May 2, 2023/InvestmentOne Update
- Revenue: down 17.64% q/q, up 8.17% y/y
- Gross profit margin: down 317bps q/q, 85bps y/y
- PBT margin: up 14bps q/q, down 833bps y/y
- PAT margin: up 146bps q/q, down 618bps y/y
Improvement in Topline Performance
Last week, Guinness Nigeria Plc released its 9M 2023 unaudited financial report, and it showed that revenue was up by 8.17% y/y to N172.48 billion in 9M 2023 from N159.44 billion in the previous year, 9M 2022. A breakdown of the revenue segment showed that revenue is generated from two main streams: local sales (which rakes in most of the revenue) and exports. In further details, there was an 8.13% y/y increase to N170.81 billion brought in locally from N157.97 billion in 9M 2022, while the exported sales witnessed a larger upscale of 12.75% y/y to N1.67 billion. In this period, the cost of sales (9.61% y/y) grew faster than revenue (8.17% y/y), as revenue amounted to N172.47 billion from N159.44 billion while cost of sales was N112.09 billion from N102.26 billion. Despite rising costs which was facilitated by heightened inflationary pressures, gross profit grew by 5.60% y/y from N57.18 billion to N60.38 billion. However, gross profit margin dropped by 85bps to 35.01% y/y.
Increasing Cost Stifles Bottomline Performance
Bottomline performance was relatively low compared to 9M 2022. In details, operational costs rose by 25.25% y/y, bringing expenses to N42.96 billion in the period as compared to N34.29 billion in 2022. Likewise, net finance costs increased to N7.48 billion from N416.83 million. This was due to the adverse increase in finance costs by 523.02% y/y which offset the 67.31 y/y increase recorded in finance income. As such, PBT experienced a drop of 55.75% y/y to N9.94 billion. Tax costs were down by 43.40% y/y from N7.19 billion in the previous year to N4.07 billion in 9M 2023. In line with PBT, profit after tax fell by 61.61% y/y to close at N5.86 billion in 9M 2023, with the profit after tax margin losing 618bps.
Sequential Performance
On a q/q basis, gross profit fell by 24.76% as revenue contracted by 17.64%, despite the drop in cost of sales within the period (-13.53%). Accordingly, gross margin dipped by 317bps. In line with the drop in gross profit, PBT shrank by 15.19% in spite of the drop in finance costs by 37.05%, while PBT margin grew by 14bps. PAT posted a positive performance of 44.49% q/q to N1.84 billion as tax liability was lower in Q3, coming in at N866.42 million.
Outlook
Going forward, we expect key earnings indicators to be pressured in the near to medium term due to weak consumer spending caused by significantly high inflation, foreign exchange constraints, high input costs, tough business environment, and other macroeconomic challenges. However, we opine that the company’s brand and customer loyalty, reasonable price increases to control rising costs, and other strategies by the management should keep the brewer afloat in the face of various headwinds.
9M (MARCH) N’ Million | 9M 2023 | Q/Q | Y/Y | 9M 2022 |
Revenue | 172,478 | -17.64% | 8.17% | 159,444 |
Cost of Sales | -112,092 | -13.53% | 9.61% | -102,262 |
Gross Profit | 60,386 | -24.76% | 5.60% | 57,182 |
Gross margin | 35.01% | -317bps | -85bps | 35.86% |
OPEX | -42,956 | -24.08% | 25.25% | -34,297 |
Opex/sales | 24.91% | -207bps | 339bps | 21.51% |
Net Finance Cost | -7,488 | -37.05% | 1700.00% | -416 |
PBT | 9,942 | -15.19% | -55.75% | 22,469 |
PBT margin | 5.76% | 14bps | -833bps | 14.09% |
Tax Credit/ (Expense) | -4,077 | -54.83% | -43.30% | -7,190 |
PAT | 5,865 | 44.39% | -61.61% | 15,279 |
PAT margin | 3.40% | 146bps | -618bps | 9.58% |
Source: Company’s Financials, Investment One Research
