February 19, 2024/CSL Research
Nigerian Breweries experienced a slight y/y growth in its top-line. The audited financial results for the fiscal year 2023 revealed an 8.9% increase in Revenue, reaching N599.6 billion compared to N550.6 billion in FY 2022. Additionally, on a q/q basis, the company witnessed a substantial 59.3% surge in Revenue during Q4 2023, reaching N197.95 billion, up from N124.27 billion in Q3 2023. The remarkable fourth-quarter performance aligns with our anticipated growth, driven by heightened demand during the holiday season.
The Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 14.1% y/y to N354.6bn from N310.7bn (FY 2022). While Gross Margin declined to 40.9% from 43.6% in FY 2022, Gross Profit was marginally up by 2.1% y/y to N245.1bn from N240bn in FY 2022.
Operating Expenses, adjusted for depreciation grew 2.95% y/y. Selling and Distribution Expense rose by 3.9% to N133.2 billion, up from N128.2 billion. On the other hand, Administrative Expense was down 1.8%, decreasing to N22.4 billion from N22.9 billion in FY 2022. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) showed a modest 0.8% y/y increase, reaching N89.0 billion compared to N88.37 billion in FY 2022. However, the EBITDA Margin contracted by 1.2 percentage points, settling at 14.8% compared with 16% in FY 2022.
The company recorded Operating Profit of N41.0bn, a 15.9% decline from N48.77bn in FY 2022 due to higher input cost and one-off re-organization cost. Also, Other Income declined by 1% y/y to N2.95bn from N2.99bn (FY 2022). In effect, Earnings Before Interest and Tax (EBIT) declined by 15.1% y/y to N43.96bn from N51.76bn (FY 2022).
In FY 2023, the company’s Finance Income rose by 47% to N513m from N349m (FY2022) as interest income on their bank deposits grew, driven by a 78.4% increase in Cash and Cash Equivalents balance to N39.6bn compared with N22.2bn in the same period of 2022. However, Net Loss on Foreign Exchange transactions spiked by 482.1% to N153.3bn from N26.3bn in FY 2022. Finance Cost jumped by 331.8% to N36.4bn from N8.4bn (FY 2022) on the back of high interest rate payment on both ballooned long-term loans & borrowings which shot up to N136.3bn from N2.4bn (FY 2022) and short-term loans & borrowings which grew 71.35% to N205.3bn from N119.8bn (FY 2022).
Overall, the company reported Loss After Tax of N106.31bn compared with a Post Tax Profit of N13.2bn in the corresponding period of 2022. It is worth noting that the FX loss wiped off earnings, as the business would have recorded N8.11bn PBT (ex FX loss) for the period.
We have a Sell recommendation on Nigerian Breweries with a price target of N33.93/s. Current Price N38/s.
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