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BUA Cement PAT expanded by 48.2% y/y to NGN33.14bn

BUA Cement published Q1-22 unaudited financials last week Friday (April 22), which showed that PAT expanded by 48.2% y/y to NGN33.14 billion while EPS settled at NGN0.98 (+48.2% y/y). The growth in EPS was due to the double-digit topline growth and moderation in net finance cost.
BUA Cement delivered double-digit revenue growth of 58.5% y/y in Q2-22, akin to LAFARGE (+26.8% y/y). Though management is yet to provide details behind the increase in revenue, we believe the topline growth was price-driven, given the significant hike in prices implemented in the prior year. In addition, we think resilient private sector demand for cement provided another layer of support.
EBITDA grew by 55.9% y/y in Q1-22, as revenue growth (+22.9%) was strong enough to neuter the increases in cost of sales ex-depreciation (+58.7% y/y) and OPEX ex-depreciation (+88.8% y/y). We note that the surge in OPEX was due to the sharp increases in admin expenses (+42.4% y/y) and selling and distribution expenses (+171.3% y/y). On the latter, we note that marketing expenses and overheads spiked by 338.1% y/y in Q1-22, suggesting management intensified spending on marketing to drive sales. As a result of cost pressures, the trickle-down impact of the revenue growth on margins was limited as the EBITDA margin weakened by 0.8ppts to 47.7% in Q1-22 (Q1-21; 48.5%).
Earnings were also lifted by the steep moderation in net finance cost (-96.5% y/y), supported mainly by the decline in finance cost (-60.7% y/y). We attribute the substantial reduction in finance cost to the positive impact of refinancing expensive debt with a cheaper source of finance in 2020. We recall that BUA Cement issued a local bond of NGN115.00 billion in December 2020, which was partly utilised to settle expensive facilities.
Overall, PBT grew by 71.0% y/y to NGN42.35 billion in Q1-22, with related PBT margin improving by 3.2ppts to 43.7%. Following the jump in tax expense (+283.1% y/y to NGN9.20 billion in Q1-22), PAT grew slower by 48.2% y/y to NGN33.14 billion.
Analysts say they like that BUA Cement was able to leverage the favourable pricing environment in delivering double-digit revenue growth.

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