United Capital Research, in a recent note to clients, said that only BUA Cement will surmount the headwinds caused by the coronavirus pandemic.
The cement industry is reeling from slow construction activities and a 9.50 percent cut in capital expenditure spending by Federal Government in the 2020 budget further cast a pall on companies’ earnings.
Analysts at United Capital led by Wale Olusi see Bua Cement exploiting the consolidation of Cement Company of Northern Nigeria (CCNN) and Obu cement to deliver inorganic growth in full year (FY) 2020.
BUA’s revenue increased by 425.12 percent to N53.96 billion as at March 2020, that compares with 3.75 percent increase in revenue for Dangote Cement, and 9.78 percent rise for Lafarge Africa.
BUA is making more profit on sales and is more efficient in converting raw materials into sales than peer rivals. What this is means is that there is more to invest, save, and/or cover indirect expenses.
The company’s gross profit increased by 16.34 percent to N24.94 billion as at March 2020 from N21.052 billion as at March 2019.
On the other hand, Dangote Cement, the largest producer of the building material and most capitalized company in Nigeria saw a 2.97 percent uptick in gross profit while Lafarge Africa’s profit was up by 0.19 percent.
Cement companies are cutting capital expenditure spending due to tepid construction activities, signaling tepid economic growth.
BUA Cement’s purchase of property plant and equipment slumped 81.40 percent to N2.36 billion as at March 2020.
Khaled El Dokani, Chief Executive Officer (CEO) of Lafarge Africa said the company will freeze capital expenditure while it forecast a drop in second quarter sales as the coronavirus pandemic hit demand.