May 2, 2023/Cordros Report
International Breweries Plc (INTBREW) published its Q1-23 unaudited results after the close of market on Friday (28 April), reporting a loss per share of NGN0.09 in Q1-23 (vs earnings per share of NGN0.03 in Q1-22). The negative earnings outturn was influenced by a decline in revenue (-5.4% y/y) and higher OPEX (+9.4% y/y).
Revenue declined by 5.4% y/y (Q1-22: +47.6% y/y) in Q1-23. Though we highlight that the brewer took price increases in the period, we believe the lower revenue outturn was underpinned by lower volume growth. Findings from our channel checks revealed that the cash crunch experienced in the economy during the period impacted consumers’ ability to purchase goods in the period. Sequentially, revenue declined by 6.6% q/q.
Gross margin dipped by 117bps y/y to 17.7% in Q1-23 (Q1-22: 29.5%), as the company recorded a higher cost of sales balance (+10.3% y/y) amid the decline in revenue (-5.4% y/y). We believe the higher cost of sales reflects higher input and overhead costs amid the high inflationary environment.
Elsewhere, the EBITDA margin declined by 135bps y/y to 8.5%, owing to the contraction in gross margin (-117bps y/y) amid higher operating expenses (+9.4% y/y).
Surprisingly, net finance costs declined by 38.0% y/y to NGN1.14 billion in Q1-23, underpinned by a significant increase in finance income (+127.9% y/y) amid a slower growth (+36.6% y/y) in finance cost. Though the company did not provide a breakdown of its finance income, we believe the growth in the period was driven by an increase in interest income on short-term fixed deposits.
The brewer posted a pre-tax loss of NGN4.12 billion in Q1-23 (vs pre-tax profit of NGN1.86 billion in Q1-22). Thus, following a tax credit of NGN1.81 billion, the loss after tax settled at NGN2.31 billion (vs profit after tax of NGN721.17 million in Q1-22).
Comment: INTBREW’s performance remained weak, underscoring the brewer’s struggle for positive earnings since Q1-22. While we expect improvement in the topline on better cost-reflective prices and volume growth, our short-term outlook for the brewer remains underwhelming as we expect earnings to remain under pressure given the challenging operating environment. Our estimates are under review.
