Cement maker and one of the leading makers of the product hit revenues of N90 billion in the first quarter of 2022, dragging up profit in the period but margins failed to respond to the northward movement of the inflows.
Turnover jumped up by 28.3 per cent to N90.06 billion from N70.2 billion in the period. The revenue improvement may have been caused by government’s emphasis on infrastructure, the company’s sales savvy and inflationary pressures.
But the company had to spend upwards of N61.74 billion to make that level of sales; it is 35.5 per cent more than the N45.6 billion spent in the equivalent period. The rise, however still led to a better gross profit than was achieved earlier as gross profit rose by 15per cent to N28.33 billion from N24.6 billion.
Despite better gross profit numbers, gross profit margin dropped to 31.5 per cent from 35.1 per cent, indicating that the company has to do more in terms of its sales strategy.
Meanwhile, the company tamed costs to push up operating profit by 14.5 per cent to N26.1 billion from N22.81 billion but this did not stop operating margin from dropping to 29 per cent from 30.3 per cent. This mean the company can do with cutting costs further in the coming months.
The cement company made net profit of N24.84 billion in the period, a rise of 16.9 per cent compared to the N21.3 billion stashed in the equivalent period in 2021 but once again, margins dropped as net profit margin fell to 27.6 per cent from 30.3 per cent.
But shareholders would be glad to learn that return on equity improved in the period to 11.1 per cent from 10.6 per cent, after all the business exists to maximize shareholders worth.
Meanwhile, nine months to the end of the previous financial year, the company raised revenue, by 19.4 per cent to N186.9 billion from N156.5 billion. This jump enabled top line or gross profit to grow by nearly a quarter to N87.2 billion from N70.2 billion after moderating Cost of Sales by 15 per cent to N99.6 billion from N86.3 billion.
The effect of the above is a rise in gross profit margin to 46.7 per cent from 45 per cent to indicate that the company’s sales policy is delivering the desired results. This, as noted above, also galvanized operating results.
Another beneficiary of the rising operating results is the pretax numbers, which jumped by a quarter to N74.3 billion from N59.2 billion thus setting up a growth to 40 per cent from 37.8 per cent in pretax margins. Improving pretax numbers shows the cement maker is on point as far as managing its finances are concerned.
With increasing revenue and rising margins, it is no surprise that BUA’s bottom line is responding accordingly, as net profit shoots up by 23.2 per cent to N65.91 billion from N53.5 billion to push up net profit margin to 35.3 per cent from 34.2 per cent, meaning that the company is able to raking in more from every revenue naira than it did in the equivalent period.
Rising profit had a concomitant effect on shareholders’ value as Return on equity jumped to 17.7 per cent from 14.2 per cent. It also had a buoying effect on Return on Assets, pushing it up to 9.5 per cent from 7 per cent. The combined effect of these metrics and rising margin stands the cement maker as a profitable entity that is worth the naira of investors.
It is difficult not to be a profitable company when a company plays in the cement sector in a growing economy where infrastructure is at the centerpiece of the government. BUA is at the centre of such a growth and looks poised for more growth in the future. The first of such a future is its full year result which is due any moment. Our prognosis is that it will do well this financial year. Barring any significant headwind on the economy, the company is likely to keep its strong form well into the future. We therefor recommend for investors to buy and keep the BUA stock.
