Nigerian Breweries trillion naira valuation show rise of the consumer

Nigerian Breweries (NB) the nation’s biggest brewer by volume sold is one of only two stocks on the Nigerian Stock Exchange
(NSE) with a market value higher than N1 trillion, showcasing the rise of the Nigerian consumer and its solid execution.

NB current stock price of N150 gave it a valuation of N1.134 trillion ($7 billion) at the close of trading Friday.

The rise of Nigerian Breweries highlights the county’s expanding middle class amid rising disposable incomes and purchasing power.

“There has been a renewed focus by international investors to plug into the increased spending power of Africa’s rising middle class and one of the most popular avenues is through the sector,” Kayode Akindele, partner at 46 Parallels, a Lagos based investment firm said.

“NB has been a darling of investors with solid profits and good dividends over the years and the fact that it is part of the Heineken group and brand doesn’t hurt.”Nigerian breweries reported in March that full gross revenues for 2013 rose by 6.3 percent to N268.61 billion as against N252.67 in the comparable period of 2012. Gross profits increased by 8.7 percent to N136.47 billion.

Furthermore the beer maker increased gross margins to 50.7 percent in 2013 from 49.6 percent in’2012.

Meanwhile profit before tax spiked by 11.9 percent to N62.24 billion from N55.62 billion in the comparable period of 2012. The increase in pretax profits was fueled by reduction in finance costs by 22.82 percent to N6.93 billion in the review period, while operating expenses increased marginally by 10.4 percent to N62.84 billion. The increase in profitability of the company affected its net margin as it climbed to 26 percent in 2013 from 25.7 percent 2012.

What this means is that the company was able to accrue N26 to the profit position for every N100 earned in 2013, up from N25 in 2012- one of the highest in the industry. Return on average assets (ROaA) for the year was 17 percent, while Return on average equity (ROaE) was equivalent to 41.8 percent. Earnings per Share EPS in the period increased to 570k compared to 503k recorded erstwhile 2012.

The company also declared a final dividend of 450k for every share held representing a payout ratio of 79 percent of earnings.

Nigeria’s GDP per capita has tripled between 2004 and 2010, moving from $644 to $2,700 according to National Bureau of Statistics (NBS) data.

Over the last three years the domestic brewery industry in Nigeria has shown an average growth in turnover of about 16 percent according to Augusto & co.,( a rating and research firm) in its 2012 industry outlook report.

“Even as Western beer consumption slows down due to the global economic downturn, Nigeria‘s brewery industry continues to thrive due to the emergence of democracy and a growing middle class,” they said.

Nigeria’s population of 170 million people is growing faster than the rise in its poverty rate.

According to data from the National Bureau of Statistics (NBS), while the number of people in relative poverty rose from 69 million to 112 million, the number of non-poor – the lower middle class and above – also grew, by around 7million, to 54 million people.

Nigeria’s alcoholic beverages market is expected to continue to grow fast given the current low rate of per capita consumption compared to other African countries like South Africa.

Beyond that Euromonitor International, a research firm, estimates that by 2016, the size of the Nigerian consumer market would be worth $223 billion, more than double the 2010 levels. The country has also emerged as Africa’s largest economy with a GDP of $510 billion, which is more than 40 percent higher than its closest rival on the continent South Africa.

According to Akindele, Nigeria’s consumer story is just beginning for international investors.

PATRICK ATUANYA