October 24, 2024/CSL Research
Nigerian Breweries’ 9M 2024 financial results revealed a strong 76.9% y/y increase in Revenue, reaching N710.87bn from N401.8bn (9M 2023). Howbeit, on a q/q basis the company’s Revenue shrunk by 10.5% in Q3 2024 to N226.1bn from N252.65bn (Q2 2024). This new revenue milestone in 9M 2024 is primarily attributed to an approximate 43% overall price increase across their widely accepted product segments, which was essential for maintaining margins. The 9M Revenue level has already surpassed that of FY 2023 by 18.5%.
The Cost of Sales (excluding depreciation) increased at a faster rate than revenue, rising by 101.8% year-on-year (y/y) to ₦500.96 billion in 9M 2024, compared to ₦249.24 billion in 9M 2023. On a quarterly basis (q/q), the increase was more modest, up by just 0.3% to ₦175.87 billion in Q3 2024, from ₦174.84 billion in Q2 2024. The sharp rise in costs was driven by a 129.5% y/y increase in raw materials and consumables, which totalled ₦407.2 billion, along with a 100.2% y/y rise in repairs and other overheads, reaching ₦29.1 billion. Consequently, the Gross Margin declined to 33.3% from 43.9% in 9M 2023. Despite this margin compression, Gross Profit grew by 34.1% y/y, reaching ₦236.7 billion, compared to ₦176.5 billion in 9M 2023
The challenging business environment led to a significant rise in the company’s Operating Expenses (OPEX), which increased by 48.2% year-on-year (y/y) to ₦171.6 billion. Selling and Distribution Expenses climbed by 43%, reaching ₦135.4 billion, up from ₦94.7 billion, while Administrative Expenses surged by 60.3% y/y to ₦32.7 billion, compared to ₦20.4 billion in 9M 2023. Despite these rising costs, EBITDA grew marginally by 7.2% y/y to ₦65.18 billion, up from ₦60.79 billion in 9M 2023. However, the EBITDA margin, for the first time, dropped below 10%, falling by 6 percentage points to 9.2%, down from 15.1% in 9M 2023. The company also reported ₦3.4 billion in other income from ancillary operations, which helped boost Earnings Before Interest and Tax (EBIT) to ₦29.04 billion, compared to ₦27.26 billion in 9M 2023.
The company’s Finance Income increased to ₦484 million in 9M 2024, up from ₦293 million in 9M 2023, driven by higher interest income from bank deposits. This rise occurred despite an 11.4% decline in Cash Equivalents, which stood at ₦35.04 billion as of 9M 2024, compared to ₦39.56 billion at the end of 2023. Currency instability, ongoing since mid-2023, continued to affect the company’s foreign exchange transactions. This was reflected in a Net FX loss of ₦160.48 billion, marking an 84.8% increase from ₦86.8 billion in 9M 2023.
Finance Cost jumped by 281.4% to N72.04bn from N18.9bn (9M 2023) on the back of high interest payment on ballooned loans & borrowings which shot up to N652.1bn from N341.6bn (FY 2023).
Overall, the company reported Pre-tax loss of N202.9bn compared with a Pre-tax loss of N78.16bn in 9M 2023.
We have a Sell recommendation on Nigerian Breweries with a price target of N23.27/s. Current Price N28.00/s
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Nigerian Breweries 9M 2024 QuickTake.pdf
