BUA Cement Plc is losing profit for the second year with its bottom line down year-on-year and quarter-on-quarter to N34 billion at half year.
The second quarter saw a worse performance than the first with the company’s profit speeding downward from a drop of 33 per cent to under N18 billion in the first quarter to a 55.8 percent drop year-on-year to N16 billion in the second.
The cement-producing company’s interim financial report for the half year ended June 2024 shows that the lower profit figure for the second quarter is despite much bigger sales revenue for the period at N202.8 billion against N161 billion recorded for the first quarter.
Sales accelerated from 51.5 per cent growth in the first quarter to a 76.8 per cent increase in the second quarter. Much of the increase in turnover was consumed by foreign exchange losses that jumped close to eight times year-on-year to almost N30 billion in the quarter.
Other costs that pressured earnings in the second quarter include production cost that grew well above the sales figure at 134.8 percent to N138.5 billion, speeding up from 107.6 percent increase to N116 billion in the first quarter.
Also, administrative costs rose about five times year-on-year in the second quarter to N6.7 billion while selling and distribution expenses claimed a significant share of the profit. The cost increases claimed more than all the gains in sales revenue in the second quarter and therefore slashed after-tax profit from N36.8 billion in the same quarter last year to N16.3 billion in the second quarter.
Half-year earnings position shows a turnover of N363.9 billion for BUA Cement at the end of June 2024, an increase of N142.8 billion or 64.6 per cent year-on-year.
Led by energy and materials costs, the cost of production grew much more rapidly than sales at 121.6 per cent or almost N140 billion, therefore claiming most of the increase in sales revenue.
The company’s production cost is dominated by energy costs that advanced by 172 percent year-on-year to over N130 billion in the half year. Next in rank is the costs of raw materials which grew by close to 141 per cent to about N95 billion during the same period. But the growth driver of input cost is operation and maintenance charges that grew by roughly 279 per cent to N40.5 billion at the half year.
Gross margin went down from 48 per cent in the same period last year to 30 per cent at half year and gross profit only edged up by less than 3 per cent year-on-year to a little above N109 billion.
A major drop of 86 percent in other income to N137 million plus increases in operating costs claimed more than the gain in gross profit, leading to a decline in operating profit at the end of half-year operations. The Increases in operating expenses were led by administrative costs, which jumped by 82.5 per cent over the review period to over N11 billion.
Operating profit dipped 5.7 per cent to less than N82 billion at the end of six months of trading.
A big inflow came from finance income like a windfall, which rose more than fourfold to N9.8 billion in the half year. That paid off much of the finance expenses of N10.9 billion for the period and cut down net finance expenses from N8.4 billion to N1 billion over the review period.
The company’s borrowings expanded from N532.3 billion at the end of 2023 to N653 billion at the end of the half-year operations and the cost saving from the drop in net finance cost was overwritten by net foreign exchange losses that multiplied close to 19 times to N40 billion at half year.
Net foreign exchange losses claimed about one-half of operating profit and slashed pre-tax profit by 47.5 percent to N40 billion at the end of June 2024. After-tax profit also dropped by 46 per cent to close at N34 billion at half year.
BUA Cement is facing a major drop in profit for the second year, as the same functions of production cost increase and foreign exchange losses plunged the company’s bottom line to N69.5 billion in 2023 – the lowest in four years.
Earnings per share is down from N1.88 in the same period last year to 48 kobo for BUA Cement at half year.
