FSDH Initial Reaction: Nigerian Breweries 3Q23 results 
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October 27, 2023/FSDH Research

Key Performance Highlights:

• Nigerian Breweries reported a 4.2% YoY increase in revenue to N124.4 billion in 3Q23 against N119.4 billion in 3Q22, driven by higher pricing to mitigate inflation. However, overall volumes fell during 3Q23 due to continued high pressure on disposable income and the socio-political challenges in various parts of the country, partially offset by increased flavoured beer volume led by Desperados. The company noted that the lower volumes, higher input costs influenced by inflation and devaluation of the naira, and a one-off restructuring cost resulted in operating loss during the period as pricing and significant cost savings initiatives were not enough to fully mitigate rising input costs.
   
• The company’s other income grew 18.5% YoY from N506 million in 3Q22 to N600 million in 3Q23. The selling and distribution expenses were up 6.4% YoY to N33.1 billion, and the administrative expenses ballooned 42.7% YoY to N8.8 billion in 3Q23, driven by increased employee benefits and distribution costs. The finance income soared 257.6% YoY to N107 million in 3Q23 compared to N30 million in 3Q22. In contrast, the finance costs increased significantly by 149.7% YoY to N7.7 billion in 3Q23, from N3.1 billion in 3Q22 due to higher interest expense on leases. However, the company’s foreign exchange losses declined 49.2% YoY to N1.6 billion in 3Q23. Consequently, the company incurred net finance costs of N9.2 billion in 3Q23, a 49.5% YoY increase.
   
• In 3Q23, the company reported a loss before income tax of N10.3 billion versus N6.6 billion in 3Q22. Moreover, the company’s income tax credit benefit was N723 million in 3Q23 compared to a tax credit of N2.6 billion in 3Q22. Resulting from foreign exchange losses due to the devaluation of the naira and higher interest costs, Nigerian Breweries reported a net loss of N9.6 billion in 3Q23, compared to a net loss of N4.0 billion in 3Q22. The company reported a loss per share of N1.16 in 3Q23 versus N0.49 in 3Q22.
   
• Sequentially, Nigerian Breweries’ revenue declined by 19.3% QoQ to N124.4 billion in 3Q23, while the cost of sales marginally declined by 1.8% QoQ. Selling and distribution expenses fell 4.8% QoQ to N33.1 billion, while administrative expenses grew 9.2% QoQ to N8.8 billion, and other income fell 39.9% QoQ to N600 million in 3Q23. Notably, the company reported an operating loss of N1.1 billion in 3Q23 compared to an operating profit of N26.5 billion in 2Q23 due to lower sales volume. Nigerian Breweries’ net finance cost declined 88.0% QoQ to N9.3 billion compared to N76.9 billion in 2Q23, primarily due to lower net loss on foreign exchange transactions during the quarter. As a result, Nigerian Breweries reported a net loss of N9.6 billion in 3Q23, compared to a net loss of N36.9 billion in 2Q23.
   
• On 9 October 2023, Nigerian Breweries announced the resignation of Mrs. Yeliz Yedikardesler as a Non-Executive Director effective 6 October 2023. Moreover, the Board has appointed Mr. Jaap Antoon Albert Overmars as a Non-Executive Director effective 25 October 2023.

Market Reaction: Investor’s reaction to 3Q23 results was muted as the stock remained unchanged at N38.00 versus a 0.18% loss for the All-Share Index (26/10).

Nigerian Breweries Earnings Highlight 3Q23

Source: Company Financials, FSDH