July 31, 2024/Cordros Report
Nigerian Breweries Plc (NB) published its Q2-24 unaudited financials yesterday (30 July). The results showed a lower loss per share of NGN3.21 (Q2-23: NGN4.44). However, for H1-24, the loss per share increased to NGN8.21 (H1-23: NGN5.70), impacted by ongoing cost pressures and foreign exchange losses.
NB reported a 63.4% y/y increase in revenue for Q2-24 (H1-24: +72.0% y/y), driven by significant price increases (c. 35.0%) to counter inflationary pressures and currency weakness, along with innovation and volume growth. Management reported strong expansion in its premium portfolio, with Desperados and Tiger leading the way, showing over 10.0% growth. In the non-alcoholic segment, Hi-Malt, Fayrouz and Maltina also saw single-digit growth. Quarterly revenue increased by 10.8%, reflecting the impact of higher pricing.
Gross margin contracted by 135bps y/y to 30.9% in Q2-24 (Q2-23: 44.4%), due to elevated increase in cost of sales (+103.1% y/y) following the 118.0% y/y increase in raw materials and consumables. As a result, EBITDA (-145bps y/y) and EBIT (-121bps y/y) margins declined to 10.4% and 5.1%, respectively, amid a 51.9% y/y increase in OPEX.
Net finance cost declined by 17.3% y/y to NGN63.63 billion (Q2-23: NGN76.90 billion) driven by a 45.1% y/y decline in FX loss amid a 279.5% y/y increase in finance cost.
Overall, NB recorded a lower pre-tax loss of NGN50.76 billion in Q2-24 (Q2-23: NGN50.41 billion). Following a NGN17.65 billion tax credit in the period (+30.5% y/y), the loss after tax settled at NGN33.11 billion (Q2-23: NGN36.88 billion).
Comment: NB continues to navigate a tough environment marked by high inflation and exchange rate volatility, which are impacting performance and dampening strong topline growth. Looking ahead, we expect sustained revenue growth, fuelled by robust pricing, and continued focus on premiumisation and product innovation. However, NB is likely to remain in a loss position for 2024E, primarily due to the substantial impact of naira devaluation on its large FX denominated payables, coupled with high costs. Nevertheless, to strengthen its balance sheet, the brewer is raising up to NGN600.00 billion through a rights issue in H2-24, which is expected to eliminate all debt (FX & local), thus positioning the company for a brighter outlook in the medium term. Our estimates are currently under review.
