Cement: How Dealers Frustrated Our N3,500/Bag Policy – BUA

BUA Cement Chairman Highlights Challenges with N3,500/Bag Policy Amid Dealer Exploitation

The Chairman of BUA Cement, Alhaji Abdul Samad Rabiu, recently shared how cement dealers frustrated the company’s attempt to keep cement prices low for consumers. He revealed this during the 8th Annual General Meeting of the company in Abuja.

Rabiu explained that despite BUA Cement selling over a million tons of cement to dealers at N3,500 per bag last year, the dealers sold the same bags to consumers at prices as high as N7,000 to N8,000. This action undermined BUA Cement’s intention to pass on cost benefits to the end-users.

One ton of cement is equivalent to 20 bags of 50 kg each. Rabiu mentioned that BUA Cement had to discontinue the N3,500 per bag policy as it was not meant to subsidize dealers. The company had no control over the market prices, and dealers capitalized on this, making significant profits due to the price difference.

He further explained that the devaluation of the Naira and the removal of the fuel subsidy last year made the pricing policy unsustainable. “We were selling cement at N3,500 with the hope that dealers and retailers would pass the savings on to consumers. Unfortunately, many dealers took advantage of this and sold at double the price, sometimes at N7,000 or N8,000 per bag,” Rabiu stated.

Rabiu also highlighted the challenges BUA Cement faced due to the fluctuating exchange rates, which made it difficult to maintain the N3,500 per bag policy. At the time, the exchange rate had risen from N600 to nearly N1,900 to the US Dollar, making it impossible for the company to keep prices at the intended level.

Despite these obstacles, Rabiu assured that BUA Cement is committed to keeping cement prices as stable as possible, even though external factors like energy costs, which are dollar-denominated, pose significant challenges. “Energy is our biggest cost, and we pay for it in dollars. For instance, the monthly gas bill for one of our plants has surged from around N3 to N4 billion Naira to about N15 to N16 billion Naira,” he explained.

The financial report presented at the AGM showed that BUA Cement recorded a strong revenue growth of 27.4%, reaching N460 billion in 2023, up from N361 billion in 2022. However, the devaluation of the Naira in June 2023, along with growing inflation, led to increased production costs, which rose by 39.5% to N276 billion from N197.9 billion the previous year.

Despite these challenges, BUA Cement reported a net profit after tax of N69.5 billion and declared a N2 dividend per share. The company also faced a net foreign exchange loss of N70 billion, primarily due to finance costs associated with constructing additional production lines and foreign trade payables.