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BUA Group: A conglomerate for our times
Across the globe in Emerging Markets large conglomerates like the BUA Group are driving innovation and jobs, while strengthening economies from India to South Korea, Mexico to China.
BUA Group is a leading food, infrastructure, mining and manufacturing conglomerate Headquartered in Nigeria with diversified investments spanning key business sectors of the African economy, including but not limited to Cement, Ports, Mines/Steel, Real Estate, Consumer Goods and Refining.
The flagship BUA Cement has 11million metric tons per annum (MTPA), combined cement production capacity, the foods group 1.5 million MTPA combined sugar production capacity, and 700,000 Hectares of land mass for Sugarcane plantation.
Consulting firm McKinsey has compiled a database of large companies with business in Africa revealing some 400 companies earning revenues of $1 billion or more, including BUA Group.
Flagships BUA Foods (N418.3 billion) and BUA Cement (N361 billion) had combined sales of over N779.3 billion ($1.70 billion…$1/N460) in 2022.
McKinsey however notes that despite some notable corporate success stories, Africa lags behind other emerging regions in hosting large companies.
Moreover, Africa’s big companies are smaller, on average, than those in other emerging economies. Because of these twin issues—too few large firms and too little scale among those that do exist—the total revenue pool of large companies in Africa (excluding South Africa) is about a third of what it could be, according to McKinsey.
Mckinsey in its report states that Africa’s relative lack of big companies matters not just for shareholders but also for society, because these firms are the primary drivers of economic growth.
“We might think of big companies as the baobabs of the business landscape: not only do they tower above the rest, they also have deeper roots and longer life spans,” McKinsey said.
“Like baobabs, large firms create their own ecosystems, fostering small-business creation through their supply chains and distribution networks. They are also better able to attract capital, which means they are much more likely to compete on the global stage,” the report said.
BUA Group is doing exactly this for the Nigerian economy.
BUA Foods has two wholly owned subsidiaries namely BUA Sugar Refinery FZE and LASUCO Sugar Company Limited. Its location in the FZE makes BUA the only operator of a destination sugar refinery in Nigeria. This enables it to leverage export operations to sub-regional markets and position to take advantage of African Continental Free Trade Area (AfCFTA) opportunities.
In addition to the market expansion across the African continent, the export opportunities give BUA the ability to generate foreign exchange earnings.
BUA Group is strengthening and expanding its domestic market share, while maximising the opportunities in the export market for brand penetration to drive business growth.
In 2022, BUA commenced export sales to West African regional markets. A shipping vessel, MV Bundu was enrolled to provide accelerated delivery of products to drive competitive advantage.
The two major listed companies of the BUA Group (BUA Cement and BUA Foods) paid a total of N35 billion in taxes in 2022.
The market cap of BUA Groups listed Cement and Food firms is N6.6 trillion or about 1.65 percent of Nigeria’s GDP.
BUA Group was established by Abdul Samad Rabiu in 1988. Rabiu who is one of Africa’s richest men with a net-worth of $6 billion, according to the Bloomberg Billionaires Index is also a major philanthropist.
Last month the BUA Group Chairman Rabiu, was conferred with an Honorary Degree from the University of Maiduguri during the university’s 24th Combined Convocation in recognition of his significant contributions to national development, education, and entrepreneurship in Nigeria.
In a landmark event coinciding with the convocation, the Abdul Samad Rabiu International Centre for Innovation and Entrepreneurship, fully funded and constructed with a 1 billion Naira donation from his personal foundation, ASR Africa, was officially commissioned and handed over to the university with the Vice President of Nigeria, Sen Kashim Shettima, gracing the occasion.
ASR Africa is the brainchild of African Industrialist, Philanthropist and Chairman of BUA Group, Abdul Samad Rabiu, the Abdul Samad Rabiu Africa Initiative (ASR Africa) was established in 2021 to provide sustainable, impact-based, homegrown solutions to developmental issues affecting Health, Education and Social Development within Africa.
Cementing Nigeria’s middle class
All over the world, owning a home opens the door to investments, buying power, and improving credit, and allows families to pass that wealth on to their children who then continue to pass it on through the generations.
According to the U.S Federal Reserve, the median homeowner will have nearly 45 times the net worth of the median renter, meaning home ownership helps to build up a vibrant middle class.
In Nigeria, one of the most important factors for home affordability is the price of cement. To assist Nigerians to achieve their home ownership dreams, the management of BUA Cement Plc, recently made a commitment to reduce prices following a periodic review of operations for efficiency.
BUA informed its customers, stakeholders, and the public that effective October 2, 2023, it decided to bring the price reduction forward. As a result, BUA Cement would now be sold at an ex-factory* price of 3,500 Naira per bag so that Nigerians can begin to enjoy the benefits of the price reduction before the completion of its plants.
Upon completion of the ongoing construction of its new plants, which would increase production volumes to 17million metric tons per annum, BUA Cement PLC said it also intends to review these prices further (in line with earlier pronouncements) by the first quarter of 2024.
Nigeria’s housing deficit is estimated at 28 million units as of 2023, while the population is expected to reach 223.8 million this year, according to the United Nations. An estimated N21 trillion is required to provide housing units and bridge existing deficits.
Analysts say the move by BUA Group to reduce cement prices is a major step towards cementing Nigeria’s middle class.
BUA Group investors cash out with dividends and capital gains
Investors in NGX listed BUA Group firms such as BUA Cement and BUA Foods have cashed out with robust dividends and solid capital gains.
BUA Foods has evolved over the last three decades from a commercial and trading entity to become a publicly listed company. Listing on the NGX occurred in 2022 to democratise BUA’s wealth creation journey aimed at continuous delivery of long-term value to all stakeholders.
In practical terms it meant that BUA Foods returned N63.0 billion to shareholders via dividends paid in 2021, amounting to ₦3.50 per share approved at the 1st AGM of the company.
Return on Equity and Assets stood at 39.6% and 15.0% respectively in 2022, and the total shareholder return was 67.9% for the inaugural post-listing period. BUA Foods sustained a strong financial performance in 2022, with a revenue of ₦418.4 billion, profit after tax of ₦91.3 billion, with 14% growth in return on equity.
In 2021, BUA Foods had a total shareholder return of 67.9%, comprising share price gains and dividends paid within the calendar year. BUA paid out 90.3% of profits after tax as dividends, amounting to ₦3.50 in dividends per share paid to shareholders in 2021, with a resultant yield of 5.4%. Earnings per share grew to ₦5.10 in 2022, from ₦ 4.20 per share in 2021.
For the 2022 financial year, the Directors recommended a dividend of ₦4.50 per share. This represents a growth of 28.5% from the previously declared and fully paid dividend of ₦3.50 per share in 2021.
BUA Foods stock has gained 206% year-to-date in 2023, placing it among the top 10% of performers on the NGX this year. The NGX broad market index is up 39.4% by comparison.
BUA Cement sustained its excellent performance in 2022, delivering a profit after tax (PAT) expansion of 12.42% year on year (yoy), relatively better performance when compared to Lafarge Africa (+5.10% yoy) and DANGCEM (4.90 % yoy).
The company has been recording double digit growth in earnings since it listed on the Nigerian stock exchange in January 2020 to become one of the most capitalised firms in Nigeria.
The cement maker’s operating profit spiked by 24.46 percent to N129.71 billion in December 2022 from N104.22 billion as at December 2021.
AbdulSamad Rabiu, a man with a plan
It takes inexplicable hard work, vision, and perseverance to build a business empire that stands the test of time. Abdul Samad Rabiu, Billionaire businessman and philanthropist, has turned his cement and food business into one of the largest companies in the world.
Of course, the astute billionaire is able to develop a plan of action that helped him achieve his overall aim as his firms have significant market capitalisation that makes them pivotal on the Nigeria Exchange Group (NGX).
Nothing tarnishes a hero as failure, Abdul Samad Rabiu never underachieves. He is the cream of the crop in the industrial sector, a role model to young upcoming entrepreneurs who wish to build a business from the scratch and turn it into a successful venture that creates jobs and contributes immensely to economic growth.
It is important to note that Rabiu’s cement business “BUA Cement International Limited” that commenced operations in 2008, focusing on bulk and bag cement unloading through its floating terminal, between 2009 and 2010, acquired Edo Cement Company and a majority stake in Cement Company of Northern Nigeria (CCNN) Plc through its ownership of Damnaz Cement Company.
The acquisition paved the way for the 2018 merger of CCNN plc and Kalambaina Cement Company to create a bigger CCNN entity which, in turn, combined with OBU Cement Plc in 2019 to birth BUA Cement Plc. BUA Cement Plc is the second largest producer of the building materials by total installed capacity (11.0MMT), across the country.
The well or meticulously conceived business combination as well as dominating cement activities in three geo-political regions (North West, South South, and South East) gives it competitive advantage.
In 2020, BUA Cement listed on the Nigeria Stock Exchange and became the 3rd largest company by market capitalization. Today, it has a market cap of N3.32 trillion, making it one of the most valuable firms in Nigeria as investors are optimistic about the company’s future growth prospects.
The company had issued a N115 Billion corporate bond, the largest issuance in the history of the debt capital market as it seeks to strengthen its working capital position and provide financing for projects that are in the pipeline.
From a domestic market share of 12.90 percent in 2018, behind Dangote Cement (66.9 percent) and Lafarge Africa (20.2 percent), BUA Cement narrowed the gap with Lafarge Africa as analysts at Afrinvest estimated BUA Cement’s share to have increased to 16.7 percent in 2021 compared to 19.0 percent for Lafarge Africa.
By 2022, BUA Cement has outperformed its peers, overtaking Lafarge WAPCO to become the second largest cement producer in Nigeria by volume and installed capacity.
BUA Cement was the only listed cement player in Nigeria that recorded an increase in sales volume in 2022 (driven by added volume from the additional installed capacity of 3 million metric tons per annum from the new line-4 in Sokoto), as its volume dispatched increased to 6,300 kilotons in 2022 from 5,400 kilotons in 2021.
This compares to 5,861 Kilotons, for WAPCO in 2022.
BUA Cement’s strategy for the future is geared toward capturing new markets including exports, harmonizing sales and marketing efforts across its two plants to drive revenue & cost synergies, and shifting the energy mix in favour of cost-effective and greener sources.
There are indications the future is propitious for BUA Cement because there is going to be an influx in foreign and private investments on the back of demographic growth, urbanization, and the need to accelerate economic performance in a sustainable way.
The government proposed infrastructure spending geared towards shrinking the infrastructure gap well for the cement industry as there are expectations of acceleration in cement demand.
The World Bank estimates that countries in Sub-Saharan Africa need to invest 7.1 percent of their GDP annually in SDG-related infrastructure but have only invested around half of this level, 3.5 percent of GDP reforms, benefit the construction sector and consequently increase cement demand in most SSA countries.
Nigeria’s cement consumption per capita has experienced modest growth, from 138kg per person in 2021 to 139kg per person in 2022. Although this growth is commendable, it trails the global average per capita consumption of 541kg.
This adds impetus to the argument that the country’s population of 400 million is a blessing in disguise as a young population and the middle class crave for accommodation.
Indeed, AbdulSamad Rabiu has got magic fingers and anything he touches turns to gold. His fingers are the investment strategies he deplores to make his business to a higher level, even higher than his competitors.
The courageous way the indefatigable man birthed BUA Food Plc, the largest consumer goods firms in Nigeria by profit, takes the breath of many investors away. Nobody always sees his strategic reforms coming, being a quiet, humble, and unassuming person.
Of course, the voyage of BUA Foods Plc started with the edible oils business following the acquisition of Nigeria Oil Mills Limited in the year 2000.
Later, it ventured into the refining of sugar through BUA Sugar Refinery Limited which was incorporated on 13 April 2005. BUA Rice Limited was incorporated in 2014, while IRS Flour Limited and IRS Pasta Limited were birthed in 2019.
In November 2021, following a restructuring by way of a scheme under Section 711 of CAMA among BUA Sugar Refinery Limited, IRS Flour Mills Limited, IRS Pasta Limited, BUA Rice Limited, BUA Oil Mills Limited, and BUA Foods Limited, further to which BUA Sugar Refinery (a private limited liability company, incorporated on 13 April 2005 and commenced business operations in September 2008) emerged as the surviving entity.
As part of the restructuring, the name of the enlarged entity was changed to BUA Foods Limited.
By share transfer forms dated 11 October 2021, the shareholders of BUA Sugar Refinery FZE and LASUCO Sugar Company Limited each transferred all their shares to BUA Sugar Refinery Limited thereby making them wholly owned subsidiaries of the Company. In December 2021, BUA Foods Limited was converted into a public limited liability company.
The new firm BUA Foods Plc has a market capitalisation of more than three trillion Naira, and it overtook Dangote Sugar Refinery Plc and Nestle Nigeria who capitulated to macroeconomic headwinds to become the largest consumer goods firms by earnings.
It is noteworthy that the company has four divisions: Sugar, that contributes 60 percent to Group sales; Flour, that contributes 29 percent to Group sales; Pasta, that make up 11 percent of Group sales, and Rice, a new addition to the portfolio of products, that contributed 0.30 percent to Group’s sales, based on nine months 2023 numbers.
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