August 3, 2026/Cordros Report
Nigerian Breweries Plc (NB) released its Q2-26 unaudited results (30 July), reporting a 15.6% y/y decline in EPS to NGN1.19 (Q2-25: NGN1.42), bringing H1-26 EPS to NGN3.00 (+5.1% y/y). The weaker Q2 earnings came despite higher revenue (+10.2% y/y) and EBITDA margin expansion (+84bps y/y to 24.7%), as a 21.71 ppts y/y rise in the effective tax rate to 51.2% weighed on bottom line profitability. Separately, the company fully repaid its interest-bearing borrowings during the quarter, ending the period with a net cash position of NGN74.63 billion (Q2-25: net debt position of NGN74.32 billion).
NB’s revenue grew by 10.2% y/y in Q2-26 (H1-26: +8.9% y/y). We attribute the growth mainly to volumes expansion, as our channel checks indicate muted pricing actions since January 2026, with the company raising trade incentives to drive volume and defend market share. On a quarter-on-quarter basis, revenue declined by 5.4%, reflecting seasonal softness amid persistent rainfall.
Gross margin expanded by 406bps y/y to 44.8% in Q2-26 (H1-26: +202bps y/y to 44.2%), as cost of sales grew at a slower pace (+2.7% y/y) relative to revenue. We believe the moderation was driven by subdued growth in raw materials and consumables costs, which rose by 0.7% y/y (H1-26: +2.9% y/y), reflecting the company’s ongoing local sourcing initiatives, which continue to offset residual input price inflation.
Similarly, EBIT and EBITDA margins expanded modestly by 82bps y/y and 84bps y/y to 19.6% and 24.7%, respectively (H1-26: -18bps y/y and +27bps y/y to 20.4% and 25.5%, respectively), despite a 28.3% y/y spike in operating expenses (H1-26: +20.2% y/y). OPEX growth was driven by higher selling & distribution expenses (+33.3% y/y), reflecting a 47.1% y/y surge in distribution costs (H1-26: +25.7% y/y) and a 13.0% y/y increase in advertising and sales spend (H1-26: +20.9% y/y) during the quarter, consistent with the elevated trade incentives underpinning the volume recovery. Nonetheless, the OPEX-to-sales ratio deteriorated by 362bps y/y to 25.6% in Q2-26 (H1-26: +224bps y/y to 23.8%).
Below the operating line, net finance costs declined by 84.1% y/y in Q2-26, driven by a 62.1% y/y reduction in finance costs following the full repayment of borrowings, alongside a 101.3% y/y increase in finance income to NGN1.19 billion on a larger cash balance. Accordingly, interest coverage strengthened significantly to 40.7x (Q2-25: 13.4x). Meanwhile, in H1-26, net finance costs declined by 61.1% y/y, reflecting a 50.4% y/y reduction in finance costs as the company progressively deleveraged through the period, alongside a 194.8% y/y increase in finance income to NGN2.52 billion.
Finally, PBT increased by 21.9% y/y in Q2-26, while PAT declined by 15.6% y/y, as the effective tax rate rose to 51.2% (Q2-25: 29.5%). The higher charge is largely non-cash, reflecting the use of the company’s remaining deferred tax credit, which fell to nil during the quarter (Mar-26: NGN21.31 billion). Meanwhile, in H1-26, PBT grew by 18.2% y/y, while PAT advanced 5.1% y/y, despite the effective tax rate settling at 40.5% (H1-25: 33.1%). Notably, cash tax paid over the period was NGN14.32 billion, well below the reported charge of NGN63.37 billion.
Comment: NB’s Q2-26 operating performance remained robust, supported by strong revenue growth, margin expansion and a sharp drop in finance costs. However, the benefits were largely offset by a sharply higher effective tax rate, which weighed on bottom-line earnings. The elevated tax rate reflects the exhaustion of the deferred tax asset, which had supported reported earnings through the recovery. Separately, the balance sheet repair is now largely complete, with retained earnings returning to positive territory, restoring capacity for dividend payments. Looking ahead, we expect earnings momentum to remain firm in 2026E, supported by a seasonally stronger second half, a normalisation in the effective tax rate and exchange rate stability, with volume recovery remaining the primary driver of topline growth. That said, elevated energy costs, which should keep distribution expenses under pressure, alongside sustained trade incentive spending to defend market share and a softer-than-expected volume recovery, remain the key risks to our outlook. Our estimates are under review.
