July 30, 2023/CSL Research
Nigerian Breweries’ top-line grew marginally y/y. The H1 2023 unaudited numbers showed that Revenue grew by 1.2% y/y to N277.42bn (H1 2023) from N274.09bn (H1 2022). However, on a q/q basis, Revenue showed improvement, up 25% in Q2 2023 to N154.11bn from N123.31bn recorded in Q1 2023. We opine that the weakened consumer purchasing power dragged sales volumes as consumers continue to adjust their expenditure pattern in favour of most contingent and basic needs.
The Cost of Sales (adjusted for depreciation) grew more than Revenue, up 4.5% y/y to N149.22bn (H1 2023) from N142.82bn (H1 2022). Gross Margin declined to 46.2% in H1 2023 from 47.9% in H1 2022. Consequently, Gross Profit marginally relapsed by 2.3% y/y to N128.2bn from N131.27bn in H1 2022.
Operating Expenses (adjusted for depreciation) moderated, down 2.57% y/y, beat down by selling & distribution expenses (adjusted for depreciation) which nosedived by 3.5% y/y to N63.93bn (H1 2023) from N66.22bn (H1 2022). Despite this, EBITDA contracted by 2% y/y to N50.51bn (H1 2023) from N51.52bn (H1 2022). EBITDA Margin was down by 0.6ppts to 18.2% in H1 2023 from 18.8% in H1 2022 largely due to the impact of stunted Revenue.
Depreciation & Amortisation grew by 25.7% y/y to N23.49bn (H1 2023) from N18.68bn (H1 2022). The company recorded Operating Profit of N27.02bn in H1 2023, a 20.1% decline from H1 2022 of N33.84bn. Also, Other Income declined by 32.3% y/y to N1.35bn from N2bn in H1 2022. In effect, Earnings Before Interest and Tax (EBIT) declined by 20.8% y/y to N28.38bn in H1 2023 from N35.8bn in H1 2022.
In H1 2023, the company’s Finance Income dwindled by 18.9% to N186m from N229m in H1 2022 despite a 57% increase in Cash and Cash Equivalents to N34.8bn in H1 2023 from N22.18bn as of December 2022. We believe management may be able to give an explanation for the anomaly. However, Net Loss on Foreign Exchange transactions spiked by 1071% to N85.26bn in H1 2023 from N7.28bn in H1 2022 as FX scarcity and unification policy has made most companies revalue their FX liability positions which comes at a huge loss due to Naira depreciation.
Finance Cost jumped by 206.7% to N11.15bn (H1 2023) from N3.1bn (H1 2022) which we believe is due to high interest rate on ballooned long-term loans & borrowings which shot up by 972.46% to N26.01bn (H1 2023) from N2.43bn as of December 2022. Overall, Net Finance Loss increased by 848.7% to N96.22bn in H1 2023 from N10.14bn in H1 2022.
The company reported Loss After Tax of N67.84bn compared with N25.7bn PAT in corresponding period.
Our price target is being reviewed. Current price is N42/s.
