Prime Business AfricaNigeria’s BUA Cement is facing a significant challenge to its profitability as production costs continue to outpace revenue growth. Despite a 90.53% year-on-year increase in revenue to N876.46 billion in 2024, the company’s cost of sales rose to N576.21 billion, consuming 65.74% of its revenue. This trend raises concerns about the sustainability of BUA Cement’s growth and profitability in the long term.
An analysis of the company’s annual report and financial statements for the year ended December 31, 2024, by Prime Business Africa showed that the cost of production swallowed revenue by 65.74 percent, up from 60 percent in 2023, indicating the company is losing its grip on expenses.
Join our WhatsApp ChannelCost of production eating deep into BUA Cement’s revenue
In 2020, the cost of production gulped 54.41 percent of revenue, but it declined to 53 percent the next year before picking up the pace in 2022, consuming 54.83 percent.
The last time BUA Cement’s revenue grew faster than the company’s cost of production was in 2021, when the former rose by 22.86 percent and the latter increased by 19.68 percent, according to an analysis of the company’s financials.
In the last three years, BUA’s cost of sales has deeply eaten into the company’s revenue, with analysis showing that costs grew by 45.13 percent year-on-year in 2022 compared to the 40.28 percent revenue growth recorded within the same period.
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A year after, a 39.14 per cent increase in the cost of production overshadowed the 27.42 per cent growth recorded in the manufacturer’s revenue, while in 2024, turnover went up by 90.53 per cent but fell below the 108.73 per cent increase in BUA Cement’s cost.
This left BUA Cement with N300.25 billion as gross profit last year, against the N183.95 billion reported in the corresponding period in 2023.
Profit growth rate declining
However, the cement manufacturer noted that profit before tax (PBT) was N99.63 billion during the period in review, which is 48.19 percent higher than the N67.22 billion recorded the year before.
But after removing the income tax of N25.72 billion, BUA Cement was left with N73.90 billion profit after tax (PAT) by the end of last year, up by 6.41 percent compared to the N69.45 billion net income reached in 2023.
Prime Business Africa gathered that within the period cost of sales grew faster than BUA Cement’s revenue, PAT growth rate has dropped as well.
In 2021, the company saw a 24.51 percent increase in net income, however, it slowed to 12.13 percent in 2022, before declining by 31.24 percent in 2023.
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