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Nigerian Breweries Plc results show standalone EPS of NGN0.64

Nigerian Breweries Plc (NB) published its Q2-22 unaudited financials last week, reporting a standalone EPS of NGN0.64 (Q2-21: NGN0.01), bringing H1-22 EPS to NGN2.32 (H1-21: NGN0.96).

The EPS growth was supported by the sturdy topline growth (+31.0% y/y) recorded in the reporting period.

Revenue grew by 31.6% y/y (H1-22: +31.0% y/y) in Q2-22. We believe that headline price increases instituted across NB’s product categories, particularly in the premium segment supported the topline growth. In addition, we also believe that revenue would have benefitted from an increased volume outturn following the expansion activities at its Ama brewery and resilient demand from on-trade channels (hotels, bars, restaurants, clubs, etc.), which account for c.64.0% of beer industry sales. However, on a q/q basis, revenue declined by 1.1%.

Gross margin came in at 41.3% in Q2-22, 553bps higher than Q2-21’s print (H1-22: 43.3%), as revenue (+31.6% y/y) grew faster than COGS (+20.2% y/y). In addition, we think that the continued growth in the high-margin premium segment driven by the Heineken brand has been positive for price/volume mix and provides evidence that premiumisation continues to yield positive results.

OPEX increased by 42.0% y/y in Q2-22, resulting in an operating expense ratio (OER) of 33.1% (Q2-21: 30.8%). The growth in OPEX was due to a 52.1% y/y increase in marketing and distribution expenses (84.9% of total OPEX), reflecting the brewer’s continuous focus on increasing brand visibility. Nonetheless, EBIT and EBITDA increased by 123.5% y/y and 41.8% y/y to NGN12.33 billion and NGN21.75 billion, respectively. Sequentially, EBIT (+381bps) and EBITDA (+115bps) margins improved to 9.0% (Q2-21: 5.2%) and 16.0% (Q2-21: 14.8%), respectively.

Elsewhere, net finance charges grew by 43.4% y/y, due to a 106.2% y/y surge in the company FX losses due to exposure from its foreign currency denominated payables, amid a higher finance income (+141.8% y/y).

Overall, the company recorded a PBT of NGN5.13 billion in Q2-22 (Q2-21: NGN494.27 million). Following a NGN179.05 million tax credit in the period, PAT came in higher at NGN5.31 billion (Q2-21: NGN133.37 million).

Comment: We are impressed with NB’s ability to deliver growth in its top and bottom lines despite the prevailing constraints (FX illiquidity and elevated inflation) existent in the operating environment. Overall, we believe NB remains on track to deliver positive earnings in 2022FY underpinned by a favourable price/volume mix and continuous improvements in its premiumisation strategy. Our estimates are under review.