Nigerian Breweries Plc (NB) published their Q1-26 unaudited financials yesterday, posting an EPS of NGN1.80 (+25.6% y/y). Earnings performance was driven by modest revenue growth (+7.7% y/y), softer cost growth (+7.4% y/y) and a 54.5% y/y decline in net finance costs.

NB grew revenue by 7.7% y/y in Q1-26 (Q1-25: 68.9% y/y), reflecting limited pricing carryover amid a subdued volume performance, as demand remained constrained by high product elasticity and still-fragile consumer spending. On a q/q basis, revenue declined by 1.9%.
 
Gross margin expanded modestly by 13bps y/y to 43.5% (Q1-25: 43.4%), as cost of sales growth (+7.4% y/y) remained contained relative to revenue growth. The modest growth in cost reflects soft growth in raw materials and consumables (+5.0% y/y). On a q/q basis, cost of sales declined by 14.0%, reflecting ongoing cost optimisation efforts.
 
Operating leverage weakened, with EBIT and EBITDA margins declining by 107bps y/y and 23bps y/y to 21.2% and 26.2%, respectively, pressure by a +12.3% y/y increase in OPEX. The growth in OPEX was primarily driven by higher advertising and sales expenses (+30.0% y/y to NGN35.68 billion), which accounted for 39.0% of total OPEX, as the company intensified spend to defend market share.
 
On the financing side, net finance cost declined by 54.5% y/y to NGN6.95 billion in Q1-26 (Q1-25: -NGN15.27 billion), driven by a 403.3% y/y surge in finance income alongside a 46.1% y/y reduction in finance costs, reflecting improved cash yields and lower funding pressures.
 
Overall, NB grew profit before tax by 14.9% y/y to NGN80.41 billion in Q1-26 (Q1-25: NGN60.99 billion), while profit after tax grew by 25.6% y/y to NGN55.95 billion, further supported by a decline in the effective tax rate to 30.4% (Q1-25: 36.3%).
 
Comment: NB’s Q1-26 earnings performance was driven by modest revenue growth outpacing cost growth. However, operating leverage weakened, as higher advertising and sales spend to defend market share and deepen penetration weighed on margins amid subdued topline performance. Looking ahead, we expect topline growth to be largely volume-driven, tracking underlying consumer demand trends, while earnings should be supported by continued cost optimisation, alongside FX stability and a more favourable macro backdrop. Our estimates are currently under review.