THUR 31 MARCH, 2022-theGBJournal| BUA Cement published 2021FY audited financials at the close of business Tuesday, reporting PAT growth of 24.5% y/y to NGN90.08 billion while EPS settled at NGN2.66 (+24.5% y/y).
The growth in EPS was due to the topline growth, stable margins in the face of elevated cost pressures and moderation in net finance cost. The board has proposed a final dividend of NGN2.60/s (an increase of 25.6% above NGN2.07/s in 2020FY), implying a dividend yield of 3.7% based on the closing price of NGN70.75 (March 29).
Though management is yet to provide details behind the double-digit growth in revenue, Cordros Research analysts say they believe resilient private sector demand for cement combined with the strong upward adjustment in cement prices supported the topline performance.
‘’We highlight that the other industry players that have published earnings (DANGCEM; 18.1% y/y for Nigerian operations I LAFARGE; 18.8% y/y) raised prices significantly in 2021FY. At the 9M-21 conference call, management disclosed that the increase in price per tonne (+12.9% y/y) was due to a reduction in the discounts offered to key distributors,’’ Cordros said.
EBITDA grew by 22.8% y/y in 2021FY, as revenue growth (+22.9% y/y) outstripped the growth in cost of sales ex-depreciation (+22.0% y/y) and OPEX ex-depreciation (+34.5% y/y). We note that the surge in OPEX was due to sharp increases in admin expenses (+31.5% y/y) and selling and distribution expenses (+47.9% y/y).
As a result, the trickle-down impact of the revenue growth on margins was limited as the EBITDA margin remained flattish at 46.5% in 2021FY (2020FY; 46.6%).
Earnings were also lifted by the steep moderation in net finance cost (-63.5% y/y), following the faster decline in finance cost (-55.5% y/y) relative to finance income (-27.8% y/y).
We attribute the substantial decline in finance cost to the marked reduction in gross debt (-26.8% y/y to NGN197.05 billion in 2021FY vs NGN269.29 billion in 2020FY).
Overall, PBT grew by 30.4% y/y to NGN102.87 billion in 2021FY, with related PBT margin improving by 2.3ppts to 40.0%. Consequent to the jump in tax expense (+96.0% y/y to NGN12.79 billion in 2021FY), PAT grew slower by 24.5% y/y to NGN90.08 billion.
Commenting further on the performance, Cordros said they like that BUA Cement optimised its price/volume mix to keep margins stable despite energy cost pressures caused by the local currency devaluation amidst high inflationary pressures.
‘’We expect private sector demand for cement to moderate this year as activities in the real estate sector normalise to pre-pandemic levels. In addition, we are concerned about the ability of the company to transfer the burden of elevated energy prices to consumers in a bid to preserve margins, given that cement producers have raised prices significantly over the past two years. Nevertheless, we believe economies of scale associated with the new and energy-efficient Kalambiana line II (3MMT) will provide some support for margins.’’
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