Nigerian Breweries sheds over N1.1tr in market cap as selloffs deepen

Nigeria’s largest beer maker has spent the past year losing all the weight that makes it one of the largest companies on the Nigerian Stock Exchange. In the last 26 months, Nigerian Breweries has seen it’s stock market capitalisation declined from as high as N1.5 trillion in August 2017 to as low as N368 billion as at market close on Friday. The company has lost an average of monthly market cap loss of around N82 billion.

The market rout which begun a little more than a year ago was triggered by a significant decline in the brewer’s profitability. NB profit after tax in 2018 dipped from N33b to about N19b sparking the first round of selloffs as investors anticipated the poor performance much earlier. The stock fell from around N191 per share in August 2017 to N103 per share one year later as investors sold off the stocks after the company reported a decline in profit of around 41 percent in 2018.

The trend is yet to improve as the company’s unaudited 9 months 2019 performance shows that the brewer earned only N12.2 billion in 9 months as profit after tax which is about 17 percent less than they achieved last year.

In the last year, the brewer has lost almost half of its market capitalization, declining about 48 percent since last October as investors do not foresee any positive outlook in the near term.

“I think the challenge with Nigeria Breweries is that their operating expenses are rising at a time that revenue is flattening for the company. Within increased competition within the brewery industry, NB has found it very difficult to grow their topline while their cost has continued to rise along with inflation. Between 2017 and 2018 alone, the cost to income ratio jumped from around 61% to 71%. Even though the company is on track to grow its revenue to N346 billion this year, we still expect the company’s profit to be around N16 billion by year-end which is about N3 billion less than they earned in 2018 despite generating higher revenue this year,” said Obinna Uzoma, chief economist at EUA Intelligence.

In the 9 months financial performance, NB generated almost N260 billion in sales, compared to a year earlier when the achieved about N256 billion in sales during the same time period. A slow down in revenue growth and rising cost appeared to have weakened the attractiveness of the stocks to investors who seem bluntly uninterested in holding onto the brewers’ stocks. The stock traded at N46 at market close on Friday its lowest point in over 5 years.