May 2, 2023/CSL Research
International Breweries’ top-line shrank y/y. The Q1 2023 unaudited numbers showed that Revenue declined by 5.4% y/y to N54.40.31bn in Q1 2023 from N57.52bn in Q1 2022. We opine that the weakened consumer purchasing power moderated sales volumes as consumers continue to adjust their expenditure pattern in favour of the most basic needs, added to the fact that Q1 is usually a weak quarter for brewers. Again, Q1 2023 was characterized by cash scarcity which must have affected demand.
The Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 15.5% y/y to N39.45bn in Q1 2023 from N34.32bn in Q1 2022. Consequently, Gross Profit was down 35.6% y/y to N14.95bn from N23.21bn in Q1 2022. Gross Margin also declined to 27.5% in Q1 2023 from 40.3% in Q1 2022.
Operating Expenses (adjusted for depreciation) grew marginally, up 2.0% y/y, driven by growth in Marketing & Administrative Expenses (adjusted for depreciation), up 12.1% y/y to N 9.20bn in Q1 2023 from N8.20bn in Q1 2022. Consequently, EBITDA contracted by 63.6% y/y to N4.6bn in Q1 2022. EBITDA Margin was down by 13.5ppts to 8.5% in Q1 2023 from 22% in Q1 2022, largely due to the impact of lower Revenue.
In the absence of Other Income, and despite a drop in Depreciation & Amortisation by 15.3% y/y to N7.58bn in Q1 2023 from N8.94bn in Q1 2022, the company recorded an Operating Loss of N2.96bn in Q1 2023, compared with N3.70bn in Operating Profit in Q1 2022.
In Q1 2023, the company’s Finance Income grew higher by 127.9% to N3.44bn from N1.51bn in Q1 2022 despite a 28% decline in Cash and Cash Equivalents to N20.78bn in Q1 2023. The company may have negotiated better Interest rates considering a higher interest rate environment. Finance Cost grew by 36.6% to N4.6bn in Q1 2023 from N3.35bn in Q1 2022 driven by growth in long-term borrowings, up 14.64% to N163.98bn (Q1 2023) from N143.03bn (Q1 2022). Overall, Net Finance Cost was down to N1.1bn from N1.8bn.
The company reported Loss After Tax of N2.31bn compared with N721m PAT in Q1 2022.
Our price target is being reviewed. Current price is N4.7/s
| International Breweries, Q1 2023 (Nm) |
Source: Company, CSL Research
