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April 26, 2022/FSDH Research

Key Performance Highlights:

• Nigerian Breweries reported a strong 30.4% YoY revenue growth to N137.8 billion in 1Q22. The increase in revenues is partially offset by a 14.1% YoY increase in the cost of sales to N75.3 billion in 1Q22. The prices of raw materials and consumables soared 17.4% YoY to N54.6 billion in 1Q22 because of rising inflationary pressures. This resulted in the gross margin expanding by a massive 779 bps YoY to 45.3% in 1Q22. The company’s performance in 1Q was stellar as its profit jumped 77.7% YoY, owing to solid double-digit revenue growth.
   
• The company’s other income rose significantly by 133.5% YoY (-77.0% QoQ) to N859 million in 1Q22. The marketing and distribution expenses jumped 62.3% YoY to N32.1 billion in 1Q22 compared to N19.8 billion in 1Q21, while the administrative expenses increased 29.7% YoY to N7.5 billion in 1Q22. The finance income grew 189.0% YoY to N74 million in 1Q22 compared to N25 million in 1Q21, while the finance costs declined 51.5% YoY to N1.2 billion in 1Q22, primarily due to a 47.4% decrease in the interest expenses to N1.0 billion in 1Q22 from N1.9 billion in 1Q21. The company incurred a net loss on foreign transactions of N1.9 billion, increasing 206.7% YoY in 1Q22.
   
• Nigerian Breweries reported a profit before tax at N20.8 billion compared to N11.5 billion in the prior year, a jump of 80.3%. With an income tax charge of N7.1 billion this quarter, the company reported a net profit of N13.6 billion in 1Q22 compared to N7.7 billion in 1Q21, with the net profit margin jumping 263 bps to 9.9% in 1Q22 from 7.2% in 1Q21. Nigerian Breweries reported earnings per share of N1.69 in 1Q22 versus N0.96 in 1Q21.
   
• On a sequential basis, Nigerian Breweries recorded a steady 7.6% QoQ growth to N137.8 billion in revenue for 1Q22, compared to N128.0 billion in 4Q21. The revenue growth was subdued because the company’s revenues are subject to seasonal fluctuations due to weather conditions and festivities, with the peak-selling season typically resulting in higher revenue and profitability in the last quarter of the year. The cost of sales declined by 2.1% QoQ in 1Q22, resulting in a 22.2% QoQ increase in gross profit to N62.5 billion as against N51.1 billion in 4Q21. Furthermore, the other income fell 77.0% QoQ to N859 million from N3.7 billion in 4Q21. Net Finance cost fell a significant 48.9% to N3.0 billion in 1Q22. The increase in revenue, decrease in the cost of sales and a fall in finance cost percolated down as the Net Profit vaulted 206.0% QoQ to N13.6 billion in 1Q22 versus N4.4 billion in 4Q21.
   
• Looking at the margins, the company’s margins expanded substantially this quarter. The company reported a gross margin of 45.3% in 1Q22 (+779 bps YoY, +541 bps QoQ), an operating margin of 17.2% in 1Q22 (+351 bps YoY, +413 bps QoQ), while the net margin came in at 9.9% (+263 bps YoY, +641 bps QoQ). 

Market Reaction: Investor reaction to 1Q22 results was overwhelming as the Nigerian Breweries stock closed 9.86% up at N53.50, versus a 0.17% gain for the All-Share Index (25/4). The stock further soared 8.41% to close at N58.00 on April 26.

Nigerian Breweries Earnings Highlight 1Q22

Source: Company Financials, FSDH