FSDH Initial Reaction: Guinness Nigeria FY22 results 
Kindly click here to download the report.

August 1, 2022/FSDH Research

Key Performance Highlights:

• Guinness Nigeria, a leading beverage and alcohol company, recorded handsome growth numbers for FY22 with double-digit revenue growth across all key categories. The company recorded 28.9% YoY revenue growth to N206.8 billion in FY22, despite the challenging macro environment with rising inflation and increasing operating costs. Solid top-line performance has benefitted mainly from price increases across all brands and a favourable brand mix. 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 profit spurted 59% YoY to N72.7 billion in FY22 as revenues grew ahead of the cost of sales, resulting in a margin expansion of 664 bps YoY to 35.1% in FY22 (+320 bps vs FY20). The cost of sales rose 17.0% YoY to N134.2 billion in FY22 compared to N114.7 billion in FY21. 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 vaulted 166.1% YoY to N2.7 billion in FY22, primarily driven by an N1.7 billion gain on the disposal of property, plant, and equipment. Marketing and distribution expenses jumped 43.3% YoY to N37.3 billion in FY22. Advertising and promotion expenses increased 50.2% YoY, in line with the company’s strategy to invest and support its growth priorities and the recovery of the on-trade following the easing of Covid-19 restrictions. The distribution expenses increased 35.8% YoY, primarily due to cost inflation on freight and diesel. The company also recorded a 32.9% YoY increase in administrative expenses to N13.7 billion in FY22. Consequently, the operating profit came in at N23.9 billion, with a whopping 142.1% YoY increase, versus an operating profit of N9.9 billion in FY21 (FY20 operating loss: N12.8 billion). The operating margin was up 540 bps YoY to 11.6% in FY22, compared to 6.2% in FY21.
   
• The company’s finance income shot up 259.8% YoY to N1.9 billion in FY22, driven by an 11x increase in the interest income from financial assets to N991 million, supported by a 141.0% jump in the gain on remeasurement of foreign currency balances. The company’s finance costs declined 54.0% YoY to N2.1 billion in FY22, driven by a loss on the remeasurement of foreign currency balances. Hence, the Net financing costs decreased by 94.5% YoY to N226 million in FY22 compared to N4.1 billion in FY21, as a result of a reduction in the net interest cost and investments of excess Naira cash in fixed deposits with banks at higher rates. Guinness Nigeria reported an effective tax rate of 33.9% in FY22 compared to an effective tax rate of 78.2% in FY21, resulting from the movement in deferred tax liabilities during the year. Consequently, the company reported a net profit of N15.7 billion in FY22 versus a mere N1.3 billion profit in FY21. The earnings per share came in at N7.15 per share versus N0.57 per share in the prior year.
   
• The company has proposed a final dividend of N7.14 per share (FY21:0.46 per share), subject to appropriate withholding tax and approval, to be paid to shareholders whose names appear registered in the company’s books at the close of business on 23 September 2022.
   
• On 1 July, the company announced the appointment of Mr. Dayalan Nayager as a Non-Executive Director and Vice Chairman of the Board with effect from 1 July 2022. Furthermore, on 28 July, the company announced the appointment of Mrs. Tariye Gbadegesin as a Non-Executive Director with effect from 27 July 2022.

Market Reaction: The investor reaction to the solid results was subdued as the stock remained unchanged at N90.50 versus a 1.42% gain for the All-Share Index (29/7).

Guinness Nigeria Earnings Highlights FY22

Source: Company Financials, FSDH