Sunday, October 1, 2023


Nigeria’s leading food manufacturing company BUA Foods released its 2023 first-quarter earnings showing profit before tax rose a whopping 85% to N49.5 billion. 

Earnings per share rose from N1.27 to N2.25 in the period under review.

The impressive growth in profit follows a string of stellar performances spanning the last two years since it became a publicly listed company on the Exchange.

BUA Foods ended 2022 with a 31% rise in profit after tax, the performance was likely to provide a positive outlook for its shareholders’ medium to long-term view of their investments.

The group has invested massively in the sugar industry, rice milling facility, and edible oil plants providing it a platform to keep generating revenues.

Profit Drivers

During the quarter its top-line revenue rose 60.3% to close at N144.3 billion providing enough buffer to absorb rising operating costs. The group’s revenue came from all its 7 major business segments, with every single one of them posting revenue growth quarter on quarter.

For example, its Sugar businesses which include fortified, non-fortified, and molasses contributed N93 billion to revenues compared to N54.1 billion in the same period in 2022. Sales from its fortified segment alone. doubled to about N61 billion.

The non-fortified Sugar business relates to a brand of sugar that is not fortified with Vitamin A and is used typically for industrial consumption. The fortified sugar is fortified with vitamin A and is for domestic consumption.

Also contributing significantly to topline revenues is its Bakery Flour business which grew from N18.3 billion to N29.6 billion in the period under review. The company owns an energy-saving and waste-reduction type flour mill in Port Harcourt built for efficiency. It commenced production in 2019 with a capacity of 500,000 MT per annum and plans to increase the capacity to 1.3 MT per annum this year.

BUA Pasta business which involves the processing, manufacturing, and distribution of pasta such as its IRS premium and slim products also delivered impressive revenue growth. Revenues for the division also rose from N15.9 billion to N19.4 billion.

Cost Drivers

Despite the rise in revenues the company also faced significant cost pressures as its cost of sales rose by 42% to N87.6 billion, albeit lower than the pace of revenue growth. In its 2022 audited accounts, it reported that it experienced a rise in raw materials and energy costs pushing

Another major margin pressure was in its operating expenses which rose 3 folds to N9.2 billion. It was driven by a spike in its selling and distribution costs. The company spent N6.2 billion on selling and distribution, compared to just N708 million in the prior year, as it focused on an aggressive sales strategy.

Despite the rising input and operating costs, BUA Foods still earned a profit margin equivalent to N27.9 for every N100 of sales, compared to N25.3 reported in the corresponding quarter in 2022.

Blow Out Results

BUA Foods’ first quarter result is the best since the company was listed in 2021, helping it retain its title as the most profitable food manufacturing company on the Exchange.

▪ Asides from almost doubling its earnings per share to N2.25, it also generated cash of N34.9 billion in net operating cash flow deploying about N7.4 billion of the cash to repay loans.

▪ Cash at the end of the period rose from N27.6 billion in December 2022 to N50.3 billion as of March 2023. The company did not take on any new loans.

▪ The company’s rising profit appears to indicate a business resilience amidst a tough economic environment, increasing competition, and a thrifty consumer market.

The group share price closed trading down 7% at N94.1 and trading at a current price-to-earnings multiple of 20x. However, its profitability growth of 85% on a quarter-on-quarter basis helps justify its high price-to-earnings multiples.

▪ The company proposed a dividend of N4.5 per share with a scheduled payment date of September 21st, 2023.

▪ BUA Foods has about N52.8 billion in construction work in progress as it continues to invest in business expansion.

▪ It also added about N45.9 billion in new plant and machinery during the year.


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