FSDH Initial Reaction: Guinness Nigeria 2Q24 results 
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January 26, 2024/FSDH Research

Key Performance Highlights:

• Guinness Nigeria reported a mixed set of numbers for 2Q24. The company recorded revenue growth of 26.6% YoY to N83.1 billion in 2Q24 from N65.6 billion in 2Q23, while it reported N7.8 billion net loss in 2Q24 versus a N1.3 billion profit in 2Q23. Domestic revenue grew 26.4% YoY to N82.6 billion from N65.3 billion in 2Q23, and export revenue was up 91.5% YoY to N496 million in 2Q24 from N259 million in 2Q23. The increased cost of sales due to inflationary pressure and currency devaluation impacted the cost of imported materials; thus, the gross profit margin continued to fall on a YoY basis. However, the company’s operating profit grew on a YoY basis as Guinness Nigeria was able to control administrative expenses (-5.1% YoY). The increased operating profit, further boosted by other income, resulted in a slight improvement in operating margin by 13 bps, but the EBITDA margin declined marginally in 2Q24.
   
• Gross profit marginally increased by 15.6% YoY to N27.8 billion in 2Q24, as the significant revenue increase was more than offset by the cost of sales. However, the gross margin contracted 319 bps YoY to 33.5% in 2Q24. The cost of sales rose 33.0% YoY to N55.3 billion in 2Q24 compared to N41.6 billion in 2Q23. The company’s other income jumped 280.3% YoY to N1.1 billion in 2Q24, primarily driven by an N1.1 billion gain from a promissory note from an Export Expansion Grant. Marketing and distribution expenses rose 23.7% YoY to N15.5 billion in 2Q24. Administrative expenses declined 5.1% YoY to N4.9 billion from N5.2 billion in the prior year period. Consequently, Guinness recorded an operating profit of N8.5 billion, a 28.3% YoY rise, versus an operating profit of N6.6 billion in 2Q23. The operating margin expanded by 13 bps YoY to 10.3% in 2Q24, compared to 10.1% in 2Q23.
   
• The company’s finance income increased 211.1% YoY to N2.5 billion in 2Q24, driven by a gain on re-measurement of foreign currency balances. Moreover, the company’s finance costs shot up 352.9% YoY to N19.3 billion in 2Q24 versus N4.3 billion in 2Q23 due to higher accrued interest payments, exchange differences on foreign currency loan and a major loss in the re-measurement of foreign currency balances. Consequently, the net financing costs spiralled to N16.8 billion in 2Q24, up 385.8% YoY, compared to net financing costs of N3.5 billion in 2Q23. The company reported a considerable net loss of N7.9 billion in 2Q24 versus a net profit of N1.3 billion in 2Q23. Furthermore, the company reported a loss per share of N3.57 versus an earnings per share of N0.58 in the prior year period.
   
• Sequentially, Guinness Nigeria reported a 39.5% QoQ revenue growth in 2Q24. However, the cost of sales also grew 33.5% QoQ to N55.3 billion in 2Q24 against N41.4 billion in 1Q24. Gross profit marginally increased by 53.3% QoQ to N27.8 billion from N18.1 billion in 1Q24, resulting in a margin expansion of 301 bps QoQ to 33.5% in 2Q24. However, higher marketing and distribution expenses (+23.7% QoQ) and higher finance costs (+313.5% QoQ) resulted in a net loss of N7.8 billion in 2Q24 versus a net profit of N2.6 billion in 1Q24.
   
• On 25 January 2024, Guinness Nigeria announced the resignation of Mrs. Tariye Gbadegesin from the Board of Guinness Nigeria Plc, effective 24 February 2024.

Market Reaction: The investor reaction to the 2Q24 results was muted as the stock remained unchanged at N70.75 versus a 0.57% rise for the All-Share Index (25/1).

Guinness Nigeria Earnings Highlights 2Q24

Source: Company Financials, FSDH