- Abdul Samad Rabiu, Chairman of BUA Cement, disclosed his company’s to sell cement at N3,500 per bag last year was undermined by dealers who sold it at N7,000 to N8,000
- Rabiu shared that the company abandoned the price policy as it was not intended to subsidise dealers, while the naira devaluation and fuel subsidy removal made the policy unsustainable
- The company faced a net foreign exchange loss of N70 billion, with N52.5 billion due to finance costs, yet reported a net profit of N69.5 billion
Abdul Samad Rabiu, Chairman of BUA Cement, said that cement distributors frustrated the company’s plan to set the price of cement at N3,500 per bag in 2023.
Rabiu disclosed this when he was addressing the 8th Annual General Meeting in Abuja on Thursday, August 29.
Company sells to dealers at N3,500, BUA explains
Rabiu explained that his company had sold over a million tons of cement to dealers at N3,500 per bag to benefit consumers, but the dealers subsequently sold the cement to the public at high prices ranging from N7,000 to N8,000 per bag.
“So, a lot of the dealers took advantage of that policy. Rather than pass the low prices to the customers, they were selling at even double the price we sold to them.
“Some were selling at N7,000 and 8,000 per bag. They made a lot of money with the very high margin. I think we had sold more than a million tons at N3,500 before we realised what the dealers were doing, Rabiu stated.
Dealers high margin profits frustrate policy plan
He explained that BUA Cement was unable to prevent the dealers, who profited significantly from the high margins because the company lacked control over market prices.
“We wanted that price to stay at that level but dealers refused. So, we could not sustain that simply because we did not want to be in a situation where we are subsidizing dealers.
He further said that the company had to abandon the policy because its goal was not to subsidise dealers.
Naira devaluation, removal of fuel subsidy hinder policy
He also mentioned that the Naira devaluation last year and the removal of the fuel subsidy contributed to the policy’s unsustainability.
“And then, because of the issues that Nigeria faced at the time about devaluation of the Naira last year and the removal of fuel subsidy, we could not continue that policy.
“I’m referring to the point when the foreign exchange rate moved from about N600 to maybe N1,800 to the US Dollar. So, it became even more challenging and more difficult for us to actually sustain that price policy.”
The devaluation of the Naira in June 2023, along with its persistent depreciation and rising inflation, caused the Company to experience mounting price pressures. This led to a 39.5% rise in production costs, pushing the total expense to N276 billion from N197.9 billion in the previous year.
BUA reports N70 billion loss
During this review period, the company reported a net foreign exchange loss of N70 billion, with N52.5 billion of that amount attributed to finance costs.
He mentioned that despite the challenges, the company has been committed to preventing prices from escalating in line with the Naira devaluation percentage increase.
He said, “If you see the exchange rate then, and the exchange rate today, you will see that cement is actually cheaper today than what it was last year, the reason being that if the dollar was up the costs go up by same margin and the price of cement should actually be, maybe, N10,000 Naira per bag.
“The price of cement, if you take the N4,000 that it was in the beginning of last year, at 4,000 and today’s N6,000, it’s only 50% increase.
Despite hurdles, BUA reports net profit
“So, we directly pushed to ensure that the price of cement is not getting higher than what it is today.
“But then again, you have areas where everything is dollar-dominated. Energy is the biggest cost. And our energy today is denominated in dollars. We buy gas to power our plants mainly. And gas is priced in dollars,” Abdul Samad Rabiu, Chairman of BUA Cement stated.
Despite these hurdles, the company reported a net profit after tax of N69.5 billion and declared a dividend of N2 per share.
The chairman shared that one of BUA’s plants now incurs a monthly invoice of around N15 billion to N16 billion, a significant increase from the former N3 billion to N4 billion. This is merely one example. The Board's financial report noted a strong 27.4% increase in revenue, climbing to N460 billion from N361 billion in 2022, attributed to the expanding market share.
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