods sold (COGS) excluding depreciation (+63.4% year-on-year) and operating expenses (OPEX) excluding depreciation (+57.4% year-on-year) during the review period.

The company also reported a 55.1% year-on-year growth in revenue for Q3-23, while the 9-month revenue increased by 27.9% year-on-year. Although the management did not provide specific details behind the revenue growth, it is believed that higher prices in Q3-23 (+19.0% year-on-year) compared to Q3-22 contributed to the positive performance. It’s worth noting that cement sales turnover saw a minimal 0.1% quarter-on-quarter growth, potentially influenced by reduced sales volume due to heavy rainfall in Q3-23.

In Q3-23, the gross margin declined by 300 basis points year-on-year to 41.9%, mainly due to the faster growth of cost of sales excluding depreciation (Q3-23: +63.4% year-on-year) compared to revenue (Q3-23: +55.1% year-on-year). This increase in COGS was driven by rising raw material costs (+47.3% year-on-year) and energy expenses (+26.7% year-on-year), reflecting inflationary pressures and currency devaluation. Furthermore, both Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Earnings Before Interest and Taxes (EBIT) margins weakened, down 310 basis points and 60 basis points year-on-year to 34.0% and 28.5%, respectively, mainly due to the substantial rise in OPEX excluding depreciation (+57.4% year-on-year).

BUA CEMENT’s net finance costs saw a sharp increase in Q3-23 (+240.4% year-on-year), driven by foreign exchange losses of NGN24.80 billion and a higher interest expense (+59.2% year-on-year to NGN10.58 billion), which outweighed the growth in finance income (+20.54 percentage points to NGN6.08 billion).

Consequently, the Profit Before Tax (PBT) declined by 35.2% year-on-year in Q3-23, leading to a related PBT margin decrease of 11.40 percentage points to 8.1%. However, a tax credit of NGN3.13 billion in Q3-23 (compared to a tax expense of NGN1.78 billion in Q3-22) partially mitigated the decline in earnings, resulting in a slight 1.4% decrease in Profit After Tax (PAT) to NGN12.48 billion.

Looking ahead to Q4-23, despite the challenges in the review period, there is cautious optimism that the reduction in ex-factory prices implemented by management in October will stimulate demand for BUA Cement’s products and boost sales volume. Additionally, it is expected that the company will implement strategies to safeguard margins by hedging foreign exchange positions and managing production costs.

Management has scheduled a call for November 7th at 3:00 p.m. Nigerian time to provide further insights into the company’s performance and future plans. Click here to register.