BUA Cement’s Bank Borrowings More Than Triple In 2023

BUA Cement Plc has witnessed a dramatic increase in its bank borrowings, with figures soaring by 233 percent in the past year, according to a recent analysis by BusinessDay.

The company’s financial records reveal that its bank borrowings escalated to ₦418.16 billion, up from ₦125.44 billion in 2022.

A Lagos-based research analyst told BusinessDay, “The borrowing spike is largely attributed to the company’s expansion efforts, with most of the foreign exchange losses stemming from these borrowings.”

Further analysis of the statement shows that of the total borrowings, current bank loans stood at ₦122.68 billion, up from ₦80.69 billion, while non-current loans grew to ₦295.46 billion from ₦44.74 billion.

The company recorded a net foreign exchange loss of ₦69.95 billion, higher than the ₦5.5 billion in 2022. Of this, ₦52.5 billion was attributed to finance costs associated with the construction of additional capacity at its Obu and Sokoto facilities, while ₦17.47 billion was linked to foreign trade payables.

The company said in a statement, “The FX loss capitalised relates to the portion of the exchange losses arising from foreign currency borrowings eligible to be capitalised as part of the borrowing costs for capital projects under construction.”

Despite a decline in after-tax profit to ₦69.45 billion from ₦101.01 billion in 2022, there was a notable revenue growth of 27.4 percent, reaching ₦460 billion from ₦360.9 billion in the previous year, owing to an increase in price.

However, with the naira devaluation and ongoing depreciation, coupled with rising inflation, the company faced increasing price pressures, leading to a 39.5 percent increase in production costs to ₦276 billion compared to ₦197.9 billion in 2022.

Administrative expenses rose to ₦12.29 billion from ₦10.5 billion, while distribution and selling expenses increased to ₦29.06 billion from ₦19.68 billion.

Despite the cost pressures, Earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 7.8 percent to ₦169.72 billion in 2023. However, the EBITDA margin decreased by 6.7ppts to 36.90 percent in 2023 from 43.61 percent in 2022.

Depreciation and Amortisation were up by 12.9 percent to ₦25.06 billion. Other income declined to ₦2.06 billion from ₦2.78 billion, mainly due to the absence of modification grants recorded in 2023.

Operating profit, impacted by foreign exchange losses, decreased to ₦74.69 billion from ₦129.72 billion in 2022.

Finance income recorded a growth of 563.9 percent to ₦12.88 billion, attributed to an increase in interest income.

Finance costs also rose by 89 percent to ₦19.94 billion due to higher interest expenses on lease liability, benefit obligation, borrowing, and an overdraft.

In its financial statement, the company noted that all interest expenses were calculated using the effective interest rate, except for interest expenses on defined benefit obligations.

The company added, “The capitalisation rate used to determine the amount of general borrowing costs to be capitalised is the weighted average rate applicable to the company’s general borrowings. The determined effective interest rates are First Bank LC (15.36 percent), Fidelity Bank -12 percent, and Union Bank RSSF loan – 12.29 percent (2022: 11.9 percent).

“The specific borrowing costs were capitalised using the actual costs that are directly attributable to the acquisition, construction, or production of the qualifying assets. The determined effective interest rate of the specific borrowing cost is IFC Loan – 12.06 percent.”

The company’s total equity decreased to ₦385.22 billion from ₦411.11 billion.

Net cash from operating activities saw a marginal increase to ₦147.60 billion from ₦147.46 billion, while net cash from investing activities reported a negative of ₦104.12 billion from a negative of ₦101.43 billion.

Net cash flows generated/(used in) from financing activities turned positive to ₦89.66 billion from a negative of ₦60.36 billion.

Cash and cash equivalents as of December 31, 2023, amounted to ₦225.07 billion, up from ₦48.05 billion.