January 31, 2024/Cordros Report
International Breweries Plc (INTBREW) published its 2023FY unaudited results yesterday (30 January). The report showed a higher loss per share of NGN1.26 in Q4-23 (vs a loss per share of NGN0.84 in Q4-22), translating to a loss per share of NGN2.21 in 2023FY (vs loss per share of NGN0.81 in 2022FY). The poor performance in the period resulted from the combined impact of increased FX loss (+234.2% y/y) and a jump in net finance costs (+591.1% y/y).
In Q4-23, revenue expanded by 38.3% y/y (2023FY: +20.9% y/y), with the notable increase attributed to price hikes, especially in the Malt and Lager segments. Additionally, we highlight that Trophy’s market leadership in the Lager segment contributed to the robust revenue growth. On a q/q basis, revenue increased by 19.0%, benefitting from higher prices and festive-induced consumption.
Gross margin expanded significantly by 697bps y/y to 17.9% in Q4-23 (2023FY: +12bps y/y to 20.1%), supported by strong revenue growth (+38.3% y/y) amid the rise in the cost of sales (+27.5% y/y). The elevated costs are primarily due to higher energy prices, FX illiquidity constraints, commodity cost headwinds, and inflationary pressures. For context, INTBREW recorded a 24.1% y/y increase in raw materials consumed and allocated overheads.
INTBREW reported an operating loss of NGN35.84 billion in Q4-23 (vs operating loss of NGN22.99 billion in Q4-22), driven by a substantial 234.2% y/y increase in FX loss to NGN33.60 billion (Q4-22: NGN10.05 billion).
Net finance costs (+591.1% y/y) increased significantly, following higher finance costs (+165.4% y/y) arising from interest on borrowings (+251.2% y/y), alongside a 50.1% y/y decline in investment income. The increase in interest expenses is attributed to the brewer’s heightened reliance on loans and borrowings during the period, notably, with loans and borrowings surging to NGN376.09 billion in 2023FY (2022FY: NGN194.08 billion).
In conclusion, the pre-tax loss increased to NGN44.14 billion (vs pre-tax loss of NGN24.19 billion). Consequently, the loss after tax settled at NGN33.80 billion in Q4-23 (Q4-22: NGN22.66 billion), following a tax credit of NGN10.34 billion.
Comment: Despite the impressive topline growth, the brewer’s performance in the period was significantly impacted by high finance costs and FX illiquidity. While we anticipate sustained revenue growth from modest price increases, the brewer still faces a grim profitability outlook driven by ongoing challenges with high financial leverage. As a result, we anticipate a strain on profitability due to higher debt servicing costs and lingering FX issues. Our estimates are under review.
