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May 4, 2022/FSDH Research

Key Performance Highlights:

• Guinness Nigeria, a leading beverage and alcohol company, recorded healthy growth numbers for 3Q22 on the back of a strong recovery in the six months to 31st December 2021. The company recorded 18.1% YoY revenue growth to N50.3 billion in 3Q22, despite the challenges arising from rising inflation and foreign exchange scarcity. Solid top-line performance has benefitted mainly from price increases across all brands, a favorable brand mix, and resilient consumer demand. Revenue grew across all key categories driven by the company’s strategic focus brands, Malta Guinness and Guinness, and strong growth in local and imported spirits and the ready-to-drink category.
   
• Gross margin spurted 859 bps YoY to 41.1% in 3Q21; it also improved by 658 bps compared to 2Q22. The cost of sales edged 3.1% lower YoY to N29.6 billion in the 3Q22 compared to N28.8 billion in 3Q21. The increased cost of sales is mainly due to inflationary pressure, sales volume growth, currency devaluation impacting the cost of imported materials, air-freight cost increase, and a shift towards more expensive can products.
   
• The company’s other income came in at a negative N32 million in 3Q22 versus N255 million in 3Q21. Marketing and distribution expenses soared 19.2% YoY to N9.2 billion in 3Q22. Marketing expenses jumped 33.2% YoY due to increased marketing investment to support the company’s strategic growth priorities, and the recovery of the on-trade and distribution expenses climbed by 6.3%, driven by higher volumes, freight and diesel inflation, and extended journey times for road transportation. However, it managed a reduction in administrative expenses, resulting in a 12.9% decline YoY. Consequently, the operating profit came in at N9.3 billion, with a whopping 136.8% increase YoY.
   
• The operating margin was up 926 bps YoY to 18.5% in 3Q22, attributed to a strong topline coupled with a controlled cost of sales and reduced administrative expenses. Finance income stood at N440 million in 3Q22, resulting from total interest income arising from financial assets, while finance costs dropped 66.2% YoY to N237 million in 3Q22. The company reported a whopping 3.0x YoY jump in profit before tax to N9.5 billion in 3Q22. Guinness Nigeria reported a net profit of N6.5 billion in 3Q22 versus a mere N2.2 billion profit in 3Q21. The earnings per share came in at N2.95 per share versus N0.98 per share in a prior-year quarter.
   
• Guinness Nigeria recently announced long-term strategic expansion plans in Nigeria with the acquisition of an additional 25-acre commercial property in the Ogba industrial area of Lagos purchased in late 2021.

Market Reaction: The investor reaction to the solid results was restrained as the stock remained unchanged at N93.00 versus a 1.64% gain for the All-Share Index (29/4).

Guinness Nigeria Earnings Highlights 3Q22

FSDH Research