Key Highlights
- BUA Foods reported an impressive performance in 2022, with revenue up 25.53% YoY to N418 billion, driven by impressive growth from the sugar segment, which accounted for 66% of the group’s revenue.
- Despite severe macroeconomic headwinds, such as inflation and currency devaluation, BUA Foods’ profit before tax surged by 38% to N107.230 billion, while earnings per share grew by 19.58%.
- BUA Foods’ strong business fundamentals and growth potential, demonstrated by its investments in the sugar industry, rice milling facility, and edible oil plants, suggest that the company is well-positioned to continue to sustain its revenue growth trajectory and deliver value to shareholders.
One of Nigeria’s leading integrated consumer goods companies, BUA Foods, recently released its full-year financial report for the year ended December 31, 2022, reporting an impressive performance.
All round revenue growth
Revenue was up 25.53% year-on-year to N418 billion on the back of impressive growth from the sugar segment; accounting for 66% of the Group’s revenue.
According to the company, the increase in revenue was due to a year-on-year increase in its Sugar division which saw sales surge by 31% to N274.2 billion (12M 2021: ₦209.4 billion). The impressive performance of its Sugar division was driven by price adjustments and export sales within the period. The company reports volume sold increased slightly by 1% to 607,218 tons within the period.
Other divisions such as the Flour and Pasta business also recorded impressive revenue growth of 24% (N86.1 billion) and in Flour to ₦86.1 billion and 6% (B57.4 billion) respectively. The flour and Pasta business contributes 20% and 14% to the top line respectively.
For its Flour business, made up of bakery flour and wheat barn, a 16% drop in combined volumes sold (170, 820 tons) meant it had to also rely on price adjustments and a “redesigned route to market” to drive revenue growth. The pasta division also recorded drops in volumes but relied on price adjustments to deliver higher revenue growth.
Earnings surge despite the higher operating cost
Just like most businesses in Nigeria experienced severe macroeconomic headwinds such as inflation and currency devaluation, BUA Foods also had to contend with a surging rise in its input cost of production.
The company experienced a rise in raw materials and energy costs pushing the cost of sale up 23% to N282 billion. Rising energy costs such as diesel also contributed to a surge in the company’s selling and distribution costs despite cutting admin expenses by 22% or N3.3 billion. Overall, the company still managed to keep operating expenses rising by 15% just below the inflation rate.
The company’s EBITDA increased by 38% to N119.4 billion during the year also delivering an EBITDA margin of 29% 3 times the prior year’s numbers. This helped provide a buffer of debt service coverage for its rising debt portfolio. In 2022, the company spent N310.411 billion repaying loans and borrowings. While the net cash and cash equivalent increased marginally by N185 million.
On the strength of the revenue growth, profit before tax printed at N107.230 billion, a whopping 38% increase when compared to N77.469 billion reported for 2021. The company had a profit after tax of N91.344 billion representing a 31% year-on-year growth. Earnings per share which is indicative of performance from a shareholder perspective also grew by 19.58% to N5.07, up from N4.24 reported in the comparative year 2021.
Shareholders rewarded
Against the expectation of a possible trade-off for future expansion, the company surprisingly paid dividends of N3.50 per share amounting to N63 billion, which represents about a 69% dividend payout ratio (dividend paid out of profits). At the current price of N102 per share, the share price offers a dividend yield of 3.43%.
Though the company’s dividend yield may trail other stocks’ dividend yields, it is essential to keep in mind that higher dividend yields do not always indicate attractive investment opportunities because the dividend yield of a stock may be elevated as a result of a declining stock price.
In the case of BUA Foods, shareholders not only get to be rewarded with dividends, they also enjoy the benefit of capital gains. BUA Foods has gained N576 billion or 65% since it was listed in January 2022. This year it has gained 57% to N102 per share, ranking it 9th on the NGX in terms of year-to-date performance.
Positive outlook business drivers
The investors’ strong sentiment on the stock could probably be due to the company’s strong growth potential based on on-ground plans and variables. The sugar division, which accounts for about 66% of the group’s revenue, boasts of a 1.5 million MT installed capacity sugar refinery; the second largest refinery in West Africa.
To ensure adequate feedstock to the sugar refining plants and also in response to the Federal government’s backward integration policy in the sugar industry, the Company has invested in sugar estates within Nigeria. For example, the company acquired the LASUCO Sugar Company Limited (“LASUCO”) plantation in Lafiagi, Kwara State, which is 20,000 hectares.
In May last year, the company enrolled a shipping vessel MV Bundu to accelerate its export expansion efforts. With this, the company is well-positioned to take advantage of the AFCFTA.
The company’s 200,000 MT per annum rice milling facility in Kano has also been upgraded and commissioned. It will be fully commercialized in 2023 providing the company with another source of incremental revenue. Also, 250,000 MTPA edible oil plants are expected to be operational in the next 3-5 years.
Bottomline
BUA Foods’ current performance is likely to provide a positive outlook for its shareholders’ medium to long-term view of their investments. The company’s revenue growth across all divisions, despite macroeconomic headwinds, and its commitment to rewarding shareholders with dividends demonstrate its strong business fundamentals and growth potential.
Additionally, the company’s investments in the sugar industry, rice milling facility, and edible oil plants suggest that it is well-positioned to continue to sustain its revenue growth trajectory.
With its current price-to-earnings multiples of 20x, the company’s stock is likely to remain attractive to investors who seek long-term capital appreciation and dividends. Therefore, BUA Foods’ current performance is likely to offer its shareholders confidence and optimism in their medium to long-term view of their investments.