August 1, 2022/CSL Research

Guinness Nigeria plc (June Year-end) sustained growth across key performance indicators. The Foreign Extra Stout brewer recorded Revenue growth of 28.9% y/y to N206.82bn (FY 2022) from N160.42bn (FY 2021). However, on a q/q basis, the Revenue moderated by 5.8% to N47.38bn in Q4 2022 from N50.32bn recorded in Q3 2022. We are yet to confirm any price adjustments by the company in 2022 in response to the recently introduced excise duty of N10 per litre imposed on all non-alcoholic carbonated and sweetened beverages, but we believe the Revenue growth was driven largely by recent increase in prices across all brands.

The Cost of Sales (adjusted for depreciation) grew slower than Revenue, up 17% y/y to N134.16bn in FY 2022 from N114.71bn in FY 2021. This resulted in an increase in Gross Margin to 38% in FY 2022 from 32% in FY 2021. We think that the increase in Gross Margin is commendable given the prevailing challenges in the cost of doing business mainly on the back of FX illiquidity. Consequently, Gross Profit increased 59% y/y to N72.66bn in FY 2022 from N45.71bn in FY 2021.

Operating Expenses (adjusted for depreciation) grew strongly as Marketing and Distribution Expenses (adjusted for depreciation) grew by 43.3% to N37.35bn in FY 2022 from N26.1bn in FY 2021. Similarly, Administration Expenses (adjusted for depreciation) increased by 32.9% to N13.718bn in FY 2022 from N10.32bn in FY 2021. This reflects the drastic increase in diesel cost in part and the base effect of lockdown in the second half of 2020/2021 financial year. Despite the aggressive increase in Opex, the slower growth in Cost of Sales Vs Revenue ensured EBITDA remained upbeat, up 73.5% y/y to N29.53bn in FY 2022 from N17.02bn in FY 2021. Also, EBITDA margin increased by 3.7ppts to 14.3% in FY 2022 from 10.6% in FY 2021.  

Depreciation & Amortisation increased by 2.9% y/y to N8.47bn in FY 2022 from N8.23bn in FY 2021.  The 139.5% y/y growth in Operating Profit to N20.07bn in FY 2022 from N8.79bn in FY 2021 coupled with a 166% y/y increase in Other Income to N2.74bn in FY 2022 from N1.03bn in FY 2021 drove Earnings Before Interest and Tax (EBIT) higher by 142.3% y/y to N23.80bn in FY 2022 from N9.82bn in FY 2021.  

The company’s Finance Income jumped 259.8% to N1.90bn in FY 2022 from N529m in FY 2021 as Cash and Cash Equivalent increased by 93% to N69.10bn in FY 2022 from N35.87bn in FY 2021. Specifically, gains in foreign currency balances increased by 141% to N879.85m in FY 2022 from N365.04m in FY 2021. Meanwhile, in the absence of long-term borrowings, Finance Cost moderated, down 54%, to N2.13bn in FY 2022 from N4.63bn in FY 2021 as Letters of Credit reduced by 12% to N5.99bn in FY 2022 from N6.83bn in FY 2021. Accordingly, Net Finance Loss moderated by 94.5% to N226m in FY 2022 from N4.18bn in FY 2021. 

Consequently, Net Profit grew significantly to N15.65bn in FY 2022 from N1.26bn in FY 2021. The company declared a final dividend of N7.14k with a closure date of September 26, 2022, and payment date of October 26, 2022. This translates to a dividend yield of 7.89% at current market price of N90.50k. 

Our estimates are under review. Current Price: N90.50. 

Guinness Nigeria, FY 2022 (Nm)

Source: Company, CSL Research