Nigerian Breweries plc has maintained a steady year-on-year (y/y) growth in revenue and profit despite the prevailing hike in the cost of doing business.
The firm’s nine months (9M) 2022 unaudited numbers showed that revenue grew by 27.2 percent to N393.45 billion from N309.28 billion in the corresponding period of 2021.
The company noted that the growth was partly due to its winning pricing strategy and a strong performance in the first half of the year.
However, on a quarterly basis (q/q), the revenue moderated by 12.4 percent in the third quarter (Q3) to N119.37 billion from N136.31 billion recorded in the second quarter (Q2) of 2022.
Analysts at CSL Stockbrokers Limited stated that “while we note that sales are usually at their peak in the fourth quarter (Q4) due to increased consumption during the yuletide season, we believe that the steady quarterly declines in revenue may be related to the shrinking consumer disposable income as consumers adjust their expenditure pattern in favour of most basic needs.”
Nigerian Breweries also noted that “the last three months saw the return of market seasonality characterised by lower volume performance. The market decreased by a high single digit reflecting pressure on consumer disposable income as well as heavy rains and food. Nevertheless, we performed relatively well in the period led by our strong premium portfolio of Heineken®, Tiger, and Desperados.”
Profit reported by the company grew by 79.56 percent to N14.76 billion in the nine months period ended September 2022 from N8.22 billion in the nine months period ended September 2021.
The Board approved an interim dividend of N3.29 billion that is, forty (40) kobo per ordinary share of 50 kobo in the share capital of the company, which will be payable on Thursday, 1st December 2022 to all shareholders registered in the books of the company at the close of business on Wednesday, 23rd November 2022.
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Rising Inflation – now at 20.77%
Nigerian Breweries in the nine months (9M) period ended September 2022 recorded a 20.23 percent increase in its cost of sales which amounted to N238.9 billion from N198.7 billion in the same period in 2021. The rising input costs claimed 60.73 percent of the total revenue reported in the period.
Nigerian Breweries stated that “revenue growth in the quarter driven by pricing was offset by higher input cost arising from increased rate of inflation and higher energy cost.”
Increased costs
Operating Expenses remained elevated particularly on the back of marketing and distribution expenses which grew by 46.38 percent y/y to N101 billion in 9M 2022 from N69.11 billion in 9M 2021.
Administrative expenses grew by 17.18 percent y/y to N20.6 billion in 9M 2022 from N17.58 billion in 9M 2021. We note particularly that Distribution expenses, on a standalone, increased 105 percent to N39.74 billion in 9M 2022 from N19.36bn in 9M 2021, which is reflective of the jump in diesel cost.
Moreso, advertising and sales expenses jumped by 71 percent to N44.44 billion in 9M 2022 from N25.9 billion in 9M 2021.
Consequently, earnings before interest, tax, depreciation and amortization (EBITDA) increased by 14.1 percent y/y to N61.19 billion in 9M 2022 from N53.63 billion in 9M 2021. EBITDA Margin notched by 1.9 basis points to 44.1 percent in 9M 2022 from 42.2 percent in 9M 2021.
Interest rate hike (15.50%)
The company’s finance income jumped by 172.6 percent to N259 million in the nine months period ended September 2022 from N95 million in the corresponding period of 2021 despite a 12 percent decline in cash and cash equivalents to N14.69 billion in September 2022 from N16.73 billion as of December 2021.
Analysts at CSL Stockbrokers Limited stated that “we believe the management may have repriced their balances with the banks in line with the rise in interest rates.”
However, on a yearly basis, cash and cash equivalents were up 24.7 percent to N14.69 billion in the nine months period ended September 2022 from N11.78 billion in the same period ended September 2021.
Meanwhile, finance costs moderated, down 19.5 percent, to N6.19 billion in 9M 2022 from N7.69 billion in 9M 2021 as long-term loans and borrowings reduced by 18.53 percent to N5.57 billion in 9M 2022 from N6.83 billion as of December 2021.
Overall, the net finance costs increased by 35.8 percent to N16.30 billion in 9M 2022 from N12 billion in 9M 2021.
Total long-term and short-term loans in the period amounted to N113.7 billion, a 44.73 percent increase from N78.56 billion in September 2021. Further analysis of the cash flow from financing activities shows that repaid loans and borrowings amounting to N28.7 billion in September 2022.
Nigerian Breweries also paid interests of N2.43 billion and lease liability of N223 million in the nine months period of 2022.
FX illiquidity resulting in naira depreciation (N840/$)
Net loss in foreign exchange transactions remained elevated, up 135 percent to N10.36 billion in the nine months period ended September 2022 from N4.41 billion in the corresponding period of 2021 as FX illiquidity and consequent naira depreciation persisted.
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