BUA Foods Posts 24% Profit Growth in Q2 2024 Amidst N27.4bn FX Loss

Olufemi Adeyemi 

BUA Foods, a leading food processing company in Nigeria, reported a remarkable 24% increase in its profit during the second quarter of 2024. Despite facing a significant N27.4 billion foreign exchange loss, the company demonstrated resilience and effective cost management strategies, resulting in this impressive financial performance.

BUA Foods reported a pre-tax profit of N76.8 billion for the second quarter of 2024, indicating a 24% increase compared to the N61.8 billion pre-tax profit recorded in the same quarter of 2023.

As per the group's unaudited financial statements dated June 30, 2024, the revenue for Q2 2024 reached N315.5 billion, representing a substantial 79% year-on-year growth from N176.6 billion in Q2 2023.

The contributions from the second quarter, combined with the first quarter, resulted in a half-year revenue of N672.3 billion, which signifies a remarkable 110% increase from N320.9 billion in the first half of 2023.

Additionally, BUA Foods experienced a foreign exchange revaluation loss of N27.4 billion during the reviewed quarter.

The cost of sales for the group exceeded its revenue, amounting to N210.5 billion in Q2 2024, which reflects a 106% year-on-year increase from N102.1 billion in Q2 2023.

Consequently, this situation led to a reduction in gross margin, despite a 41% rise in gross margin to N105 billion, up from N74.5 billion in Q2 2023.

During the first half of the year, BUA Foods experienced a substantial increase in gross profit, with a 64% year-over-year growth, rising from N132.8 billion in H1 2023 to N218.4 billion in H1 2024.

However, the gross margin witnessed an 8.9 percentage point decline, moving from 41.3% in H1 2023 to 32.4% in H1 2024.

Key Highlights for Q2 2024 Compared to Q2 2023

Revenue reached N315.5 billion, reflecting a year-over-year increase of 79%.

Cost of sales amounted to N210.5 billion, representing a 106% rise year-over-year.

Gross profit stood at N105 billion, marking a 41% increase year-over-year.

The gross margin was recorded at 33%, a decrease of 900 basis points year-over-year.

Operating profit was N99.5 billion, showing a year-over-year growth of 51%.

The operating margin was 32%, down by 500 basis points year-over-year.

Net finance income totaled N4.7 billion, an impressive year-over-year increase of 212%.

Profit before tax reached N76.8 billion, reflecting a 24% increase year-over-year.

Profit after tax was N75.1 billion, which is a 37% rise year-over-year.

Earnings per share were N4.17, also up by 37% year-over-year.

Total assets amounted to N1.1 trillion, indicating a year-to-date increase of 3%.

In the first half of the year, the company’s sugar sales increased significantly by 88%, from N196.5 billion in H1 2023 to N369.7 billion. Similarly, flour sales experienced substantial growth of 164%, moving from N86.05 billion in H1 2023 to N227.9 billion. Furthermore, pasta sales demonstrated a remarkable 95% increase, rising from N37.9 billion in H1 2023 to N74 billion.

However, it is important to note that the group’s selling and distribution expenses also increased during this period. Specifically, these expenses rose by approximately 43% year-over-year, moving from N12.85 billion in H1 2023 to N18.35 billion in H1 2024. This increase is primarily attributed to the escalation in diesel costs during the half-year period.

Over the past six months, the devaluation of the Naira significantly affected the company's financial expenses, resulting in a foreign exchange loss of N54.7 billion during this timeframe.

BUA Foods experienced a reduction in its loan portfolio, with current bank borrowings decreasing to N363.2 billion as of the first half of 2024, down from N649.7 billion at the conclusion of the fiscal year 2023.

Conversely, the group's trade payables surged by 96%, rising to N96.8 billion from N49.3 billion at the end of fiscal year 2023.

This increase in trade payables was primarily attributed to an 88% rise in withholding taxes and VAT obligations, which reached N74.6 billion, up from N39.7 billion as of the end of fiscal year 2023.

BUA Foods has established itself as the leading profitable consumer goods company in the first half of the year, showcasing a robust profit profile throughout the period.

In comparison to other consumer goods firms listed on the Nigerian Exchange, such as Dangote Sugar, Flour Mills of Nigeria, and Nestle Nigeria, BUA Foods boasts the most favorable profitability metrics.

For the quarter ending June 30, 2024, the group achieved a gross margin of 33%, in contrast to Dangote Sugar's 5% and Flour Mills of Nigeria's 11%. Nestle Nigeria, however, reported a gross margin of 35%.

Regarding profitability, BUA Foods demonstrated remarkable success by achieving a pre-tax profit of N76.8 billion during the quarter. In contrast, Dangote Sugar and Nestle Nigeria faced financial challenges, incurring pre-tax losses of N104.6 billion and N56.4 billion, respectively. FMN Plc managed to secure a pre-tax profit of N7.4 billion during the same period.

In reference to the group’s financial performance, Dr. Ayodele Abioye, Managing Director of BUA, highlighted several key factors that contributed to the positive outcomes.

The launch of new products, including macaroni, premium pasta, and semolina, was instrumental in meeting customer demands and driving revenue growth.

Additionally, the company’s strategic expansion into new markets further enhanced revenue streams and strengthened partnerships with key stakeholders.

Furthermore, a strong emphasis on cost optimization initiatives resulted in sustained margins and overall profitability.