October 31, 2023/CSL Research

International Breweries’ 9M 2023 unaudited numbers showed a Revenue increase of 14.6% y/y to N183.78bn (9M 2023) from N160.43bn (9M 2022). We believe the nation’s high inflation and diminished consumer purchasing power impacted sales volumes, as consumers persist in adapting their spending preferences towards essentials.

The Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 23% y/y to N125.53bn (9M 2023) from N102.03bn (9M 2022). Gross Margin declined to 31.7% (9M 2023) from 36.4% (9M 2022). Consequently, Gross Profit was down 0.3% y/y to N58.25bn in 9M 2023 from N58.41bn in 9M 2022.

Operating Expenses (adjusted for depreciation) grew significantly, up 134.2% y/y driven by Net Other Expense which grew significantly to N36.18bn (9M 2023) from N3.73bn (9M 2022) due to unrealised FX loss of N39.96bn. Consequently, EBITDA turned negative -N4.41bn from +N31.65bn in 9M 2022.

In the absence of Other Income, and despite a marginal drop in Depreciation & Amortisation by 7.2% y/y to N28.12bn (9M 2023) from N30.19bn (9M 2022), the company recorded an Operating Loss of N32.41bn (9M 2023) compared with N1.46bn Operating Profit in 9M 2022.

In 9M 2023, the company’s Finance Income grew by 218% to N8.89bn from N2.79bn (9M 2022) despite a 43% decline in Cash and Cash Equivalents to N7.45bn (9M 2023). We believe the company may have re-priced their cash balances with the banks. The company’s Finance Cost grew by 181.4% to N19.99bn (9M 2023) from N7.11bn (9M 2022) driven by the growth in long-term borrowings which was up 123.87% to N320.21bn (9M 2023) from N143.03bn (FY 2022).

In Q3, a N4.95bn loss was recorded, and the company reported Loss of N28.56bn (9M 2023) from N2.81bn (9M 2022), making it the fourth consecutive loss-making quarter.

We have a sell recommendation with a price target of N2.2/s. Current price is N4.55/s

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