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Sunday, November 27, 2022

BUA Cement Growth Accelerates in Q1 as Covid-19 Business Plans Yield Fruit

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Investors love a company that thrives amid an economic tempest, and that is because they are optimistically sure of getting the minimum required rate of returns required on their investment.
Shareholders are Oliver Twist as they always ask for more, and BUA Cement Nigeria Plc, the third largest producer of the building material in Africa’s largest economy mirrors the entity they crave for.
BUA Cement has consistently delivered return on equity higher than cost of capital, which is why it has effortlessly maximised the value of stakeholders.
Return on equity represents profitability while cost of capital simply is the cost of various sources of finance such as ordinary share capital, preference capital, and debt.
When the former exceeds the latter, then a rational analyst accepts that the investment is worthwhile.
Since the cement marker merged two of its cash cows to become a giant in the Nigerian business landscape, it has continually beat analysts’ earnings estimates.
Despite the havoc wrought by the Covid-19 pandemic that hit the economy, BUA Cement’s first quarter (Q1) revenue spiked by 25.10 percent to N53.96 billion from N43.13 billion in the earlier period.
Earnings before interest, taxation, depreciation, and amortization (EBITDA) increased by 16.7 percent to N24.60 billion in March 2020 as against N21.10 billion the previous year.
Perhaps more interesting is that the Q1 revenue growth eclipsed peer rivals such as Dangote Cement (+3.97 percent), and Lafarge Africa (+9.78 percent).
The company’s net income as at March 2020 was up 26. 19 percent to N19.78 billion, which compares to Dangote cement’s (the most capitalised firm in Nigeria) 1 percent uptick.
Cement volume dispatched was up 20.0 percent to 1,328kt in March 2020 from 1,107 kt the previous year, underpinned by increased capacity output and growing market acceptance.
To mitigate the impact of the coronavirus pandemic on business operations, the management and board of directors of BUA Cement implemented business continuation plans.
“In response to the global pandemic, we implemented our “COVID business continuity program,” built into our corporate governance framework, the firm said.
“This minimises disruptions along the value chain; priorities the safety of workers and customers; and assesses probable scenarios a prolonged lockdown would have on the business.”
The lockdown imposed by government to curb the spread of the coronavirus pandemic paralyzed construction activities as cement volumes continues to be weak.
Before the pandemic sneaked like tendril of smoke from Wuhan City of China to cripple the global economy, cement makers were reeling from a cut down on capital expenditure spend and delay in the passage of the 2020 budget.
Despite these challenges, BUA Cement continues to thrive as it uses it fixed asset in generating higher sales. Fixed asset turnover ratio increased to 13.76 percent in March 2020 from 10.96 percent the previous year.

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