FSDH Initial Reaction: Nigerian Breweries FY23 results 
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February 19, 2024/FSDH Research

Key Performance Highlights:

• Nigerian Breweries reported an 8.9% YoY increase in revenue to N599.6 billion in FY23 against N550.6 billion in FY22, driven by a positive price mix. However, the operating profit fell by 15% due to higher input and one-off reorganization costs despite strong and aggressive cost savings and other efficiency measures.
   
• The Company’s other income was almost flat on a YoY basis at N3.0 billion at the end of FY23. The selling and distribution expenses were up 4.9% YoY to N142.5 billion, and the administrative expenses were up 1.7% YoY to N28.6 billion in FY23, driven by increased employee benefits and distribution costs. The finance income soared 47.0% YoY to N513 million in FY23 compared to N349 million in FY22. In contrast, the finance costs increased significantly by 331.8% YoY to N36.4 billion in FY23, from N8.4 billion in FY22 due to higher interest expenses on loans and borrowings. Furthermore, the Company’s foreign exchange losses surged 482.1% YoY to N153.3 billion in FY23. Consequently, the Company incurred net finance costs of N189.2 billion in FY23, a 449.7% YoY increase.
   
• In FY23, the Company reported a loss before income tax of N145.2 billion versus N17.3 billion profit before income tax in FY22. Moreover, the Company’s income tax credit benefit was N38.9 billion in FY23 compared to a tax expense of N4.2 billion in FY22. Resulting from foreign exchange losses due to the devaluation of the naira and higher interest costs, Nigerian Breweries reported a net loss of N106.3 billion in FY23, compared to a net profit of N13.2 billion in FY22. The Company reported a loss per share of N12.81 in FY23 versus earnings per share of N1.58 in FY22.
   
• Looking at the quarterly performance, Nigerian Breweries recorded robust revenue growth as the Company’s revenue shot up 25.9% YoY to N197.8 billion in 4Q23. However, this growth was negated by a more than proportionate increase in the cost of sales of 40.0% YoY. Although the Company faced a 17.6% YoY rise in selling and distribution expenses to N40.9 billion, the 108.8% rise in other income to N1.0 billion and a 52.3% fall in administrative expenses led to the Company’s operating profit increasing by 2.0% YoY to N16.7 billion in 4Q23. The Company’s net loss on foreign transactions jumped by 316.2% YoY to N66.5 billion, while finance income rose 143.2% YoY to N221 million in 4Q23, which resulted in a 362.3% YoY rise in the net finance cost to N83.8 billion. Consequently, Nigerian Breweries reported a loss before tax of N67.1 billion in 4Q23, compared to a loss before tax of N1.8 billion in the prior period. Helped by tax credit, the Company reported a net loss of N49.1 billion in 4Q23 compared to a net loss of N1.6 billion in 4Q22. Furthermore, the margins took a hit in 4Q23, with the EBITDA and Net margin declining by 233 bps and 2383 bps each, while the Operating margin and Gross margin declined by 197 bps and 705 bps, respectively.
   
• On 16 November 2023, Nigerian Breweries announced its plans for the proposed acquisition of 80% economic and voting rights in Distell Wines and Spirits Nigeria Limited (DWSN) and 100% of Heineken Beverages’ import business in Nigeria for ₦7.01 billion. Nigerian Breweries called for an Extraordinary General Meeting with its shareholders on 20 December 2023, and the shareholders approved the transaction. Following the conclusion of the Transaction, DWSN became a subsidiary of Nigerian Breweries. Also, Nigerian Breweries expanded its operation to include the importation, marketing and distribution of wines, spirits and cider products.
   
• On 7 December 2023, the Company announced the resignation of Mr. Asue Ighodalo as the Chairman of the Board on 31 December 2023. The Board of Directors appointed Mr. Sijbe Hiemstra to act as the interim Chairman of the Board effective 1 January 2024. Moreover, Mrs. Ndidi O. Nwuneli, MFR, notified the Board of her stepping down as an Independent Non-Executive Director by 31 December 2023. The Board appointed Mrs. Stella Ojekwe-Onyejeli as an Independent Non-Executive Director effective 1 January 2024.

Market Reaction: Investor’s reaction to FY23 results was subdued as the stock declined by 9.08% to close at N34.55 versus a 3.15% loss for the All-Share Index (19/2).

Nigerian Breweries Earnings Highlight FY23

Source: Company Financials, FSDH