Guinness Nigeria Plc (GUINNESS) published its 2023FY audited results after market close yesterday (27 July), reporting a loss per share of NGN8.29 (vs EPS of NGN7.15 in 2022FY). The negative outturn in earnings resulted from higher net finance charges.
GUINNESS reported revenue growth of 10.9% y/y in 2023FY (2022FY: +28.9% y/y). According to management, the revenue growth was driven by (1) strategic pricing across categories like Stout, Ready-to-Serve, and Mainstream Spirits to counter cost inflation and, (2) successful positioning of its product mix. On pricing, our findings reveal that the brewer increased prices by c.18.3% in the year, with a larger portion of the price increase in the Stout (c.26.5%) category. On a quarter-on-quarter basis, revenue grew by 5.4%, supported by higher pricing in the period.
Gross profit margin contracted by 108bps y/y to 34.1% (2022FY: 35.1%) in 2023FY, driven by the increase in the cost of sales (+12.8% y/y), which outpaced revenue (+10.9%) for the year. Cost pressures from the double-digit inflationary environment, currency depreciation and FX illiquidity underpinned the higher cost of sales.
In line with the brewer’s strategic focus and growth drive, operating expenses rose by 14.0% y/y in 2023FY (2022FY: 40.3% y/y). As a result, EBIT and EBITDA margins settled lower at 10.2% (-138 bps) and 14.3% (-140bps), respectively.
Meanwhile, net finance cost surged (201.4x increase year-on-year) to NGN45.50 billion in 2023FY, following a 24.0x increase in finance cost to NGN53.29 billion (2022FY: NGN2.13 billion). The higher finance cost arose from a significant unrealized FX loss of NGN49.10 billion (compared to NGN1.43 billion in 2022FY). This loss was driven by various factors, including remeasurement of other foreign currency balances (17.5x increase to NGN21.44 billion), as well as substantial increases in exchange differences on foreign currency letters of credits (NGN19.61 billion) and foreign currency intercompany loans (39.8x increase to NGN8.05 billion).
Furthermore, GUINNESS recorded a loss before tax of NGN22.14 billion in 2023FY (vs profit before tax of NGN23.67 billion in 2022FY). With a tax credit of NGN3.97 billion, the net loss came in at NGN18.17 billion (vs net income of NGN15.65 billion in 2022FY).
Management conference call on 4 August 2023 at 01:00 PM: Click here to register.
Comment: GUINNESS’ performance in the period, particularly in Q4-23, was significantly affected by challenges resulting from the devaluation of the local currency and ongoing FX illiquidity. Despite these increased cost pressures, we like that the brewer’s operating profit remained resilient. Looking ahead, we expect GUINNESS to benefit from price increases in various segments, including stout, ready-to-serve, mainstream, and premium spirit offerings. Also, the company’s efforts to optimize its route-to-market strategy, enhance distribution channels, and position its innovative portfolio should contribute to its growth. Nevertheless, the brewer continues to face significant hurdles due to weak consumer spending, unfavourable regulations, and currency devaluation. Our estimates are currently under review.
