April 28, 2023/CSL Research

Guinness Nigeria Plc Q3(Jan-March) unaudited numbers showed resilience across key performance metrics. The renowned Foreign Extra Stout brewer recorded Revenue growth of 7.4% y/y to N54.02bn (Q3 2023) from N50.32bn (Q3 2022). However, on a q/q basis, the Revenue dropped by 17.6% from N65.60bn recorded in Q2 2023. We maintain our view that the weakened consumer purchasing power moderated sales volumes as consumers continue to adjust their expenditure pattern in favour of most contingent and basic needs added to the fact that the first quarter of the year is usually a weak quarter for brewers. Also, first the first quarter of 2023 was characterized by cash scarcity which must have affected demand.

The Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 23.5% y/y to N31.06bn in Q3 2023 from N25.15bn in Q3 2022. This resulted in a decrease in Gross Margin to 42.5% in Q3 2023 from 50% in Q3 2022. Consequently, Gross Profit was down 8.8% y/y to N22.97bn in Q3 2023 from N25.18bn in Q3 2022.

Operating Expenses (adjusted for depreciation) grew in tandem with Cost of Sales, up 23.2%, as Administrative Expenses (adjusted for depreciation) grew by 131.3% y/y to

N3.39bn (Q3 2023) from N1.47bn (Q3 2022). Marketing and Distribution Expenses (adjusted for depreciation) grew marginally by 3.3% to N8.22bn in (Q3 2023) from N7.95bn in Q3 2022 which reflects sustained increase in diesel cost. The increase in OPEX, the faster growth in Cost of Sales Vs Revenue consequently depleted EBITDA (although positive), down 27.9%% y/y to N11.36bn (Q3 2023) from N15.76bn (Q3 2023). Also, EBITDA margin decreased by 10.3ppts to 21.0% (Q3 2023) from 31.6% (Q3 2022).

Depreciation & Amortisation increased by 8.9% y/y to N7.01bn in Q3 2023 from N6.43bn in Q3 2022 as additional Capital Expenditure (CAPEX) were incurred for the business. Despite a significant rise in Other Income y/y to N526m from negative N32m in Q3 2022, the 53.3% y/y decline in Operating Profit to N4.36bn in Q3 2023 from N9.33bn in Q3 2022 drove down Earnings Before Interest and Tax (EBIT) by 47.5% y/y to N4.88bn (Q3 2023) from N9.29bn (Q3 2022).

The Cash and Cash Equivalents shrank by 16.0%, down to N58.03bn (Q3 2023) from N69.1bn in FY-June 2022. Consequently, Finance Income dropped by 9.7% y/y and the company’s Finance Cost skyrocketed by 984% y/y to N2.57bn in Q3 2023 from N237m in Q3 2022. Specifically, loss in foreign currency balances shot up by 716% to N3.19bn in Q3 2023 from N390m in FY 2022. Accordingly, Net Finance Loss came to N2.17bn compared with Net Finance Income of N203m in Q3 2022.

Consequently, Net Profit plummeted by 71.5% y/y to N2.71bn in Q3 2023 from N9.50bn in Q3 2022.

Our estimates are under review. Current Price: N70/s