October 26, 2023/CSL Research
Nigerian Breweries’ top-line grew marginally y/y. The 9M 2023 unaudited numbers showed that Revenue grew by 2.1% y/y to N401.69bn (9M 2023) from N393.34bn (9M 2022). Also, on a q/q basis, Revenue was down 19.4% in Q3 2023 to N124.27bn from N154.11bn recorded in Q2 2023. While we note that sales are usually at its peak in Q4 due to increase in activities during the yuletide season, 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) marginally grew more than Revenue, up 2.4% y/y to N225.26bn (9M 2023) from N219.92bn (9M 2022). While Gross Margin declined to 43.9% (9M 2023) from 44.1% (9M 2022). Gross Profit was up 1.7% y/y to N176.43bn from N173.42bn in 9M 2022.
Operating Expenses (adjusted for depreciation) was up 2.61% y/y. Selling and Distribution Expense was down 0.9% to N94.7bn from N95.5bn mitigating the impact of the 18.9%y/y increase in Administrative Expense to N19.2bn from N16.76bn (9M 2022). EBITDA inched up by 0.1% y/y to N61.16bn (9M 2023) from N61.07bn (9M 2022) while EBITDA Margin contracted by 0.3ppts to 15.2% in 9M 2023 from 18.8% in 9M 2022.
Depreciation & Amortisation grew by 25.3% y/y to N35.48bn from N28.31bn (9M 2022). The company recorded Operating Profit of N25.68bn in 9M 2023, a 21.6% decline from 9M 2022 of N32.77bn. Also, Other Income declined by 22% y/y to N1.95bn from N2.51bn in 9M 2022. In effect, Earnings Before Interest and Tax (EBIT) declined by 21.7% y/y to N27.6bn in 9M 2023 from N35.27bn in 9M 2022.
In 9M 2023, the company’s Finance Income rose by 13.1% to N293m from N259m in 9M 2022 driven by a 44% increase in Cash and Cash Equivalents Balance to N21.14bn from N14.69bn in the same period. However, Net Loss on Foreign Exchange transactions spiked by 737.9% to N86.83bn in 9M 2023 from N10.36bn in 9M 2022.
Finance Cost jumped by 205.1% to N18.89bn (9M 2023) from N6.2bn (9M 2022) which we believe is due to high interest rate on ballooned long-term loans & borrowings which shot up by 82.38% to N72.15bn (9M 2023) from N39.56bn (9M 2022).
Overall, the company reported Loss After Tax of N56.82bn compared with N14.64bn PAT in the corresponding period. It is worth noting that, FX losses took the shine off earnings, as the business could have recorded N9.03bn PBT (ex FX loss) for the period.
We have a Hold recommendation on Nigerian Breweries with a price target of N39.17/s. Current Price N38/s.
Nigerian Breweries 9M 2023 QuickTake.pdf
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