The H1 2022 results of BUA Cement defied macroeconomic constraints caused by rising energy costs and currency depreciation. The cement manufacturer reported a significant increase in profit and a -11.57% decrease in gearing. With a +31.52% increase in equity, BUA’s capital structure demonstrated reduced operational stress.
Due to rising inflation and Naira depreciation, the company’s cost of sales and energy expenses per ton increased by +20.67% and +34.8%, respectively. Revenue increased dramatically as a result of pricing activities and increased production volume, which was aided by additional capacity in the new Sokoto line 4.
The share price exhibited lateral movement with smoothed volatility during the first four months of 2022. Between May 4, 2022 and June 21, 2022, the moving average share price showed resistance at N74.25k and support at N61.0k on August 03, 2022. The year-to-date return on share price fell by -18.28% on August 5, 2022, from N71.95 to N58.80.
The revenue of BUA Cement increased by +51.73% year on year (Y-o-Y), from N124.28 billion in H1 2021 to N188.56 billion in H1 2022. For the first half of 2022, total sales from the combined manufacturing units (Sokoto and Edo) were 3.3 million tonnes, with 41 thousand exported. A rise in production volume and an increase in cement pricing drove revenue growth.
Despite efforts to limit energy disruption by utilizing a variety of energy sources, energy cost rose +64.66% from N25.45bn to N43.58bn.
Profit before tax increased by +50.69% in H1 2022, from N49.70 billion in H1 2021 to N74.89 billion in HH H1 2022. The increase was attributed to a +53.86% increase in operating income, which increased from N50.52 billion in 2021 to N77.736 billion in 2022. Despite the significant increase, the firm lost N758.67 million as a result of the difference between the auction bid rate and the I&E rates, as well as a +246.12% increase in interest expenses.
The current ratio increased significantly, rising from 0.98 in H1 2021 to 1.11 in H1 2022. The significant improvement in the working capital ratio was aided by a +123.71% increase in cash and cash equivalents, which increased from N57.33 billion in 2022 to N128.24 billion. Short-term assets increased 82.63% while short-term liabilities increased 61.83%. Regardless of the rise in cash and cash equivalents, analysts observed a N17.05bn decline in cash in the bank, falling from N57.29bn to N40.24bn in H1 2022.
In H1 2022, the acid test ratio increased from 0.71 in H1 2021 to 0.87 in H1 2022. Short-term assets (excluding inventories) grew by +97.89% and short-term liabilities grew by +61.83%, respectively.
The clinker manufacturer set a new record for asset turnover ratio. The asset base ratio increased by +17.33% year on year, rising from 0.91 in H1 2021 to 0.22 in H1 2022. According to analysts, the significant increase in topline earnings and total assets aided the company’s efficiency because the asset turnover ratio of 0.22 amounted to N0.22k for every naira of assets employed.
The debt-to-equity ratio fell from 0.20 in H1 2021 to 0.18 in H1 2022. The ratio decreased by -11.57% year on year, owing to an increase in retained earnings of +82.49% from N133.31bn to N243.28bn. Nonetheless, total borrowings increased by +16.31% year on year, from N70.71 bn to N82.25bn.
