The recent surge in cement prices has been a topic of concern in the construction industry. In this regard, the BUA Group CEO provided insights into the underlying factors contributing to this price increase.

AbdulSamad Rabiu, the Chairman of BUA Cement, stated yesterday that cement distributors hindered his company's efforts to sell cement at N3,500 per bag last year.

During the 8th Annual General Meeting held in Abuja, Rabiu revealed that although BUA Cement sold over a million tons of cement to these dealers at the intended price of N3,500, the dealers ultimately sold the product to consumers for prices ranging from N7,000 to N8,000.

He explained that the company had to abandon this pricing strategy, as their goal was not to subsidize the dealers.

Rabiu noted that BUA Cement lacked the authority to regulate the prices set by dealers, who profited significantly from the price differences.

He also mentioned that factors such as the devaluation of the Naira and the removal of fuel subsidies contributed to the policy's failure.

Rabiu remarked, “Many dealers exploited this policy, opting to sell at prices that were even double what we charged them.”

Certain bags were being sold for N7,000 and N8,000, yielding substantial profits due to the significant margin. We had sold over a million tons at N3,500 before we became aware of the dealers' actions.

Due to the challenges Nigeria faced last year, including the devaluation of the Naira and the removal of the fuel subsidy, we were unable to maintain that pricing strategy.

We aimed to keep prices stable, but the dealers were uncooperative, and we did not want to find ourselves in a position of subsidizing them.

This was particularly evident when the foreign exchange rate surged from approximately N600 to around N1,800 to the US Dollar, complicating our ability to uphold that pricing policy.

Nevertheless, the company has been committed to ensuring that prices do not rise in line with the percentage increase resulting from the Naira's devaluation.

He stated, "When comparing the exchange rates from then to now, it is clear that cement is actually more affordable today than it was last year.

This is because, as the dollar increases, costs rise correspondingly, suggesting that cement prices should be around N10,000 per bag.

Considering the price of cement was N4,000 at the start of last year and is now N6,000, this reflects only a 50% increase. We have actively worked to prevent cement prices from exceeding current levels.

However, there are sectors where costs are heavily influenced by the dollar. Energy remains our largest expense, and our energy costs are dollar-denominated. We primarily purchase gas to operate our plants, and gas prices are set in dollars."

The chairman disclosed that one of BUA's plants incurs a monthly invoice of approximately N15 billion to N16 billion, a significant increase from the previous N3 billion to N4 billion. This serves as just one example.

The financial report submitted by the company's Board indicates a robust revenue increase of 27.4%, reaching N460 billion compared to N361 billion in 2022, driven by an expanding market share.

However, the devaluation of the Naira in June 2023, along with its ongoing decline and rising inflation, led to heightened price pressures that impacted production costs.

As a result, total costs surged by 39.5% to N276 billion, up from N197.9 billion in the previous year. During this review period, the company also faced a net foreign exchange loss of N70 billion, with N52.5 billion linked to finance costs.

In spite of these obstacles, the company achieved a net profit after tax of N69.5 billion and announced a dividend of N2 per share.