FSDH Initial Reaction: Guinness Nigeria 2Q22 results 
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February 1, 2022/FSDH Research

Key Performance Highlights:

• Guinness Nigeria, a leading beverage and alcohol Company, recorded handsome growth numbers for 2Q22, on the back of a strong performance in FY21 and 1Q22, despite a challenging external environment due to continued restrictions related to COVID 19, high inflation, and increased operating costs. The company recorded a 45.7% YoY revenue growth to N61.7 billion in 2Q22, driven by resilient consumer demand and improved outlet coverage, as well as headline price increases in key brands. Revenue grew across all key categories, driven by the company’s strategic focus brands, Malta Guinness and Guinness, as well as double-digit growth in local and imported spirits and the ready-to-drink category. Domestic revenue (99.0% of 2Q22 revenue) growth of 45.9% YoY to N61.1 billion outpaced the Export revenue (1% of 2Q22 revenue) growth of 27.3% YoY.
   
• The company’s gross margin expanded 715 bps YoY to 34.50% in 2Q22 (+240 bps vs 1Q22). The cost of sales increased by 31.3% YoY to N40.4 billion in 2Q22, mainly due to sales volume growth, inflationary pressures, currency devaluation impacting the cost of imported materials and increased air freight costs. The company’s marketing and distribution costs climbed 101.7% higher to N12.3 billion in 2Q22. Marketing spend continued to grow as the company continued to invest in the strategic focus brands and categories and support the recovery of the on-trade. The administrative expense also increased in the second quarter by 7% YoY. The solid top-line performance coupled with controlled costs resulted in a whopping 126.4% YoY spurt in the operating profit to N7.1 billion in 2Q22 (1Q22 operating profit: N6.5 billion). The company’s operating margin came in at 11.5% in 2Q22 versus 7.4% in 2Q21 (1Q22: 13.7%).
   
• Furthermore, the company managed its net finance cost well as it decreased by 96.0% YoY to N60 million compared to N1.5 billion in 2Q21, resulting from a reduction in the net interest cost on the back of better cash generation, despite the devaluation of the Naira. The company had cut down its debts from nearly N23 billion at the end of the 2020 financial year to N16 billion at the end of the 2021 financial year. Guinness recorded an exciting increase (811.2% YoY) in profit after tax to N4.8 billion compared to N524 million in 2Q21. The earnings per share came in at N2.18 per share versus N0.24in 2Q21.

Market Reaction: The investor reaction to the solid results was positive as the stock jumped 2.9% versus a 0.43% gain for the All-Share Index (28/1).

Guinness Nigeria Earnings Highlights 2Q22

Source: Company Financials, FSDH