BUA Cement: New Strength From Merger
That looks very much like a good start for Yusuf Binji, the company’s new managing director/CEO, who took over the mantle of the company’s leadership last December. All eyes are on him to fulfill, even surpass the big dreams that post-merger company promises to make happen going forward.
The profit decline last year came from a major shift from a tax credit of N25 billion in the prior year to a tax expense of N5.6 billion. That made a difference between a 69 percent advance in pre-tax profit and the decline in after tax profit for the year.
This year, the tax figures are on the reverse direction so far to the benefit of the bottom line position. There was a drop of 80 percent in income tax expenses for the company to about N340 million at the end of the first quarter. That again made a difference between an increase of less than 16 percent in pre-tax profit and the 26 percent rise in after tax profit to a little under N20 billion at the end of the first quarter.
The key strength in operations for BUA Cement is rapidly growing sales revenue, which it has sustained in recent years. The company achieved a top growth record of over 47 percent in turnover in 2019, growing further by 25 percent in the first quarter.
It company ended the first quarter operations with a sales revenue of N54 billion, which if sustained could see the company with a turnover in excess of N215 billion at the close of 2020.
The merger benefits aren’t coming yet by way of cost-saving, which also isn’t improving profit margin. At N29.5 billion, input cost rather encroached on revenue in the first quarter, claiming 54 percent of it compared to 51 percent on year-on-year basis. With a reduced gross profit margin, gross profit grew well below sales revenue at 16 percent to N24.5 billion.
Administrative expenses jumped by 48 percent year-on-year to N2.4 billion at the end of the first quarter. The rise was accounted for exclusively by depreciation, which soared by 164 percent to N603 million over the review period. Property, plant and equipment account for 96 percent of the company’s total assets of N407 billion at the end of the first quarter.
The sharp growth in depreciation more than neutralised the slashing of personnel expenses by 37 percent year-on-year to N287 million and technical and management fees by 46 percent to N515 million over the review period.
The only slight cost moderation during the quarter was in respect of selling and distribution expenses, which grew by 20 percent to N3.4 billion in the first quarter. Another positive development came from other income, which grew by 48 percent to N2.3 billion over the period.
The result of operating activities for the company in the first quarter is an operating profit of N21 billion – a year-on-year increase of 15.5 percent. Finance cost also moderated relative to sales revenue at an increase of 11.6 percent to N855 million. The company has balance sheet debts of a little over N28 billion, up from N21 billion at the end of 2019.
The company closed the first quarter with an after tax profit of almost N20 billion – a clear 26 percent increase year-on-year. Profit margin is good at 36.7 percent in the first quarter but is unimproved from the margin in the same period last year.
The company earned 58 kobo per share at the end of the first quarter, improving from 46 kobo per share in the first quarter of 2019. It closed last year’s operations with earnings per share of N1.79 and gave out N1.75 per share in cash dividend.
The outlook for the year indicates that the company may record one of the least adverse impacts of the Covid-19-induced economic lockdown due to the high demand for building materials by a thriving real estate industry.
A likely slowdown in the second quarter may be regained in the second half of the financial year. Overall, growths in sales revenue and profit are expected to remain good for the company to full year.
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