…. More Headwinds Ahead, Analysts Warn
February 18, 2025
By InvestAdvocate
Lagos (INVESTADVOCATE)-Nigerian Breweries Plc (NB) has reported another challenging year, posting a full-year 2024 loss per share of N12.07, only a marginal improvement from the N12.80 loss per share recorded in 2023.
Contrary to impressive news release issued by the company last weekend, InvestAdvocate analysis of the company’s financial statement revealed that the brewers continues to face crippling cost pressures and foreign exchange volatility, both of which have severely impacted profitability.
Despite an 80.8% year-on-year (y/y) revenue surge, driven by steep price increases and some volume growth, the brewer’s margins deteriorated sharply due to ballooning costs.
The cost of sales soared by 97.5% y/y, outpacing revenue growth, largely due to a 118% rise in raw material and consumables expenses. Consequently, gross margin dropped by 596 basis points (bps) to 29.4%, signaling intense cost pressures.
Further highlighting operational struggles, EBIT and EBITDA margins contracted to 6.4% (-89bps y/y) and 11.5% (-379bps y/y), respectively, weighed down by a 46.1% jump in operating expenses and a 762.6% spike in credit loss provisions.
Financing costs were another major drag, with net finance charges climbing 33.6% y/y to N252.81 billion, primarily due to a 173.5% surge in finance costs stemming from higher interest expenses on loans (+179.5% y/y).
However, a Q4 foreign exchange gain of N2.89 billion (compared to an FX loss of N66.51 billion in Q4-23) provided some relief amid the naira’s slight appreciation.
In the end, NB’s pre-tax loss widened to N182.92 billion (2023: N145.22 billion), with an after-tax loss of N144.88 billion (2023: N106.31 billion).
Analysts at Cordros Capital acknowledge the brewer’s revenue resilience but warn that “inflationary pressures, naira volatility, and mounting finance costs will continue to weigh on profitability in 2025. While price hikes and volume gains may provide some revenue support, the cost environment remains a formidable challenge,” the analysts stated in an emailed note.
Despite the deepening losses, the company equity traded on the NGX as “NB” appreciated by maximum 10% daily gain, closing at N36.30 per share on Monday, February 17, up from N33.
At this closing price, equity traders have immensely rewarded the ticker which opened at the price of N32 in the beginning of this year, precisely on January 2, 2025.
With margins under siege and debt-driven finance costs escalating, analysts said they are currently reviewing their view and projections on the stock.
Nigerian Breweries faces an uphill battle in restoring profitability, making its 2025 performance a crucial test for management’s ability to navigate Nigeria’s tough macroeconomic landscape.
