July 30, 2023/CSL Research
Guinness Nigeria Plc’s (GUINNESS) FY 2023 audited numbers showed mixed performance across key metrics. The renowned Foreign Extra Stout brewer recorded a double-digit Revenue growth of 10.9% y/y to N229.44bn (FY 2023) from N206.82bn (FY 2022). Also, on a q/q basis, Revenue inched up in Q4 by 5.4% reaching N56.96bn from N54.03bn recorded in Q3 2023. We are of the opinion that the country’s inflationary pressure and weakened consumer purchasing power moderated sales volumes as consumers continue to adjust their expenditure pattern in favour of most contingent needs. The q/q growth was also supported by the base effect of a weak third quarter for Guinness, which was characterized by cash scarcity.
The Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 13% y/y to N144.73bn (FY 2023) from N128.14bn (FY 2022). This resulted in a marginal decline in Gross Margin to 36.9% (FY 2023) from 38.0% (FY 2022). Albeit Gross Profit was up 7.7%y/y to N84.71bn from N78.68bn.
Operating Expenses (adjusted for depreciation) grew in tandem with Cost of Sales, up 13%, as Administrative Expenses (adjusted for depreciation) grew by 24.1% y/y to N15.39bn from N12.85bn. Marketing and Distribution Expenses (adjusted for depreciation) grew by 10.5% y/y to N39.37bn from N35.63bn which reflects sustained increase in diesel cost. The increase in OPEX, the faster growth in Cost of Sales compared with Revenue growth consequently depleted EBITDA marginally, down 1.2%% y/y to N29.32bn from N29.67bn. Also, EBITDA margin decreased by 1.6ppts to 12.8% (FY 2023) from 14.3% (FY 2022).
Depreciation & Amortisation increased by 9.4% y/y to N9.26bn from N8.46bn as additional Capital Expenditure (CAPEX) was incurred for the business efficiency. Despite a 28.9% rise in Other Income y/y to N3.53bn from N2.74bn, the 6.3% y/y decline in Operating Profit to N19.83bn from N21.16bn marginally drove down Earnings Before Interest and Tax (EBIT) by 2.3% y/y to N23.36bn (FY 2023) from N23.90bn (FY 2022).
The Cash and Cash Equivalents grew by 33.3%, to N92.12bn (FY 2023) from N69.1bn (FY 2022). Consequently, Finance Income grew by 309.1% y/y from N1.9bn (FY 2022) to N7.79bn (FY 2023) and on the flip side, the company’s Finance Cost skyrocketed from N2.13bn to N53.29bn y/y of which N49.1bn refers to FX loss. Accordingly, Net Finance Loss came to N45.50bn (FY 2023) compared with Net Finance Income of N226m (FY 2022).
Consequently, the business incurred a Net Loss of N18.16bn compared with Net Profit of N15.16bn in the previous financial year.
No dividend has been recommended by the Board of Directors for approval at the next AGM.
We retain a Buy recommendation on Guinness with a price target of N93/s. Current Price: N74/s.
