BUA Foods PLC (BUAFOODS) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, welcome to the BUA Foods H1 2026 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that this event is being recorded. I will now hand over to Ayodele Abioe. Please go ahead.

Thank you very much, Judith. Good afternoon, good morning, and good day, everyone, from wherever you may have joined us on this call. Distinguished shareholders, analysts, investors, members of the investing community and other stakeholders who are joining this afternoon. On behalf of our Board and management of BUA Foods, we would like to welcome you to our H1'26 investors at an analyst conference call. Thank you for joining us today and for your continued interest, confidence and support to our company. With me on this call today will be Mr. Michael Ehimah, our acting Chief Financial Officer, who will further provide insights into our financial performance and key operating metrics alongside myself. On the outline for today's call, our first half -- let me start by saying that first half for the year 2026 has been another important milestone in our journey as we continue to strengthen our position as one of Africa's leading manufacturing company. Despite operating in a challenging macroeconomic environment characterized by inflationary pressures, exchange volatility and rising operating costs, we delivered a resilient operational and financial performance while maintaining our commitments to food security, sustainability and long-term shareholder value creation. Today's presentation outline is presented on the slide as past. Let us get started with a brief overview of our business and would like to do this for the benefit of those who may have been joining us for the first time. Watford's remains one of Nigeria's leading food manufacturing and processing company listed on the gen Exchange. Our business spans the manufacturing, processing and distribution of [Exensio] food products across 5 strategic categories of sugar, flour, pasta, rice and edible oil. These product categories remain fundamental to household consumptions making our business highly relevant and agile food security agenda and the broader African consumer markets. Since our lease team -- on the Indian Exchange. And following the consolidation of our food businesses in 2021, we have successfully built an integrated operating platform that sells millions of consumers across Nigeria and West Africa. Our strategy goes beyond food. We remain committed to improving food availability, through affordability, high-quality products while creating sustainable value for all our stakeholders. We are driven by proposed and value. And our mission remains very clear to provide high-quality and affordable food products while contributing meaningfully to Africa's food security agenda. As a business and as a company, we continue to be guided by our core values of respect, innovation, commitment and excellence. This remains very central to our strategy and our operating philosophy. Happy to say that our business have continued to evolve, and our growth story have been deliberated and disciplined. As you can see on the slide, we began as a private commodity trading business, built strong market knowledge and distribution capacities over many years. With an invested heavily in manufacturing assets across our key product categories, and over the last 5 years, we have consolidated our food businesses into a unified structure, strengthening corporate governance, improve operational efficiencies optimize our asset utilization and plant position capacity strong -- with strong to market capabilities. BUA Foods integrated food manufacturing enterprise with very strong and opportunities for future growth. I will now take us to our business parts. On our key business parts. And over the next two slides, I'm pleased to not that our business fundamentals remain exceptionally strong. As report 2026. We operated across five major business divisions. We have eight manufacturing facilities strategically located across Nigeria. We are currently hoping additional capacity expansions that will deliver additional products into the markets come next year. Our operations directly and indirectly support of about 4,000 jobs and accounting we are supported by over 300 supply chain partners. And we have over 60,000 diversified shareholders and going with the current market capitalization of around CZK 17 trillion. These achievements underscore our commitment to creating economic value while supporting Nigeria food security objectives. On our stewardship and sustainability. This remains a critical pillar to our long-term strategy. And during the first half of the year, we invested substantially in social impact activities that support our communities where we operate. Our ESG agenda continues to focus on environmental stewardship, water use, noise reduction or responsible production practices. This also includes company development initiatives with strong governance and accountability standards. We are continuously improving our environmental performance metrics and embedding sustainability across our entire value chain. On our capital market performance, we're happy to report that one of the most compelling aspects of BUA Foods our remarkable capital market performance since listing in 2021. Our share price has grown from approximately 4 9s at half year 2026. Market capitalization has increased from approximately NGN 720 billion to NGN 16.9 trillion. And our shareholder base has expanded significantly just over 300, which just at start-up with 300 investors in 2021, now we are at almost 60,000 shareholders as I did. These achievements reflect where a very strong investors' confidence in our business model, our growth strategy and our ability to continue and consistently deliver value. We are now run among the largest company on the Asian exchange and continuing to strengthen our leadership position as one of the most valuable consumer goods companies in Algeria and Africa. On the next slide, I'm happy to inform us that at the beginning of the second half of this year and just recently, we successfully held our fifth Annual General Meeting. The key highlights was the approval of a 28 new per share dividend, representing a 100% increase over the previous year. And rearming, our commitment to our delivering value to our shareholders. Another key highlights important to mention was our Chairman on virion of the company's next list of groups. In this address, you reaffirmed our long-term growth ambition, setting codes -- our expansion program is shaping the future of food manufacturing in Africa. We are investing broadly to expand our scale, strengthen our capabilities, our inforce workforce leadership as Africa's leading indigenous food company, while advancing food security, accelerating industrial growth and creating enduring value for our shareholders, customers and communities at large. At this point, I would like us to go beat into the financials, and I would like to begin with a brief review of the macroeconomic environment in which we operate at the beginning of the first half. Looking backward, the macroeconomic environment in the first half of 2016, lower reforms and policy measures contributed to a marked improvement in economic conditions, providing a more supportive operating environment for businesses. We saw an engineering economies economy maintained its growth momentum with quarter 1 GDP expanding at 3.89%. Inflation also moderated with food inflation is into between 14% and 17% in H1. This is compared with approximately 25% in the same period over last year. At the same time, the Nara remained relatively stable at around 1,300 to 1,400 compared with the highs of approximately NGN 1,600 a year earlier. Stronger exchange rates coupled with lower inflation, reduced input costs, improved our cost efficiency and give us greater flexibility in our pricing decisions. Meanwhile, the monetary policy rates remains broadly unchanged, providing a stable monetary policy environment. Overall, I must say that these favorable macroeconomic conditions combined with our disciplined execution, strengthening our profitability and expanding our margins despite the competitive pricing environment. Furthermore, on our financial performance, the first half 2026 demonstrated the resilience of our business despite softer market conditions. Our revenue declined by 16% to NGN 65.1 billion, primarily due to lower selling prices and softer demand across our key product segments. And despite this, our disciplined execution strategic sourcing and effective cost management enabled us to improve profitability. We are reporting and happy to report our gross profit increased by 7% and -- our EBITDA by 12% and our profit after tax by 12% to NGN 292.3 billion. A standout performance for us was 1 of our passed 1 of our key divisions Pasta, which delivered 25% revenue growth, highlighting also the strength of our diversified portfolio. On sales cost and margin analysis, our focus to the period was not just on protecting revenue, but also an improving profitability. Food disciplined total supply chain execution and cost management, cost of sales declined by 30%, while cost per tonnes reduced by 26%. These efficiencies translated into stronger margins across the business lines. Gross margin improved by 7% from 27% to 47%. Our profit before tax margin also improved from 20% to 41%, while our profit after-tax margin improved from 29% to 28%. Finally, EBITDA margin also up from 22% to 43%. On our balance sheet, which represent our statement of financial position. Our balance sheet remains very strong and provides a solid platform for future growth. Total assets increased by 20% to NGN 1.67 trillion while shareholders' equity grew by 41% to NGN 1 trillion. Liquidity remained healthy with a current ratio of 1.9x and quickly so 1.8 while our debt-to-equity ratio improved, reflecting prudent capital management and a stronger financial position. On value creation, our commitment to shareholder value creation remains unwavering. The combination of earnings growth Capacity as pension market leadership, strong governance, operational efficiencies has enabled us to consistently create value for our investors. The continued acquisition in our market capitalization and shareholder base demonstrate growing confidence in our long-term prospects. We remain focused on maintaining a balance between growth investments, operational excellence and attractive shareholder return. For the rest of the year, our focus is sustaining gotten focus on our key priorities. While the first half of 2020 demonstrated the resilience of our business despite softer market conditions with strengthened profitability expanded margins and maintained a strong financial position through disciplined execution and operational excellence. As we move into the second half of the year, we remain focused on growth acceleration strengthening our market leadership, expanding our product offerings and delivering sustainable value for our shareholders. And in closing, I would like to thank our shareholders, our customers, our business partners -- our regulatory and most importantly, our employees who all the heavy lifting on a day-to-day basis for their continued store and support. Thank you for your time. and your continued confidence in BUA Foods. We will now be happy to take your questions, and thank you for your attention.

[Operator Instructions] At this stage, we have no questions from the telephone lines as yet. I will hand over for written questions submitted via the webcast.

Thank you very much, Judith. So dive into the question-and-answer session. Okay. I have a question from Desmond Gabriel of USD Financial Services Limited. Why did revenue decline in 2026 compared with 2025? And what drove the improvement in cost margins? Are these margin gains expected to continue?

All right. Thank you very much. Let me invite CFO to respond to this. Thank you.

Good afternoon, investors representative, Mandrea. And I say welcome to the first half conference call of BUA Foods plc. Yes, let me start, I say that the first half of the year was characterized by a relatively stable operating environment, supported by government phones and improving macroeconomic conditions. That is not to say that the decline in revenue was primarily driven by lower selling prices across our products and business lines as inflation gradually moderated downwards. Despite this, demand remained resilient across our portfolio, which are Pasta division delivering stronger growth and this reflects strength in our diversified product mix. The improvement in our margins was driven by gains from immosstable foreign exchange position and supply chain execution from sourcing materials to delivering finished products. And on margin expectation -- margin gain expectation for the rest of the year, while economic -- external economic conditions such as the foreign exchange, commodity prices and uber development are still evolving operational improvement structure. They are supply embedded and deleverage. We therefore expect that these efficiencies will continue to support sustainable margins while remaining agile in responding to changes in the operating environment as both the micro and macroeconomic conditions. Thank you.

So I have a question from Julie Komar. Management flagged hepato volume growth in half each finally clarify what that growth is expected from filling existing capacity or is confidence on new lines.

Okay. I'll take this. Thanks so much. Thank you, Juliet. Let me start by saying our focus for the second half is to sustain the margin gains, which we reported for the first half. Beyond that, it's also to further improve our operational efficiencies and explore the introduction of our new product offerings and pack sizes. We believe that together, all of these initiatives will deepen our market penetration will also help both strengthen our market position and drive higher utilization on our existing capacity, which we believe will also strongly support our future earnings growth. So to answer your question quickly, it's also to see that our volume growth in the second half will be driven primarily by our existing capacity new production investments in lines across our various product categories are expected to come on stream around middle between mid-early and middle of next year, from which point we expect to see a more significant volume increase. Thank you very much.

Thank you. I have a question from Amalia. Watford reported a 6% decline in revenue during the first half of the year. Net profit increased by double digits to more than NGN 300 billion. restoring the effectiveness of its cost efficiency initiatives and operational discipline. As the company seeks to balance margin expansion with renewed groups. What strategies are in place to sustain groups meet investor expectations and continue delivering attractive returns to shareholders.

Yes. Thank you for that question. CFO, would you like to take this as well?

No issues I will. This is coming from Mr. Jai Colada, Yes. As highlighted earlier in the MD's presentation, we remain well positioned for sustained growth. If you check out our market leadership, diversified portfolio, our non discipline in cost management, coupled with the ongoing production capacity expansion and product innovation, which will -- this will provide very strong foundation for long time value creation of that time. But coming down to the revenue decline despite this occurs during the first half -- you will notice that our profit before tax actually grew double digits over NGN 300 billion as we speak and even profit after tax, which, of course, was in excess of billion on the current strength and resilience of our business model. Now looking forward, we remain focused on accelerating growth, strengthen our market leadership, expanding our product portfolio and continue to deliver sustainable returns for shareholders and every member of our -- of the of the Board Group. Thank you.

Okay. There's another question. BUA Foods continues to benefit from a portfolio of well-established brands, strong consumer loyalty and Sepura confidence and an increasingly competitive and price-sensitive manager and consumer markets, what strategic priorities will drive the net fees of goods Specifically, how does management plan to expand market share while maintaining pricing discipline, protective margins and preserving long-term profitability.

Okay. Thank you. I didn't get the name of the source of the question, but it's okay. Okay. Thank you, Sean. All right. Thank you, Mr. Ajay. My response to this is to refer back to the presentation I made earlier. As I did mention during our last anal General Meeting, our Chairman, I don't feel our next phase of goods. In that -- on dealing, we highlighted the importance of our position in the industry in which we operate and our important role in the development of our country. As you notice, over the past years, we have sustained our market leadership challenge. We have been investing in supply capacity and product expansion. For sure, from next year, our ongoing expansion across our business divisions, including our extension into noodles and edible oil will be coming on stream. What this means is that our ability is enhanced to drive sustainable revenue growth further as we increase supply into the market to meet demand, fulfill demand again as we and strengthen our market leadership. Let's also bear in mind that in an food, and FMCG market remains fundamentally very attractive with population growth are growing as it way with increasing organization, as we all know and, of course, rising demand for affordable food products. We are very optimistic about our long-term growth prospects in this industry and our ability as a business to create sustainable value within it. Thank you very much, Amol. -- late. I hope this answers the question.

Okay. We have another question environmental, social and governance performance continues to receive great attention from investors and regulators. What measurable progress as Barfod bid in the current year, reducing greenhouse gas emissions water consumption, solid is and operational noise and those editions across its facilities.

All right. Thank you for that. I think I can take that as well. So -- so let me start for a sensibility is clearly embedded in how we operate and how we create long-term value. And over the years, we have made significant investment in improving operational efficiency -- this is also taking in mind joining to be a responsible producer. While these initiatives are equally strength in our margins, they have also enabled us to operate more sustainably by improving our water usage, reduce our waste and, of course, help in minimizing emissions and noise across our operations. These are key elements also mental impacts that we track that also impact of Fusina Health as well. We are not just stopping there. We also remain committed to continuously enhancing our environmental stewardship by investing in further initiatives that will improve resource efficiency. Reduced environmental footprint as well as supporting more sustainable operating environment. Over and above that, we believe very strongly that the operational excellence and sustainability go hand in hand. And BUA Foods remain central to deliver long-term value. Thank you very much.

Okay. Thank you very much, Jan. We have a question from Kapil lab of Vetiva Capital. Or domestic sales continued to dominate revenue around 96% to 97% for the past 3 years as post sales remain minimal. What factors are limiting the export group -- and are the plans to expand the company's spot footprint.

Yes. With the FDA common board, I think everyone is keen into that. And Amos, thank you for this question. But however, immediate power has been meeting the strong demand that we have in our domestic markets. which remains our largest growth opportunity. However, that said, finding export is an important part of our long-term strategy. We are strongly positioned to leverage these opportunities, which also represents it served by the ALC, FDA will help us to strengthen our presence across African markets in the near term. I must report also that we have been receiving substantial inquiries about our products across the country, across the continent and even beyond the continent. We believe that at some point in time, we will be able to leverage all of these inquiries to create additional value for the business and also for our country. Thank you.

Thank you, sir. We have another question from -- given the company's significant line on FX dependent raw materials, how is management position in the business to mitigate risks, particularly in light of the ongoing Middle East conflicts, which could elevate global input costs and the short supply chains for key shipping routes. Thank you.

All right. Thank you. Okay, let me divide this to the CFO. I think you can talk to us more about it. CFO?

Okay. Thank you, Andy. Really, while the ongoing political conflicts have increased suite energy costs globally, our business is positioned to mitigate this challenge through deliberate and structured risk management approaches. Fourth, we are accelerating the localization of our raw material base were feasible, reducing our exposure to foreign exchange volatility as you have witnessed in our balance sheet, unstinting supply chain resilience. Secondly, we have diversified seriously supplier base across multiple geographies and providing great procurement feasibility. -- reducing concentration risk in this process and enabling us to respond more effectively to changing market like to state finally on this now at and supply chain visibility supports a more forward-looking approach to sourcing and help to minimize the impact of short-term cost and currency flow so -- that -- these are not short-term native. They are not just one of measures. They are deliberate. They are part of our long-term strategy to building a more resilient supply chain environment within the business. Thank you.