BUA Foods, following its recent release of H1 2023 results, has demonstrated an impressive performance that maintains its trajectory of growth.
The company, which became publicly listed in January 2022, reported a remarkable 156% surge in pre-tax profit, reaching N109.381 billion in H1 2023.
This significant growth surpassed its pre-tax profit of N107 billion for the entire year of 2022.
This enabled BUA Foods to uphold a double-digit pre-tax profit margin of 34.1% compared to the 27.7% margin recorded in the comparable half-year period.
Furthermore, the company’s post-tax profit also experienced significant growth, surging by 142% to ₦95.2 billion in H1 2023, compared to ₦39.3 billion in H1 2022.
Equally noteworthy is the growth in Earnings per Share (EPS), which escalated by 142.6% to N5.29 in H1 2023 from N2.18 in the corresponding period.
A notable aspect of BUA Foods’ remarkable bottom-line performance is its achievement amidst a backdrop of challenging macroeconomic conditions.
These conditions include high inflation, elevated interest rates, and notable foreign exchange volatility. These external dynamics have led to an increase in the company’s cost of sales and other operating expenses.
For example, costs related to sales, distribution, and administrative expenses experienced significant year-on-year growth.
The prevailing environment of elevated costs has resulted in a continuous rise in production expenses, evident in the increase of the company’s OPEX to income ratio by 1.91% to 5.56% in the first half of 2023.
Despite contending with these adverse macroeconomic factors, BUA Foods has managed to deliver a noteworthy bottom-line performance.
This success can be attributed to the company’s top-line growth. Specifically, revenue saw a remarkable increase of 90% year-on-year, amounting to N320.930 billion.
This robust revenue growth was achieved across various product segments; sugar, flour, pasta, and rice
An essential additional contributor to this success is the revitalized rice division, which contributed ₦466 million to the company’s revenue during the same period.
The overall revenue growth was propelled by a combination of factors, including adjustments in selling prices, expansion of sales volumes, and penetration of export markets.
Another significant aspect of BUA Foods’ performance during the first half of 2023 is its managed exposure to foreign exchange losses, a challenge that has negatively impacted various businesses, particularly those in the consumer goods sector.
- Affirming this accomplishment, Engr. Ayodele Abioye, the Managing Director, remarked in the results commentary, “While the impact of foreign exchange losses in H1 was relatively contained due to our supply chain hedging strategy, we anticipate a more substantial effect in H2, which we are well-prepared to address.”
The compounding impact of this upward trajectory in both top and bottom-line growth is demonstrated through robust profit margins, an expanding return on equity, growing retained earnings, and a surge in the share price.
For instance, the return on equity experienced a substantial increase of 12.16% to reach 29.18% in H1 2023.
The company’s total equity also saw a noteworthy surge of 41.2%amounting to ₦326.2 billion as of H1 2023.
This increase can be attributed primarily to a significant expansion of 42.7% in retained earnings, which reached ₦318.1 billion in H1 2023.
These favourable financial indices position the company advantageously, providing it with the capability to enhance its dividend distribution.
In the 2022 financial year, the company disbursed a dividend amount of N4.5 per share. Given the prevailing market price, this dividend offering translates to a dividend yield of 3.31%.
Since its listing in January 2022, the share price of BUA Foods has exhibited a bullish trend. In 2022, it achieved a substantial gain of 65%.
As of the most recent trading day on Monday, August 7, 2023, the year-to-date (YTD) performance has been even more remarkable, with an impressive gain of 108.85%.
When considering the dividend yield in conjunction with the price appreciation, BUA Foods offers an inflation-protected return of 112.16%.
The positive sentiment among investors regarding the stock appears to stem from their anticipation of growth, a sentiment reflected in the changing price-to-earnings (P/E) ratio.
In the 2022 financial year, the stock traded at a P/E ratio of 12.36x, whereas its current P/E (trailing twelve months) ratio stands at 16.53x.
This P/E ratio of 16.53x signifies that during the first half of 2023, investors were willing to pay approximately 16.53 times the company’s earnings per share (EPS) for each share of stock.
This value surpasses the P/E ratio from the previous year, indicating that investors were more inclined to pay a higher premium for the company’s earnings compared to the preceding period.
Despite the upward trend in BUA Foods’ price-to-earnings (P/E) ratio, which indicates increased investor willingness to pay a premium for the company’s earnings, its current P/E ratio of 16.53x is slightly lower than the average P/E ratio of 16.95x for seven other companies in the consumer goods food products subsector.
This implies that, in terms of valuation, BUA Foods’ stock is trading at a relatively more favourable price compared to its counterparts within the same sector, considering their earnings performance.
