BUA Cement Plc has reported profit before tax of N99.630 billion for the financial year ended December 31, 2024, representing a 48.20% year-on-year (YoY) increase from 2023.
According to the annual report and financial statements reviewed by Nairametrics, the company’s full-year revenue surged by 90.54% YoY to N876.470 billion, driven by strong domestic sales of its bagged cement category.
Key highlights (2024 vs 2023 FY)
- Revenue: N876.470 billion +90.54% YoY
- Cost of sales: N576.213 billion +108.74% YoY
- Gross profit: N300.257 billion +63.22% YoY
- Selling & distribution expenses: N42.859 +47.44% YoY
- Administrative expenses: N22.062 billion +79.42% YoY
- Net foreign exchange loss: N92.105 +31.66%
- Operating profit: N144.295 billion +93.17% YoY
- Finance income: N18.191 billion +41.21% YoY
- Finance cost: N60.042 billion +201.16% YoY
- Profit after tax: N73.909 billion +6.41% YoY
- Earnings per share: N2.18 +6.34% YoY
- Cash and cash equivalents: N84.749 billion -62.35% YoY
- Total assets: N1.570 trillion +29.17% YoY
- Shareholders’ funds: N388.548 billion +0.86% YoY
Commentary
While revenue growth was impressive, rising costs and financial expenses significantly impacted profitability.
- The 108.74% increase in the cost of sales (N576.213 billion) outpaced revenue growth, reducing the gross profit margin by 14% to 34.2%. This increase was primarily driven by higher energy consumption as well as operation and maintenance service charges.
- Cement production is energy-intensive, and the mention of higher energy consumption and operation/maintenance costs suggests that rising fuel, electricity, and plant upkeep expenses played a major role in this margin compression.
However, the increase in operating profit to N144 billion and operating profit margin despite heavy cost pressures indicates that BUA Cement’s core business remains strong.
A 1.38% increase in operating margin is a positive sign but considering the magnitude of forex losses and cost escalation, the margin improvement appears modest. It suggests that while the company is managing costs effectively, profitability could have been much stronger if cost pressures were lower.
The company should explore efficiency measures to contain costs, including better logistics, optimized procurement, and improved FX risk management. These efforts will help boost bottom-line growth.
- Profit after tax only grew 6.41% to N73.909 billion, contracting the net profit margin to 8%. This reflects increased tax burdens and cost pressures.
- Earnings per share (EPS) increased by just 6.34%, suggesting that despite strong revenue growth and higher operating profit, bottom-line expansion remained modest.
Liquidity and financial position
- Cash and cash equivalents declined by 62.35% to N84.749 billion, driven by a reduction in short-term deposits and cash in bank. This decline impacted current assets, weakening liquidity, as reflected in the drop in the current ratio from 1.06 to 0.65.
- Meanwhile, total assets grew by 29.17% to N1.57 trillion, but shareholders’ funds saw only a marginal 0.86% increase. As a result, the company’s leverage rose from 3.16 to 4.04, indicating greater reliance on debt to finance asset growth
Key takeaways:
- Revenue growth was strong, but rising costs, FX losses, and tax burdens constrained bottom-line growth.
- Energy costs are a major concern – Higher fuel, electricity, and maintenance expenses contributed to gross margin compression.
- Operating profit resilient but not optimal: Operating profit and margin improved despite cost pressures, but profitability could have been stronger with better cost controls.
- Liquidity challenges: Cash reserves fell sharply, weakening liquidity, as seen in the decline in the current ratio.
- Increased leverage: The company relied more on debt for asset growth, raising financial risk and interest obligations.
