August 1, 2017/InvestmentOne Research
Q2:2017 results highlight: Decent numbers helped by price hike
§ Mixed sales performance: down -1.72% q/q; +12.41% y/y
§ Mixed opex/sales ratio: expanded +100bps q/q; down -54bps y/y
§ PBT and PAT surged by +57% and +43% y/y respectively.
Nigerian Breweries Plc (NB) on Friday published its unaudited Q2 2017 results which showed +57% y/y growth in PBT to c.N16.62bn. This was supported by a combination of +12.4% y/y growth in topline to c.N89.72bn, a -35.43% y/y decline in interest expense, and a +1050% y/y jump in other income.
We believe NB’s performance benefitted from price increase (as recent price check revealed an average of +30% y/y upward price review on NB’s major brands) in addition to the impact of improved access to FX for import of input materials. Dissecting the result further, we point out sustained improved operating efficiency which saw opex/sales ratio contracted by -154bps y/y to 25.4%.
Margin wise, NB recorded improvement in margin across the P& L line. With the exception of gross margin which came in flat at 45.4% (due to recognition of c.N3bn royalty and technical fees), both PBT and PAT margin of 18.52% and 13.7% respectively expanded by +531bps and +293bps y/y respectively. That said, we point out the +758bps y/y increase in tax burden which curtailed PAT growth.
On a sequential basis, performance was mixed. While topline declined by -1.72% q/q, gross margin expanded by a +100bps q/q. Furthermore, a combination of +98.3% q/q jump in interest expense, and a +119bps q/q expansion in opex/sales ratio weighed on PBT, down –4.70% q/q. PAT however grew by +7.58% q/q to c.N12.32bn.
Overall, the results were headlined by waning impact of price-hike on topline growth and recovery in margin performance.
In the near term, we see weak consumer environment and waning impact of price increase on topline as a clog on performance. That said, we however highlight that (1) NB’s strong presence in value brand segment, (2) impact of improved FX liquidity on trade cycle and (3) efforts at increasing proportion of input material sourced locally would be supportive of earnings performance in the medium to longer term.
Our models are under review. We rate NB a SELL
Nigeria Breweries Plc Q2 2017 figures ( N’ millions)
Q2 2017 | Q/Q | Y/Y | Actual H1 2016 | Y/Y | |
Sales | 89,721 | -1.72% | 12.41% | 181,010 | 15.02% |
Cost of Sales | (48,952) | -3.49% | 13.53% | (99,676) | 19.53% |
Gross Profit | 40,769 | 0.51% | 11.09% | 81,334 | 9.94% |
Gross margin | 45.4% | 100.5bps | -54.0bps | 44.9% | -207.7bps |
OPEX | (22,269) | 3.26% | 6.58% | (43,835) | 8.70% |
OPEX/Sales | 24.8% | 119.6bps | -135.7bps | 24.2% | -140.7bps |
Other income | 1,615 | 694.58% | 1050.33% | 1,818 | 540.31% |
Interest expenses | -3,495 | 98.33% | -35.34% | -5,259 | -37.34% |
PBT | 16,620 | -4.70% | 57.67% | 34,059 | 33.31% |
PBT margin | 18.52% | -57.9bps | 531.8bps | 18.82% | 258.1bps |
Tax | (4,303) | -28.16% | 123.05% | (10,308) | 59.01% |
Tax rate | 25.9% | -845.7bps | 758.9bps | 30.3% | 489.2bps |
PAT | 12,317 | 7.58% | 43.02% | 23,751 | 24.57% |
PAT margin | 13.7% | 118.7bps | 293.9bps | 13.1% | 100.6bps |
Source: NSE, Investment One Research
