October 25, 2023/CSL Research

Guinness Nigeria Plc Q1 2024 (July-Sept) unaudited numbers showed resilience across key performance and profitability metrics. The renowned foreign extra stout brewer recorded double-digit Revenue growth of 12.7% y/y to N59.54bn (Q1 2024) from N52.85bn (Q1 2023). Although, on a q/q basis, the Revenue only grew marginally by 4.5% to N59.54bn from N56.96bn recorded in Q4 2023. We believe the nation’s high inflation and diminished consumer purchasing power tempered sales volumes, as consumers persist in adapting their spending preferences towards essentials. However, we believe the company’s performance will improve in the next quarter as holiday season demand drives sales.

The Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 19.5% y/y to N39.48bn in Q1 2024 from N33.05bn in Q1 2023 and up 5.3% q/q. This resulted in a decrease in Gross Margin to 33.7% from 37.5% in Q1 2023. Gross Profit however grew marginally, up 1.3% y/y to N20.06bn from N19.80bn in Q1 2023.

Operating Expenses (adjusted for depreciation) tapered, down 12.4% y/y and 17.5% q/q, as Administrative Expenses (adjusted for depreciation) decreased by 9.6% y/y to N3.04bn from N3.36bn (Q1 2023). Marketing and Distribution Expenses (adjusted for depreciation) decreased by 13.4% to N7.77bn in Q1 2024 from N8.97bn in Q1 2023 which reflects sustained management effort at cost management. The significant decrease in OPEX neutralised the faster growth effect of Cost of Sales on Revenue. Consequently, EBITDA improved, up 23.7% y/y to N9.25bn (Q1 2024) from N7.48bn (Q1 2023). Also, EBITDA margin was up by 1.4ppts to 15.5% (Q1 2024) from 14.2% (Q1 2023).

Depreciation & Amortisation rose by 24.2% y/y to N2.78bn (Q1 2024) from N2.24bn in Q1 2023 as additional Capital Expenditure (CAPEX) was incurred for the business. Other Income rose y/y to N1.40bn from N666m (Q1 2023), the 23.5% y/y increase in Operating Profit of N6.48bn from N5.24bn (Q1 2023) drove up Earnings Before Interest and Tax (EBIT) by 33.3% y/y to N7.87bn from N5.91bn (Q1 2023).

The business liquidity continues to improve, as the Cash and Cash Equivalents rose by 19.4%, reaching N76.32bn (Q1 2024) from N63.92bn in (Q1 2023). Howbeit, Finance Income dropped by 5.6% y/y and the company’s Finance Cost skyrocketed by 87.8% y/y to N4.62bn in Q1 2024 from N2.46bn in Q1 2024. Specifically, FX loss (N3.56bn) made up about 77.07% of the company’s finance cost in Q1 2024. Accordingly, Net Finance Loss came to N4.06bn compared with N1.86bn in Q1 2023.

Overall, Net Profit declined marginally, down 5.6% y/y to N2.60bn in Q1 2024 from N2.75bn in Q1 2023.

We retain a Buy recommendation on Guinness with a price target of N93.13/s. Current Price: N65/s.

​Guinness Nigeria – Q1 2024 Quick Take.pdf​

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