Guinness Nigeria Plc (GUINNESS) published its unaudited Q2-24 results this afternoon, showing a standalone loss per share of NGN3.57 (vs EPS of NGN0.58 in Q2-23) translating to a loss per share of NGN2.39 in H1-24 (H1-23 EPS: NGN1.84). The negative outturn in earnings was primarily due to a substantial increase in net finance cost (+385.8% y/y).
In Q2-24, GUINNESS achieved a 26.6% y/y increase in revenue (H1-24: +20.4% y/y), underpinned by (1) higher prices implemented across the brewer’s strategic focus categories, such as Stout, Ready-to-Serve, and Mainstream Spirits, and (2) an improved product mix on premiumization. On a quarter-on-quarter basis, revenue grew markedly by 39.5%, benefiting from festive-induced demand and increased sales from on-trade channels.
Despite the strong topline growth, the gross profit margin contracted by 319bps y/y to 33.5% (H1-24: -349bps y/y to 32.2%), undermined by a higher cost of sales (+33.0% y/y) print, stemming from persisting macroeconomic challenges such as inflation, currency depreciation and FX market illiquidity. Accordingly, the EBITDA margin contracted by 44bps y/y to 13.3% amid higher operating expenses (+15.2% y/y).
Further down, net finance cost maintained its uptrend, surging by 385.8% y/y in Q2-24, mainly driven by a 325.9% y/y surge in finance costs. The increase in finance costs in the period is attributed to a rise in accrued interest expenses (+245.0% y/y) and foreign exchange losses (+247.1% y/y). Despite the increase in finance costs, the brewer managed to reduce its total borrowings, as the total borrowings decreased slightly by 5.3% YTD to NGN60.35 billion (2023FY: NGN63.76 billion).
Overall, the brewer reported a pretax loss of NGN8.25 billion compared to a PBT of NGN3.19 billion in Q2-23. Following a tax credit of NGN420.23 million in the quarter (vs tax expense of NGN1.92 billion in Q2-23), the loss after tax settled at NGN7.83 billion (vs PAT of NGN1.28 billion in Q2-23).
Management call on Tuesday (30 January 2024) at 12.00 pm Nigerian time. Click here to register.
According to Cordros Capital, “While the brewer demonstrated strength in revenue growth in the period, the substantial increase in finance costs, majorly due to FX loss, impacted earnings in the period. Looking forward, we anticipate sustained revenue growth fueled by premiumization and a favourable price/volume mix. Nonetheless, the brewer faces significant FX volatility risk, prompting a decision to halt the importation of Diageo Premium Spirits.”
