February 28, 2023/Cordros Report

Nigerian Breweries PLC retained its y/y upbeat in Revenue. The FY 2022 audited numbers showed that Revenue grew by 25.9% y/y to N550.64bn (FY 2022) from N437.29bn (FY 2021). Also, on a q/q basis, Revenue grew strongly, up 31.7% in Q4 to N157.19bn from N119.37bn recorded in Q3 2022. We note that the increase in Q4 sales was partly influenced by the usual increase in consumption during the yuletide season. However, we believe that the weakened consumer purchasing power also moderated sales volumes as consumers continued to adjust their expenditure pattern in favour of most basic needs.

The Cost of Sales (adjusted for depreciation) grew almost in tandem with Revenue, up 24.8% y/y to N310.69bn in FY 2022 from N249.03bn in FY 2021. This was largely influenced by the relative upbeat in the international price of raw materials and foreign exchange volatility and scarcity. Nigerian Breweries recently noted it was in the process of increasing their locally sourced raw materials to 60%. Gross Margin increased slightly to 43.6% in FY 2022 from 43.1% in FY 2021. Consequently, Gross Profit increased 27.5% y/y to N239.95bn in FY 2022 from N188.26bn in FY 2021.

Operating Expenses (adjusted for depreciation) remained elevated particularly on the back of Selling & Distribution Expenses (adjusted for depreciation) which grew by 41.8% y/y to N128.22bn in FY 2022 from N90.4bn in FY 2021. Administrative Expenses (adjusted for depreciation) grew by 9.8% y/y to N22.78bn in FY 2022 from N20.74bn in FY 2021. Specifically, Distribution expenses increased 38% to N135.83bn in FY 2022 from N98.36bn in FY 2021 which is reflective of the jump in diesel cost. Moreso, Advertising and Sales Expenses jumped by 41%. Consequently, EBITDA increased by 13.1% y/y to N88.37bn in FY 2022 from N78.16bn in FY 2021. EBITDA Margin shrank by 1.8ppts to 16.0% in FY 2022 from 17.9% in FY 2021. The decline in EBITDA Margin was largely driven by the increase in Opex margin.

Depreciation & Amortisation moderated by 4.1% y/y to N39.6bn in FY 2022 from N41.3bn in FY 2021.  In Q4 2022, the company recorded Operating Profit of N16.46bn driven by a 31.7% q/q increase in Revenue and 17.7% q/q increase in COGS. Hence, the Operating Profit for FY 2022 was N48.77bn, 32.3% higher than N36.87bn recorded in FY 2021. However, Other Income declined by 35.4% y/y to N2.98bn in FY 2022 from N4.63bn in FY 2021. Consequently, Earnings Before Interest and Tax (EBIT) rose by 43.1% y/y to N51.76bn in FY 2022 from N41.49bn in FY 2021. 

The company’s Finance Income increased by 11.4% to N349m in FY 2022 from N314m in FY 2021, supported by a 33% increase in Cash and Cash Equivalents to N22.18bn in FY 2022 from N16.73bn as of December 2021. We believe management may have repriced their balances with the banks in line with the rise in interest rates. However, Net Loss in Foreign Exchange transaction leaped by 274.1% to N26.34bn in FY 2022 from N7.04bn in FY 2021 as FX scarcity and consequent Naira depreciation persisted. Meanwhile, Finance Cost moderated, down 23.9%, to N8.42bn in FY 2022 from N11.07bn in FY 2021 as long-term loans & borrowings reduced by 40.8% to N2.43bn in FY 2022 from N4.1bn as of December 2021. Overall, Net Finance Loss increased by 93.4% to N34.41bn in FY 2022 from N17.79bn in FY 2021. 

Net Profit grew by 4.1% y/y to N13.19bn in FY 2022 from N12.67bn in FY 2021. The Management proposed a final Dividend of N1.03/s

Our price target is being reviewed. Current price is N41.35.

Nigerian Breweries, FY2022 (Nm)

Source: Company, CSL Research