BUA Foods posts double-digit growth amid macroeconomic concerns

November 10, 2022November 10, 2022 Mary

Amid a tight economic environment that has negatively put a strain on the profitability of some of its peers in the fast-moving consumer goods sector, BUA Foods has demonstrated its tenacity by reporting a 20 percent growth in revenue despite a decrease in volumes sold.

Data gathered from the nine-month (9M) financial results available on the Nigerian Exchange Group showed that its revenue grew to N289.8 billion in September 2022, up from N241.1 billion in September 2021.

According to the company, the growth in revenue despite volumes sold was driven by product price adjustments.

Further analysis of the 9M’2022 financial results shows the sugar division contributed 62.4 percent to the total revenue generated in the period. Its sugar division generated N180.9 billion in 9M’2022, a 17 percent increase from N154.7 billion in 9M’2021.

Volume sold in the sugar division declined by 8.2 percent to 418,329 tons within the period from 453,773 tons in the same period last year.

The firm stated that “the decline in production is attributable to energy disruptions within the period, and Nonfortified sugar and molasses delivered good growth from elevated demand in the period.”

The flour division contributed 22.8 percent to revenue in the nine-month period that ended in September 2022. The revenue it generated increased by 38 percent to N66.2 billion in 9M’2022 from N48.1 billion in 9M’2021.

The volume sold declined by 8 percent to 138,894 tons within the period from 151,557 tons in the corresponding period of 2021.

Revenue from bakery flour which contributed 93.8 percent of flour sales increased by 40.6 percent to N62.1 billion in 9M’2022 from N44.1 billion in 9M’2021 while wheat bran contributed 6.2 percent of flour sales which also grew marginally by 3.3 percent to N4.1 billion in 9M’2022 from N3.9 billion in 9M’2021.

The pasta division on the other hand accounted for 14.7 percent of total revenue generated in 9M’2022. Its revenue generated increased by 12 percent to N42.7 billion in 9M’2022 from 38.1 billion in 9M’2021.

Volume sold also declined by 13.0 percent to 87,648 tons from 100,320 tons in 9M’2021.

Profit despite the high input cost environment and further devaluation of the Naira

BUA Foods’ profit grew by 17 percent to N68.76 billion in the nine-month period that ended in September 2022 from N58.69 billion in the corresponding period of 2021.

On a quarterly basis, profit grew by 112 percent in the third quarter (Q3) of 2022 to N30.04 billion from N14.17 billion in the second quarter (Q2) of 2022.

Its profit margin, however, shrunk by 61 basis points to 23.7 percent in 9M’2022 from 24.3 percent in 9M’2021 on the back of rising input costs.

Input costs which accounted for 67.49 percent of the total revenue reported in the period amounted to N195.6 billion, a 23.17 percent increase from N158.8 billion reported in 9M’2021.

Growth in the cost of sales was driven by an increase in raw materials cost which claimed 88.7 percent of total input cost in the period. Energy costs on the other hand declined marginally by 6.2 percent.

BUA Foods stated that “the high input cost environment and further devaluation of the Naira against the US Dollar weighed heavily on prices for raw materials. This resulted in a higher cost of production.”

Despite this, BUA Foods EBITDA increased by 2 percent to N86.4 billion in 9M’2022 from N84.6 billion in 9M’2021.

Just as the profit margin declined, the EBITDA margin also deteriorated by 520bps to 29.8 percent in 9M’2022 from 35 percent in 9M’2021.

Cost of doing business

Administrative expenses declined during the period by 18.18 percent to N4.5 billion in 9M’2022 from N5.5 billion in 9M’2021.

Selling and administration expenses, however, grew by 32.35 percent in 9M’2022 to N10.35 billion from N7.82 billion in 9M’2021.

The firm stated that the increase in selling and distribution expenses during the period was due to a huge increase in the cost of diesel within the period.

Decline in finance charges amid rising interest rate environment

Finance charges were down by 1.8 percent to N6.4 billion in 9M’2022 from N6.5 billion in 9M’2021 “due to an efficient funding mix along business transactions,” according to the company.

Strong balance sheet

Total assets increased by 6.3 percent to N630.4 billion as of 9M’2022 from N593.5 billion reported in full-year 2021 driven largely by growth in trade and other receivables, due from related companies, and property, plant, and equipment which grew marginally because of the additions to machinery to increase capacity.

However, on a yearly basis, total assets were down by 1.08 percent from N637.4 billion in 9M’2021.

Total shareholder’s equity increased by 27.86 percent to N206.5 percent in the nine-month period ended September 2022 from N161.5 billion in the same period of 2021.

Stable Liquidity

BUA Foods’ cash and cash equivalents in the period surged by 265 percent to N30.47 billion in September 2022 from N8.34 billion in September 2021, indicating that the firm has enough cash or liquidity to cover its short-term liabilities.

Net cash from operating activities grew by 337.89 percent to N103.7 billion as of 9M’2022 from N23.7 billion in the corresponding period of 2021, indicating that the firm is generating enough cash from its operations.

Net cash from financing activities was N93.7 billion in 9M’2022 from N27 billion in 9M’2021 due to additional proceeds from borrowings of N35.2 billion, repayment of borrowings of N67.5 billion in 9M’2022 and finance cost paid.