FSDH Initial Reaction: Nigerian Breweries 1Q24 results 
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April 29, 2024/FSDH Research

Key Performance Highlights:

• Nigerian Breweries revenue jumped 84.2% YoY to N227.1 billion in 1Q24, driven by product innovation and improved pricing to partly mitigate the effects of increasing input cost and on the back of a weak 1Q23, which was impacted by cash scarcity that followed the redesign of the naira notes. Although the Cost of Sales increased 82.9% YoY to N145.2 billion in 1Q24, the company posted a Gross Profit of N81.9 billion, up 86.6% YoY. Moreover, Gross margin expanded 46 bps YoY to 36.1%, compared to 25.6% in 1Q23.
   
• Selling & Distribution expenses rose 33.6% YoY during the quarter to N45.0 billion, while Administrative expenses increased 32.2% YoY to N10.9 billion. Further, the Net loss on financial assets increased to N1.4 billion from N442.0 million in 1Q23. The strong revenue growth, coupled with the company’s rigorous cost-saving initiatives, resulted in a remarkable jump in Operating Profit to N25.3 billion in 1Q24 from N1.9 billion in 1Q23. Operating margin expanded 960 bps YoY to 11.1%, compared to 1.5% in 1Q23. Moreover, EBITDA surged 177.5% YoY to N37.8 billion in 1Q24, with EBITDA margin exhibiting a commendable growth of 559 bps YoY to 16.6% Vs. 11.0% in 1Q23.
   
• However, the Group’s Interest Cost increased to N18.1 billion in 1Q24 from N4.7 billion in 1Q23, exhibiting considerably higher Finance Costs than 1Q23. Moreover, the Net loss on Foreign Exchange transactions increased sharply to N72.8 billion in 1Q24 from N14.6 billion in 1Q23. Consequently, Net Finance Costs shot up to N90.8 billion, compared to N19.3 billion in 1Q23. Nonetheless, the Income Tax credit also doubled to N13.5 billion during the quarter. Ultimately, Nigerian Breweries 1Q24 Net Loss elevated to N52.1 billion, compared to N10.7 billion loss in 1Q23, reflected by increased interest rates resulting from the upward adjustments in monetary policy rates and continued volatility in the foreign exchange market. The company’s loss per share widened to N6.27 in 1Q24 from N1.29 in 1Q23.
   
• Looking at the sequential performance, revenues increased by 14.8% on a QoQ basis, while Gross Profit surged 36.4% QoQ. Note that Operating Profit also grew by 51.3% QoQ to N25.3 billion (4Q23: N16.7 billion). Consequently, the Gross margin expanded 570 bps QoQ to 36.1%, compared to 30.4% in 4Q23, and the Operating margin expanded 268 bps QoQ to 11.1%, compared to 8.4% in 4Q23. Ultimately, the company’s net loss in 1Q24 increased by 6.1% QoQ to N52.1 billion (4Q23: N49.1 billion).
   
• At the 78th Annual General Meeting held on 26 April 2024, the Directors of the Company were authorized to raise capital of up to N600 billion by way of Rights Issue through the issuance of ordinary shares, subject to obtaining the approval of the relevant regulatory authorities. Additionally, Mr. Jaap A.A. Overmars and Mrs. Stella O. Ojekwe-Onyejeli’s appointment as a Director of the Company was approved. Mrs. Ifueko M. Omoigui Okauru and Mr. Roland Pirmez were re-elected as company directors.

Market Reaction: Investor’s reaction to 1Q24 results was subdued as the stock declined by 2.99% to close at N26.00 versus a 0.19% loss for the All-Share Index (29/4).

Nigerian Breweries Earnings Highlight 1Q24

Source: Company Financials, FSDH