BUA Foods Plc: taking count … One year after listing

Fundamentals (revenue, EBITDA, and profits)

In 2021, BUA Foods, the consolidated entity of BUA Group’s five food businesses, recorded a 72.81% revenue growth over FY2020 driven by strong growth in the flour and pasta divisions (introduced in 2020) as well as increased production in the sugar business.

• Although EBITDA margin declined marginally by 9%, the Company recorded a 56% on-year rise in EBITDA in 2021 driven largely by growth in revenue.
• The company also reported a 97.05% growth in profit after tax to N69.768 billion.
• In 2022, revenue was up 25% year-on-year to N418 billion on the back of impressive revenue growth from the Sugar Division.
• On the strength of the revenue growth, EBITDA rose by 36%. The company also reported a 29.57% year-on-year growth in earnings to N90.401 billion and earnings per share of N5.02, which is about 29% higher than the N3.88 reported in the comparative year of 2021 suggesting it grew faster than expected.

Dividends declared if any

Surprisingly, the company declared dividends of N3.50 per share, which, at a current share price of N74.5, offers a dividend yield of 4.7%.

• The total dividend declared amounted to N63 billion representing 91% dividend payout ratio (dividend paid out of profits.

Investments

Shipping vessels: In May last year, BUA Foods took delivery of the first of two shipping vessels to augment its sugar export operations to the West African market, which kicked off successfully earlier this year.

• With this acquisition, BUA Foods is well-positioned to take advantage of the AfCFTA, considering its investments in the food sector over the years.

Sugar Estates: The company has invested in sugar estates within Nigeria to deepen local sugar production through the development of the LASUCO Sugar Company Limited (“LASUCO’) plantation in Lafiagi Kwara State and Sugar Plantation in Bassa Kogi State.

• Together BUA Foods has 70,000 hectares of land in both locations to set up large-scale sugar plantations.
• Once operational, the company expects that these plantations will significantly enhance its competitive position and reduce its reliance on the importation of raw sugar, bolster its revenue growth, and ensure cost efficiencies from the operations of the sugar plantations.

Rice Mill: The company’s 200,000 MT per annum rice milling facility in Kano is being upgraded to a capacity of 1 million MT per annum and is expected to be operational soon.

• Also, with 250,000 MTPA edible oil plants expected to be operational in 2024, the company would be able to sustain its revenue growth trajectory.

Capital appreciation since the introduction

Since the stock was listed on the NGX last year, it is up by a whopping 86.25% and so far this year the stock has appreciated by 14.6% to N74.50 as of the last trading day, Friday, February 10, 2023.

• However, its price-to-earnings ratio of 14.16 keeps it above the average for most stocks on the All-Share Index.
• It also has a high price-to-book ratio of 5.4x which suggest the market places a high value on its future profits.

Bottom line: What next for BUA Foods?

The company’s past and the pattern of innovation make BUA Foods’ outlook positive and may continue to bolster customer loyalty and significant market share.

• The company is the second-largest sugar refiner in West Africa with a combined installed sugar refining capacity of 1.5 million MTPA plants strategically located in Port Harcourt and Lagos would continue to bolster the company’s market share.
• Furthermore, the company has strongly keyed into the backward integration program of the government, which is expected to reduce demand for forex