The board and management of BUA Foods Plc may have to consider other ways of arresting the company’s thinning margin, given the soaring production cost and foreign exchange loss arising from the massive devaluation of the Nigerian Naira in the first half of the year 2024.
Owing to the harsh operating environment, according to its unaudited result for the half-year ended June 30, BUA Foods’ turnover soared by 110%, but the growth was swallowed wholesale by the even more significant 141% increase in cost of sale. This, with the impact of the huge foreign N54.667bn foreign exchange loss, net profit for the period could only rise by 38%, after income tax fell by 56%.
Revenue for the period rose to N672.393bn from N320.93bn, with sugar sales increasing by 88% year-on-year to ₦369.7bn, compared to ₦196.5bn in the previous half-year; just as revenue from Flour sales improved by 164% to ₦227.9bn, up from the previous ₦86.05bn. There was also the 95% growth in Pasta sales to ₦74.03bn, compared to the prior half-year’s ₦37.9bn.
Cost of sales jumped from N188.098bn to N453.954bn, driven by what Abdulrasheed Olayiwola, the Chief Financial Officer, and Emmanuel Chijioke, the Head, Investor Relations, said in a statement, was an increase in raw materials cost and energy cost. This was in addition to the high input cost environment and further devaluation of the Naira against the US Dollar, all of which weighed heavily on prices of raw materials, resulting in higher cost of production. Consequently, there was a 64% growth in gross profit from N132.832bn to N218.439bn, following which gross profit margin shrank to 32.4% from 41.3%.
A further breakdown of the turnover for the period showed that the Sugar division contributed 55%, down from the previous 61.2%, due majorly to price adjustments within the period, after sales volume fell by 14% to 294,920 tons from 344,130 tons. The Flour division contributed 34% to revenue, down from 26.8%, due to both
volume increase and price adjustment; just as the Pasta division contributed 11% to revenue, a marginal drop from previous half year’s 11.9% on the back of the gradual commissioning of new pasta production lines and 7% increase in production
volume to 65,644 tons from 61,098 tons.
The statement said the commercialization of BUA Foods rice business is beginning to see gains in its contribution to revenue, with a 46% increase in production volume to 1,130 tons from the previous 775 tons.
Selling and distribution expenses increased by 43% to N18.357bn from N12.854bn, due to the due to increase in cost of diesel within the period; administrative expenses more than doubled (101%) to N10.087bn from N5.014bn; just as total operating expenses leaped 59% forward to N28.445bn from N17.869bn. Other income surged by 1,268% to N12.268bn from N896.604m; following which operating profit stood at N202.262bn, 75% better when compared to the previous N115.86bn. Operating expenses to income margin fell from 5.5% to 4%; just as operating profit margin fell from 36% to 30%.
Net finance cost rose 65% from N6.3bn to N10.406bn; just as profit for the period could only improve by 25% at N137.188bn, up from N109381bn on the impact of the huge foreign exchange loss.
This resulted in PBT Margin of 20.4% from 34% in the previous half-year. Income taxes dropped from N14.182bn to N6.258bn, while profit for the period improved by 38% to N130.93bn from N95.198bn, translating to Earnings Per Share of N7.27, as against the previous N5.29 each.
Describing the result as impressive, Engr. (Dr.) Ayodele Abioye, the Managing Director, said “the first half of the year has been one of significant resilience and achievements for our company.”
The solid performance, he continued, “is a testament to the efficacy of our strategic initiatives, operational efficiency, and unwavering dedication of our board, management, and other members of staff.
“During this period, we have made significant strides in executing our strategic plans, successfully launching new products, specifically, macaroni, premium pasta and semolina to meet the yearnings of our customers,” he stressed.
Looking ahead, Abioye said BuA Foods remains “confident in our ability to navigate the challenges and opportunities in the market.
“We will continue to leverage our strong and orchestrated supply chain system to deliver a great financial performance in line with our strategic vision for sustainable growth and value creation for all stakeholders,” he added.
