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BUA Cement Surmounts Covid-19 Induced Headwinds as Profits Spike

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BUA Cement Plc has recorded strong profit growth even amid the weak construction activities caused by prolonged period of lockdown imposed by the government to curb the spread of the coronavirus pandemic.

For the first nine months through September 2020, the cement giant’s net income surged by 23.83 percent to N53.56 billion as against N43.25 billion as at September 2019.

BUA has generated more money from its operations as operating profit spiked by 15.67 percent to N62.35 billion in September 2020 from N53.90 billion the previous year.

With the new bull market, BUA stock should sustain its rally on improvement on market sentiments.  Investors like companies that have strong margins and a balance sheet that can weather the storm of macroeconomic headwinds.

Of course, the recent policy rate cut by the central bank supports the newly formed bullish trend in the equity segment of the market.

BUA’s share price closed at N41 as at 2:00 pm in Lagos, valuing it at N1.40 trillion while it has a total shareholders’ fund of N417.62 billion as at September 2020.

Meanwhile, a slew of analysts have been overly bullish on BUA, the third force in the cement industry after its successful business combination.

During the period, the company made some giant strides in deepening its marketing strategy to increase its share of the market.

Revenue increased by 20.96 percent to N156.55 billion in September 2020 from N129.43 billion the previous year.

The company’s energy cost rose as gas prices and costs of imported fuel options (LPFO and coal) increased in response to the devaluation.

This impacted cost of sales, which increased to 54.18 percent in the period under review from 51.22 percent the previous year.

However, BUA is making efforts at cost optimization, one of which is the reconfiguration of the Sokoto plant to run on gas.

Nonetheless, gross profit increased by 13.64 percent to N71.73 billion in September 2020 from N63.12 billion the previous year.

Analysts at Cardinal Stone Partners said as BUA emerged in the oligopolistic cement sector through a well-designed acquisition and combination, its extra capacity added pressure to existing competitors.

In its industry review, Cardinal Group explained that BUA added cement capacity of about 8MTPA to the Nigerian market.

Analysts said BUA is building on its historical brand capital which goes as far back as 1962 with Cement Company of Northern Nigeria (CCNN), the combination cemented the company as the cement producer in Northwest and a formidable force in the southern parts of the country.

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