BUA Cement Plc has reported an increase of 16 per cent in its profit after tax for the year ended December 31, 2020, reflecting the company’s resilience and efficient management in the face of challenging operating environment, writes Goddy Egene
When investors stake their funds on companies, their ultimate aim is to reap returns on their investments.
The returns can be in form dividend or capital appreciation. Hence, investors ensure they invest in companies that have track record of strong performance and good future prospects.
They want to ensure that no matter the challenging operating environment, they trust the board and management of such companies to deploy their managerial abilities in order to deliver good results and dividend at the end of the year.
In this respect, one company that has been investors’ preference in the stock market is BUA Cement Plc. The company last year rewarded its shareholders with a dividend of 175 kobo per share for 2019 financial year.
And despite COVID-19 pandemic, which impacted negatively on business in 2020 financial year, BUA Cement Plc is set to still reward shareholders with another handsome dividend following improved bottom-line it has posted.
BUA Cement, which is Nigeria’s second largest cement company, announced an impressive performance, showing growth in performance indicators. BUA Cement posted a revenue of N209 billion for the year ended December 31, 2020, indicating an increase of 19 per cent above N175.518 billion recorded in 2019.
Cost of sales was impacted by the general rise in the cost of doing business to be at N114 billion, compared with N93.1 billion in 2019. Selling and distribution expenses equally pointed north, rising from N11.845 billion to N12.706 billion in 2020.
Administrative expenses reduced from N10.516 billion to N9.472 billion. Also, BUA Cement Plc’s excellent cost management led to a decline of 33 per cent in net financing cost to N3.438 billion in 2020, from N5.192 billion in 2019. In the same vein, the company’s focus on efficiency, a strong management team and newer technologically advanced plants resulted in an improved its bottom-line with profit before tax (PBT) growing to N79.066 billion in 2020, up from N66.273 billion, while profit after tax (PAT) rose from N60.61 billion to N70.518 billion in 2020.
Total assets soared from N470.566 billion to N793.852 billion, while earnings per share (EPS) improved from 179 kobo to 208 kobo in 2020. The higher EPS has given more headroom for the company to increase dividend payout to shareholders.
Analysts said the performance consolidates BUA Cement’s position as one of Nigeria’s most profitable companies – a position it is expected to strengthen further with the inauguration of its new three million metric tonnes Sokoto Cement Plant in 2021 and the addition of three new lines of 9 million metric tonnes total capacity in Adamawa, Edo and Sokoto States by 2023.
Commenting, the Managing Director, BUA Cement Plc, Yusuf Binji, said that exceptional performance in the 2020 financial year, was a reflection of the continued value and strength of the BUA Cement brand and product offerings as well as a nod to the excellent implementation of the company’s Business Continuity Plan which ensured that the company was able to withstand the impact of the Covid-19 pandemic throughout 2020.
Binji had said that despite the prevailing economic conditions in 2020, BUA Cement remained quite optimistic about the future because it afforded it not only with the opportunity to further evolve its business model but also provided an opportunity for accelerated development.
BUA Cement in 2020 entered strategic alliances for the supply of Liquefied Natural Gas (LNG) at its Kalambaina Plant, Sokoto State, and for the management of its mining operations. These are deliberate and strategic choices other cost management efforts that are expected to ensure that BUA Cement will continue to combine development and innovation into its offerings and activities to drive efficiency, reduce operating costs and maximize profits.
Meanwhile, Chairman of BUA Cement Plc, Abdul Samad Rabiu, has said that despite the strides made in the Nigerian cement industry in the past few years, there was still room for immense growth.
According to him, Nigeria with its population of about 200 million people was still greatly underserved by the cement industry with current consumption levels at about 130 kilogrammes per head compared to smaller African countries with consumption levels at about 170 to 180kilograms per head.
“Nigeria’s cement consumption is expected to increase to about 200kilograms per head in coming years which is one of the reasons why BUA Cement is ramping up its investments in new plants to be able to meet this potential demand as well as take advantage of regional export opportunities through the African Continental Free Trade Area (AfCFTA) agreement which came into effect in 2021,” he said.
Apparently in preparations for the opportunities ahead, BUA Cement signed an agreement with Sinoma CBMI of China for the construction of the three new cement plants of three million tonnes each per annum in Edo, Sokoto and Adamawa states of Nigeria to be completed by the end of 2022.
Upon completion, this will bring BUA Cement’s total capacity to 20 million metric tonnes by 2022. At 9.0 million tonnes combined capacity, this is the single largest contract ever awarded in the Nigerian cement industry for the construction of new cement plants at the same time and by a single company, in Nigeria.
“Nigeria and the surrounding region is still home to huge opportunities in construction, housing, infrastructure, and allied industries. Despite these opportunities, there is no doubt that there is still a huge deficit in supply whilst demand continues to increase in Nigeria.
“This situation has led to an increase in the retail prices of cement despite ex-factory prices remaining partially unchanged. To bridge this huge deficit gap in Nigeria and in the absence of new major investments in the industry, we have taken this decision to invest and build these new plants at a total project cost of $1.05 billion which will be completed by the end of 2022,” Rabiu said.
Commenting on the agreement, the Chairman of Simona CBMI, Mr. Tong Laigou, praised the longstanding partnership between BUA and CBMI.
According to him, Sinoma CBMI is pleased to work with BUA on this huge project and help BUA in its aspiration to be the best cement manufacturer in Africa.
He further added that CBMI would bring their expertise and wealth of experience working in this environment to bring the project to completion on schedule.
From the funding angle, BUA Cement is very likely to deliver the project on schedule as the company had already raised N115 billion bond.
BUA Cement’s bond has become the largest ever corporate bond issued in the Nigerian debt capital markets (DCM) and signposted growing investor confidence in Nigeria’s second largest cement company.
The N100 billion Series 1, 7-years 7.5 per cent Fixed Rate Bond, due in 2027 was subscribed to the tune of N137.82billion. But in accordance with Rule 323(21) of the SEC Rules and Regulations, 2013, the Board approved the absorption of excess funds, not exceeding 15 per cent of the offer of N100 billion, which translates to N15billion and N115billion in its entirety.
According to Rabiu, the company made a strategic decision as a proudly Nigerian company to list on the Nigerian Stock Exchange (NSE).
“This was in line with our core strategy to continue seeking out viable investment and growth opportunities within Nigeria. This bond issuance, a first by BUA Cement, demonstrates our confidence in Nigeria’s debt capital markets as well as continued investor confidence in the BUA Cement business model, our management team, and long-term strategy, all supported by strong credit ratings. We remain committed to unlocking opportunities within the industry for Nigeria.”
In his comment, Binji, said that the success of the first series in the BUA Cement Bond Issuance Programme underscored the strength of the company’s brand.
“The transaction, being the largest corporate bond issuance in the history of Nigeria’s DCM reiterates the strength and acceptance of the BUA Cement brand and the trust placed by stakeholders in the company’s strong cash generation capacity, credit profile and strategy driven by a well experienced management team. Diversifying and extending the duration of our funding sources with the inclusion of this bond, at a competitive rate, will further enable us to achieve our strategic objectives and vision,” he said.