In its recently released H1 2023 results, BUA Cement reported a 17.2% y/y Revenue growth to N221.07bn in H1 2023 from N188.56bn in the prior period (H1 2022).
Similarly, on a q/q basis, Revenue was up by 7.9% to N114.71bn in Q2 2023 from N106.35bn in Q1 2023. While no information has been provided on the Revenue breakdown, we attribute the company’s top line growth to increases in both price and volume.
Cost of Sales (adjusted for depreciation) was up 17.4% y/y to N105.36bn in H1 2023 from N89.73bn in H1 2022. We observed that most of the cost increases came from materials (+38.08% y/y) and energy cost (+9.5% y/y).
We believe that inflationary pressures continue to raise cost as the company seeks to increase production volumes.
Given the increase in Revenue growth, Gross profit grew by 17.1% y/y to N115.7bn in H1 2023 while Gross margin contracted by 7bps y/y to 52.3% in H1 2023, impacted by elevated cost pressures.
Operating Expenses (adjusted for depreciation) increased by 46.2% y/y to N16.86bn in H1 2023 from N11.53bn in H1 2022. The increase was driven by both Administrative Expenses adjusted for depreciation (up 10.8% y/y to N5.58bn) and Selling & Distribution Expenses (up 73.9% y/y to N11.27bn).
Other Income was also up significantly by 391.5% to N983m. Despite the cost pressures, EBITDA increased by 14.1% to N99.82bn in H1 2023.
Consequently, EBITDA margin decreased by 125bps to 45.2% in H1 2023 from 46.4% in H1 2022.
Depreciation and Amortisation was up to N12.89bn, while Operating Profit grew by 11.8% y/y to N86.94bn from N77.74bn in
H1 2022.
BUA Cement recorded a 269.6% increase in Net Finance Costs to N10.52bn in H1 2023 from N2.84bn in the prior period (H1 2022).
The significant increase reflects a 228.77% y/y rise in Interest Expense to N10.59bn in H1 2023 despite a 54.79% increase in Interest Income to N2.22bn in H1 2023. Pre-Tax profit was up by 2.8% y/y to N76.42bn in H1 2023.
Tax expense declined marginally by 1.6% in H1 2023 to 12.81bn from 13.01bn in H1 2022. Consequently, Net Income increased by 3.7% y/y to N63.62bn in H1 2023 from N61.36bn in H1 2022. Earnings per share was up by 3.7% y/y to N1.88/s for H1 2023 from N1.81/s in H1 2022.
We have a target price of N80.5/s for BUA Cement with a Sell recommendation. Current Price; N98.95/s.
