AbdulSamad Rabiu, the Chairman of BUA Cement, has said the intention of his company to sell cement at N3,500 in 2023 was frustrated by the actions of cement dealers.
He stated this at the company’s 8th Annual General Meeting held in Abuja on Thursday, August 29, 2024.
He noted that despite the company’s efforts to ensure cement was sold at an affordable rate, these dealers have manipulated the market to their advantage.
He mentioned that the company needed to discontinue the policy since its involvement was not intended to support dealers financially.
He mentioned that BUA Cement was unable to regulate the dealers who, he claimed, were earning substantial profits due to the high margins, as the company lacked influence over pricing in the open market.
He said, “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 N8,000 per bag. They made a lot of money with a very high margin. I think we had sold more than a million tons at N3,500 before we realised what the dealers were doing.
“And then, because of the issues that Nigeria faced at the time about the devaluation of the Naira last year and the removal of fuel subsidy, we could not continue that policy.
“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 were subsidizing dealers.
“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 Chairman said, however, that the company had continued to work towards making that prices did not escalate at levels of the percentage increase of the Naira devaluation.
His words, “If you see the exchange rate then, and the exchange rate today, we see that cement is actually cheaper today than what it was last year.
“The reason being that if the dollar was up, so we see there is, the price of cement should actually be maybe N10,000 Naira per bag. The dollar exchange rate has actually been going up you know. The price of cement, if you take the N4,000 that it was at the beginning of last year, at 4,000 and today’s N6,000, it’s only a 50% increase
“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. You know, it’s not corre
“And our energy today is denominated in dollars. We buy gas to power our plants mainly. And gas is priced in dollars.”
The Chairman revealed that one of BUA’s plants monthly invoice, NGKW is about N15 billion Naira for one plant, one factory.
Maybe N16 billion monthly. It used to be N3 or N4 billion Naira. That is just one example.”
According to the financial report presented by the Board of the company, the company recorded a strong revenue growth of 27.4% to N460 billion (2022: N361 billion), resulting from its increasing market share.
However, with the devaluation of the Naira in June 2023, and its continued depreciation, as well as growing inflation, the Company experienced increasing price pressures which affected production costs, which increased by 39.5% to N276 billion (2022: N197.9 billion).
Within this period under review, a net foreign exchange loss of N70 billion (2022: N5.5 billion) was recorded, with N52.5 billion attributed to finance costs.
This was associated with the construction of an additional 3mmtpa lines at Obu and Sokoto, and the sum of N17.5 billion was attributed 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
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