BUA Cement’s earnings were broadly impressive despite market expectations for subdued performance due to the tough conditions during the second quarter.
The results appear to have lifted investors’ optimism, given the events that characterized the second quarter and which were expected to weigh on demand for cement across the country.
For the first six months through June 2020, BUA Cement’s net income increased by 13.06 percent to N34.81 billion from N30.61 billion the previous year.
Revenue was up 13.36 percent to N101.26 billion as at June 2020, compared to N89.85 billion the previous year.
Cement volume dispatched was up 7.9 percent to 2,46 kt from 2,282 kt, underpinned by growing market acceptance.
The impressive results are coming at time when competitors such as Dangote Cement and Lafarge Africa are reeling from receding sales volume due to social distancing and lockdown that slowed down construction activities in key cities (Lagos, Abuja, and Portharcourt).
The cement maker gross profit was up 5.53 percent to N46.74 billion as at June 2020.
Earnings before interest and taxation, otherwise known as EBIT, increased by 7.15 percent to N40.80 billion in the period under review from N38.15 billion the previous year.
BUA Cement has generated more cash for every Naira of revenue earned as Earnings Before Interest Taxation, Depreciation and Amortization (EBITDA), increased to 48.10 percent in the period under review from 45.60 percent the previous year.
The continued impressive performance in 2020 despite the challenging operating environment occasioned by the covid-19 pandemic is a pointer to the value and strength of the BUA Cement brand and product offerings according to Yusuf Binji managing director of BUA Cement.
Despite the macroeconomic headwinds and slow construction activities in key markets across the country, BUA Cement has accelerated capital expenditure spend.
The purchase of property plant and equipment surged by 87.36 percent to N42.70 billion as at June 2020 as against N22.79 billion the previous year.
There were increases in cost line attributable to the pass- through effect of the devaluation of the currency on gypsum and gas prices.
Before the outbreak of the coronavirus pandemic, investors and analysts had forecast that the country’s huge infrastructure deficit and low consumption per capital would spur the cement industry to growth.
The Federal Government had slashed capital expenditure spending by 9.50 percent in the 2020 budget as the precipitous crash in crude oil price deal a great blow on revenue.
However, the recently submitted Economic Sustainability Plan (ESP) by Vice President led committee on economic sustainability; raise some hope for the cement industry if implemented within the time frame stipulated.
But analysts fret that the project may not see the light of the day because the Nigerian government is notorious for porous implementation and delivery of policies that are needed to spur economic growth.
“Despite the prevailing economic conditions, we are quite optimistic about the future because it affords us not only with the opportunity to further evolve our business model but also provides an opportunity for accelerated development. We will continue to push to new markets aided by a focused distribution strategy,” Binji said.
BUA Cement’s stock is listed on the Nigerian Stock Exchange (NSE), and closed trading at N40.20 per share on Wednesday.
The stock has traded in a range between N27.65 to N44 per share in the past year.