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BUA Cement shows resilience to marginally improve bottom line

BUA Cement Plc have doubled cash generated from operations, markedly improving their net cash flow position.

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CCNN utilising inorganic growth against Dangote Cement with Obu cement merger approval  

BUA Cement Plc is busy taking pole position in the Nigerian cement industry. The company is the product of a recent merger which boosted the market capitalization of the Nigerian Stock Exchange by N1.3 trillion, making it the most capitalized company after MTN Nigeria and DANGOTE Cement.

The cement giant saw revenue improve by 25% Y-o-Y in Q1 2020 compared to the amount earned in 2019. Revenue in the cement industry is generally so reliant on capital expenditure and economic infrastructural developments. This encapsulates the resilience shown by BUA Cement in Q2 when it managed to record a 1% growth from N46.7 billion in Q2 2019 to N47.2 billion in Q2 2020. Note that construction activities slowed in Q2 2020 due to the COVID-19 lockdown.

READ MORE: BUA Cement Plc Releases audited Financial Results for 2019; Revenue Increased by 47.5% to N175.52 billion

Nigeria’s economy advanced only 1.87% year-on-year (Y-o-Y) in the first quarter (Q1) of 2020 compared to a 2.55% growth in the previous period, against the backdrop of restricted international trade, COVID-19, and a fall in oil prices. The economic adverse effects of these are crystal-clear, having spiralled across sectors of the economy.

Narrowing and streamlining the analysis of BUA Cement’s performance strictly to the first two quarters of 2020 highlights the financial impacts and brings to shore the regressions it has experienced.

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  • Revenue plunged by 12.2% from N53.9Billion Q1 to N47.3Billion Q2
  • Gross profit downed by 9% from N24.5Billion to N22.3Billion
  • Admin expenses had a 2% increase from N2.43Billion to N2.48Billion, further plummeting operating profit.
  • 6% and 24.7% reduction in PBT and PAT were noted in Q2, from N20Billion and N19.8Billion in Q1 to N18.9Billion and N14.9Billion in Q2 respectively.

READ MORE: CAP Plc is running at a risk of increased bad debts

The management of BUA Cement expects the bottom line to improve subsequently and is poised to expand the plants’ capacities. The company owns the Obu and Edo Cement Company Limited situated in the southern part of Nigeria. The plant has an installed capacity of 3.4 million metric tonnes (MT). Also, about a month ago, the chairman of BUA Group, Alhaji Abdul Samad Rabiu disclosed during a courtesy visit to the Adamawa State governor Ahmadu Umaru Fintiri, that there are plans to establish a 3 million MT cement plant and a 50 megawatts power plant in Guyuk and Lamurde local governments of the state.

In terms of regular business activities, BUA Cement Plc has doubled the cash generated from operations, markedly improving its net cash flow position. N64 billion was generated in 2020 half-year compared to N28.7 billion generated at the end of  2019. Investments also showed signs of improvement, as BUA Cement spent N42.7 billion in the purchase of property plants and equipment (PPE), a remarkably high number when we observe that only N22.8 billion was expended in the full financial year of 2019. The increased expenditure on PPE worsens the possibility of positive net cash flow but nevertheless, could posit confidence to investors and perhaps attract more funding. It paints BUA Plc as ‘forward-thinking’ and ‘bullish’.

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BUA did not do so well as regards its liabilities. The statement of financial position showcased a sporadic jump from N434Million in Q1 to over N19Billion in Q2. This is attributable to obligations due to related parties. BUA must ensure it covers for and eliminates this item from its books in subsequent quarters to dispel negative investor concerns.

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Debt to asset for BUA Plc rests at 5% with total liabilities standing at N120 billion and total asset at N519 billion. The import of this is that presently the company may possess more than enough assets to effectively cater for all its interest-bearing liabilities. BUA Plc is seemingly low-geared, and this directly sponsors the school of thought that room exists to take on more debts for capital expenditure (CAPEX).

The low yield environment in the Nigerian debt market emphasizes this point further. Now companies are being able to raise the lower cost of debt capital as compared to preceding years where interest rates were relatively higher due to high rates of government securities.

Ekene Onyeama is a Chartered Accountant currently plying one of the Tier one Banks in Nigeria. He started out his career at Ideascorp Limited, a private company in the hospitality industry where he served as the accountant before switching to banking. Ekene enjoys analyzing companies. He likes to write and is very excited by company valuations. He can be reached on Twitter @Ekenergy_

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Companies

Cutix Plc forecasts N148 million profit in Q4 2021

Cutix Plc has projected that its revenue will double and profit will increase by 9% to N148 million.

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Cutix Plc, dividend

Cutix Plc has projected that in the fourth quarter of its financial year 2021, its revenue will double and profit will increase by 9% to N148 million.

These projections were made by the company in a recent earnings forecast issued by the Management, and signed by the Company’s CEO and CFO.

READ: Vitafoam shares gain 9.6%, as company reports N4.11 billion as profit in 2020

Key highlights of the earnings forecast for Q4 ended April 30, 2021

  • Revenue to increase to N1.66billion, 100% Q-o-Q.
  • Cost of Sales to increase to N1.16 billion, 70% Q-o-Q.
  • Distribution, Admin & Other expenses to increase to N232.89 million, 14%% Q-o-Q.
  • Other Income to remain unchanged at N2.50 million,
  • Finance Charges to increase slightly to N47.38 million, 3% Q-o-Q.
  • Operating income to increase to N227.83 million, 14% Q-o-Q.
  • Taxation is projected at N79.74 million.
  • While Profit attributable shareholders is projected at N148.10 million.

READ: Royal Exchange Plc forecasts N500.83 million PAT in Q1 2021

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Bottom line

The earnings forecast was made on the ground that the Nigerian economy will continue improve, as the country recovers from the impact of COVID-19. In this regard, revenue in the fourth quarter of 2021 will be slightly higher than the revenue projected in the third quarter of 2021.

READ: Okomu Oil Plc records 27.01% decline in 2020 Q3 revenues

However, the increase in the cost of sales driven by the input cost will pressure profitability to the tune of N148.10 million, which is 9% higher than the profit after tax made in the corresponding quarter of 2020.

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Company Results

Vitafoam shares gain 9.6%, as company reports N4.11 billion as profit in 2020

Vitafoam Nigeria Plc profit revealed 72.10% increase when compared with the N2.39 billion reported in the corresponding period of 2019.

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Vitafoam Nigeria Plc, Vitafoam returns to a 5-year high

Vitafoam Nigeria Plc has reported in its audited financial statement for 2020 that it made a profit of N4.11billion for the year ended 30 September 2020.

This represents a 72.10% increase in profit when compared with the N2.39billion profit reported in the corresponding period of 2019.

READ: Vitafoam returns to a 5-year high

Key highlights

  • Revenue increased to N23.44 billion in 2020, 5.21% Y-O-Y.
  • Cost of Sales decreased to N12.43 billion in 2020, 8.06% Y-O-Y.
  • Gross Profit increased to N11.01 billion in 2020, 25.68% Y-O-Y.
  • Other income increased to N638.97 million in 2020, 63.91% Y-O-Y.
  • Distribution costs increased to N1.05 billion in 2020, 8.13% Y-O-Y.
  • Administrative expenses increased to N4.13 billion in 2020, 10.57% Y-O-Y.
  • Operating profit increased to N6.47 billion in 2020, 45.58% Y-O-Y.
  • Finance income increased to N106.51 million in 2020, 5.39% Y-O-Y.
  • Finance Costs decreased to N930.17 million in 2020, 11.39% Y-O-Y.
  • Profit from continuing operations increased to N3.92 billion in 2020, 58.88% Y-O-Y.
  • Profit from discontinued operations increased to N191.63 million in 2020, 345.68% Y-O-Y.
  • Profit for the year increased to N4.11 billion in 2020, 72.10% Y-O-Y.

READ: Vitafoam’s 2020 oncourse to make light–work of 2019

READ: Sterling Bank Plc forecasts N2.09 billion PAT in Q1 2021

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What you should know

  • Shares of the company have gained 9.6% within the first one hour of trading, largely at the backdrop of news of the company’s impressive performance as the current valuation of the company in the light of its results suggests that the shares of the Company are undervalued at the current price.
  • Checks by Nairametrics as of 11:10 am today confirmed that the company is on a full bid, as 4,930,245 bids from 23 investors have been placed at the highest price for the day, without a single offer at a price lower than N8.55.

READ: Ecobank Transnational Inc. records 11% increase in interest income for Q3 2020

Bottom line

The profitability of the company was beefed up in 2020 on the back of the decrease in the cost of raw materials coupled with the increase in sales from the core segment of the company which led to the 5.21% increase in revenue in 2020.

READ: Bitcoin miners are super-rich, earn $1,000,000 per hour

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However, it is important to note that the impressive performance of the Vitafoam Group was also strengthened by the increase in other profit owing to improvement in sales, this helped the company to also grow its revenue from services provided to customers’ after-sales.

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Company Results

Neimeth posts profit of N212.48 million for year-ended September 2020

Neimeth profit declined by 3.48%, as profitability was pressured by rising costs and expenses in 2020.

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Neimeth Pharmaceuticals

Neimeth Pharmaceuticals Plc has reported in its audited financial statement for 2020 that it made a profit of N212.48 million for the year ended 30th September 2020.

This represents a 3.48% decline in profit when compared with the N220.15 million PAT reported in the corresponding period of 2019.

READ: PZ incurs N1 billion in exchange rate loss 

Key highlights

  • Revenue increased to N2.84 billion in 2020, 19.73% Y-O-Y.
  • Cost of Sales increased to N1.33 billion in 2020, 13.11% Y-O-Y.
  • Gross Profit increased to N1.51 billion in 2020, 26.23% Y-O-Y.
  • Other income increased to N29.29 million in 2020, 1049.33% Y-O-Y.
  • Marketing and distribution expenses increased to N505.11 million in 2020, 33.90% Y-O-Y.
  • Administrative expenses increased to N452.28 million in 2020, 20.54% Y-O-Y.
  • Exchange loss increased to N188.05 million in 2020, 479.25% Y-O-Y.
  • Operating profit decreased to N393.26 million in 2020, -4.87% Y-O-Y.
  • Finance costs decreased to N95.87 million in 2020, -12.00% Y-O-Y.
  • Profit after tax decreased to N212.48 in 2020, -3.48% Y-O-Y.

READ: Bitcoin miners are super-rich, earn $1,000,000 per hour

Bottom line

The report revealed that despite the impressive performance of the core operating segment of the company, and the increase in the revenue generated from the Animal Health segment, the profit of Neimeth Pharmaceuticals was pressured by rising costs in 2020 and this led to 3.48% decline in profit year-on-year.

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READ: Pharma Deko Plc records 1.16% increase in 2020 9M revenues

Neimeth Pharmaceuticals suffered from substantial cost and expenses increase in 2020, as the increase in production cost, marketing and distribution expenses (driven by increased payment to employees in this department), administrative expenses (driven by expenses paid for conference and meetings, bank charges and commission, communication and subscription, energy cost, insurance and medical expenses) and increase in foreign exchange loss driven by naira devaluation, pressured profitability in 2020.

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