The CEO of BUA Group, Abdulsamad Rabiu explained that the company had to abandon its pricing policy because its aim was not to subsidize dealers. He noted that BUA Cement was unable to control the dealers, who were profiting significantly from the high margins, as the company did not have authority over prices in the open market.
He also highlighted that the devaluation of the Naira last year and the removal of the fuel subsidy contributed to the policy’s unsustainability.
Rabiu stated, “We were selling cement at N3,500 with the expectation that the dealers and retailers would pass on the benefits of the lower price to the end-users.
“It’s a situation where regardless of the selling price of cement, you have to pay. It doesn’t matter if the price doubles or triples; as long as it is below that, we didn’t actually have control over the price.”
Some dealers were selling cement at N7,000 and N8,000 per bag, reaping significant profits from the large margins. Rabiu noted, “I believe we sold over a million tons at N3,500 before we realized what the dealers were doing.”
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He explained that due to the challenges Nigeria was facing, including the devaluation of the Naira last year and the removal of the fuel subsidy, the company could no longer continue that pricing policy. “We wanted to maintain that price, but the dealers refused. We didn’t want to end up subsidizing them,” he added.
Rabiu pointed out that when the decision was made to sell at N3,500, the exchange rate was around N600 to between N1,800 and N1,900 to the US dollar. “This made it increasingly difficult for us to sustain that price,” he stated.
However, he emphasized that the company has been working to prevent significant price increases in line with the percentage rise in Naira devaluation. “When we compare the exchange rate from then to now, we find that cement is actually cheaper today than it was last year. If the dollar was up, the price of cement should be around N10,000 per bag. Last year, it was N4,000, and today it is N6,000, which is only a 50% increase.”
Rabiu reiterated their commitment to keeping cement prices stable, despite factors like energy costs being dollar-denominated. “Energy is our biggest expense, and we primarily purchase gas to power our plants, which is also priced in dollars.”
He revealed that one of BUA’s plants has a monthly invoice of about N15 billion, possibly reaching N16 billion, compared to N3 or N4 billion previously.
According to the financial report presented by the company’s Board, BUA Cement recorded a strong revenue growth of 27.4%, rising to N460 billion in 2023 from N361 billion in 2022, driven by an expanding market share. However, following the Naira’s devaluation in June 2023 and ongoing inflation, the company faced increased production costs, which surged by 39.5% to N276 billion from N197.9 billion in the previous year.
During this review period, BUA reported a net foreign exchange loss of N70 billion, up from N5.5 billion in 2022, with N52.5 billion attributed to finance costs related to the construction of additional 3 million metric tons per annum lines at Obu and Sokoto, while N17.5 billion was linked to foreign trade payables.
Despite these challenges, the Company reported a net profit after tax of N69.5 billion and declared a N2 dividend per share.
