GUINNESS published its 9M-22 (end-Mar 31) unaudited results last week, reporting growth of 199.6% y/y in Q3-22 standalone PAT. Similarly, Q3-22 EPS grew by 199.6% y/y to NGN2.95 (Q3-21: NGN0.98), bringing 9M-22 EPS to NGN6.98 (+731.2% y/y). The robust growth in EPS was supported by topline growth (+18.1% y/y) and net finance income.
Revenue grew by 18.1% y/y in Q3-22 (9M-22: +38.7% y/y) underpinned by price increases across brands, resilient consumer demand, and a favorable product mix.
According to management, revenue grew across all key categories driven by its strategic focus brands, Malta Guinness and Guinness, with strong growth recorded across the mainstream spirits (MSS), international premium spirits (IPS), and the ready-to-drink category (RTD). However, on a quarter-on-quarter basis, revenue declined by 18.4% q/q.
Gross margin expanded (+265bps) to 41.1% in Q3-22 (9M-22: +8bps to 35.9%) as the revenue (+18.1% y/y) grew faster than the cost of sales (+3.1% y/y).
In the views of the management, the rise in the cost of sales was driven by (1) the increase in sales volume, (2) a shift towards the production of more expensive “can” products, (3) currency devaluation impacting the cost of imported raw materials, and (4) the increase in the air freight cost. The stronger margin also indicates the resilient growth of the company’s key categories – MSS, IPS, and RTD.
OPEX increased by 11.6% y/y in Q3-22 (9M-22: +38.5% y/y), following a higher marketing and distribution expenses (+19.2% y/y) in the period. The growth in operating expenses reflects the higher volumes following the recovery in demand from on-trade channels and increased marketing investments underpinning the brewer’s strategic focus brands and categories. Despite the growth in OPEX, operating profit (EBIT) increased (+136.8% y/y) to NGN9.29 billion in Q3-22, underpinned by a higher gross profit (+49.3% y/y). Consequently, EBIT margin printed 18.5% in Q3-22 (Q3-21: 9.2%). Accordingly, EBITDA came in higher (+91.4% y/y) at NGN11.41 billion in Q3-22, translating to an EBITDA margin of 22.7% (Q3-21: 14.0%).
GUINNESS recorded a net finance income of NGN0.20 billion in the quarter (vs net finance costs of NGN0.75 billion in Q3-21), supported by the reduction in finance cost (-66.2% y/y), as foreign currency denominated payables benefitted from a stable Naira exchange rate during the period, and a positive outturn in finance income (Q3-22: NGN0.44 billion vs loss of NGN0.05 billion in Q3-21).
Overall, pre-tax profit grew by 199.6% y/y to NGN9.50 billion in Q3-22 (9M-22: +403.4% y/y). A tax expense of NGN3.04 billion resulted in a PAT of NGN6.46 billion in Q3-22 (Q3-21: NGN2:16 billion).
Analysts at Cordros Capital expect GUINNESS to maintain resilient topline growth, reflecting positive results from a favourable product mix, increased investments in its brands, and operational efficiencies.
