How dealers frustrated our efforts to sell cement at N3,500 per bag – BUA Cement

AbdulSamad Rabiu, Chairman of the Board of Directors of BUA Cement Plc has disclosed how cement dealers in the country frustrated the efforts of the company to sell cement at N3,500 per bag last year. TheNewsGuru.com (TNG) reports Rabiu made the disclosure at the 8th Annual General Meeting of BUA Cement held in Abuja.

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Rabiu highlighted that his company had sold over a million tons of cement to dealers at a price of N3,500 per bag, intending for these savings to be transferred to the end-users. However, he noted that the dealers were selling each bag of cement to consumers for prices ranging from N7,000 to N8,000. He mentioned that the company needed to discontinue the policy since its involvement was not intended to support dealers financially.

He mentioned that BUA Cement was unable to regulate the dealers who, he claimed, were earning substantial profits due to the high margins, as the company lacks influence over pricing in the open market.

“So, a lot of the dealers took advantage of that policy. Rather than pass the low prices to the customers, they were selling at even double the price we sold to them. Some were selling at N7, 000 and 8 000 per bag. They made a lot of money with the very high margin. I think we had sold more than a million tons at N3,500 before we realised what the dealers were doing.

“And then, because of the issues that Nigeria faced at the time about devaluation of the Naira last year and the removal of fuel subsidy, we could not continue that policy. We wanted that price to stay at that level but dealers refused. So, we could not sustain that simply because we did not want to be in a situation where we are subsidizing dealers.

“I’m referring to the point when the foreign exchange rate moved from about N600 to maybe N1,800 to the US Dollar. So, it became even more challenging and more difficult for us to actually sustain that price policy,” Rabiu said.

BUA Cement’s profit after tax drops by 31.2 per cent

Meanwhile, Rabiu, at the 8th AGM of BUA Cement Plc, disclosed that the company recorded revenue growth of 27.4 per cent in 2023 but that profit after tax declined by 31.2 per cent due to foreign exchange losses.

The BUA Cement Chairman announced that the company saw an increase in net revenue of N460 billion within the period from N361 billion in 2022. According to Rabiu, the company also improved its capacity utilisation to 61.2 per cent in 2023 from 59.8 per cent in 2022, due to an increase in cement volumes dispatched. He said that the increase in volumes dispatched also resulted in an increase in market share

“Furthermore, Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) rose to N169 billion from N155 billion recorded in the prior year. Though, profit after tax declined by 31.2 per cent to N70 billion from N101 billion recorded in the corresponding period in 2022. This was impacted by foreign exchange losses, which arose from the devaluation and the continued depreciation of the Naira,” he said.

The Board Chairman said that, despite the reduction in the company’s bottomline, it is committed to shareholder value. He announced a dividend of two Naira per share for the year ended Dec. 31, 2023 to be distributed to shareholders.

Rabiu said that the operating environment within the period was challenging as global growth declined to 3.2 per cent in 2023 from 3.5 per cent recorded in 2022.

“Conversely, global inflation peaked at 6.8 per cent in 2023. Across Sub-Saharan Africa, economic growth declined to 3.3 per cent relative to the 4.0 per cent recorded in 2022, driven majorly by global slow down, weather shocks and supply-side issues,” he said.

He said that the company would continue to implement and pursue its strategic goals of expansion and increasing market share. He said that it would also explore solutions that will enable it to sustain value creation for its shareholders and other stakeholders.

The Managing Director of the company, Yusuf Binji, said that the major challenges faced during the year arose from the currency redesign policy of the Central Bank of Nigeria (CBN). Bjnji said that the 2023 general elections and foreign exchange volatilities also created major challenges.

“Like every manufacturing business, some of our inputs are dollar-denominated, and with the devaluation and continued depreciation of the Naira, we recorded rising energy and other raw materials cost.

“Also, the depreciation of the Naira led to the revaluation of existing liabilities on the balance sheet, which resulted in an exchange loss of N70 billion,” he said.

According to him, the company was still able to manage its negative shock, declare a profit and, most importantly, preserve shareholders’ fund.