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Earnings Review H1: Nigerian Breweries Shares Make Me Thirsty !!!



Nigerian Breweries has in recent years remained one of the most consistent performers in the Nigerian Stock Market. It has continued to improve on its revenues and earnings ensuring that shareholders receive steady dividends annually.


Revenue increased 23.87% to N136.51 in the first half of the year compared to the same period last year. However, over 50% of their revenue was eaten up by cost of sales. Cost of Sales was N74b for the period higher than the N56.79b incurred in the first half of 2011. Gross Profit Margin therefore was 45.8% lower than the 48% last year. This indicates a highly competitive business environment as well as reflecting increase in price of raw materials.

Operating Expense

Operating expenses increased 20.45% to N30.26b in the first half of the year. Selling, General and Admin expenses as a percentage of gross profit was 48.4%. The impact of the rising operating expenses lowered operating profit margin from 26.1% to 24.2%.

Finance Cost

Finance Cost ballooned to N3.79b in the first half of this year just as long term loans increased 8.5% to N51b. Their debt of N51b is roughly 67% of the company’s Net Assets but just 6% of its Market Capitalization. However, rising finance cost is bound to affect profits in the near term as revenue from new investments may not materialize soon enough. Finance Cost of N3.8b is almost 12% of the company’s operating profit, though manageable and lower than my trigger of 15%, if not curtailed may start to eat deep into the company’s cash reserves and ability to fund new investments. This already show in its cash reserves, down 79% to N4.5b (from N21.8) in just six months.

Profit After Tax

Despite spike in interest cost the company was still able to grow profits by 7% to N24.6b in the first 6 months of 2012. Nigerian Breweries, with its dominance in the beverage market in Nigeria will continue to face pressure to grow profits not just by growing in numbers or value but by its efficiency. For example, whilst profit after tax rose 7% to N24.6b compared to the same period last year, Profit Margin was down 13.5% to 18% of sales. Profit Margin a metric for how efficiently management was able to earn from sales will dip if cost is allowed to increase.

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Bottom Line

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Nigerian Breweries gets my black ink for beating earnings results in comparative terms. The stock is one every Investor must strive to have based on past results and consistency. The future looks a lot more competitive for the company with the entry of SAB Miller and renewed drive by state government’s to revive their ailing beer companies. But then, this is Nigerian Breweries and then local consumption for alcoholic and non-alcoholic drinks doesn’t seem to be dropping topping 2.9% of what Nigerian’s spend annually (2010 estimates). For new buyers, an entry price of N117 may be pricey given its price earnings ratio of over 23x. For the buoyant, that price may not matter much if you consider value and balance it can bring to a portfolio. But for the kobo Investor, the thirst to own an NBL stock may just be too pricey to quench.



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Ugo Obi-chukwu "Ugodre" is a chartered accountant with over 16 years experience in financial management, corporate finance and financial analysis. He is also a retail investor and a personal finance advocate with over a decade experience investing in the Nigerian stock market.Ugo is the founder/Publisher of Nairametrics and blogs regularly on the website.



  1. Anonymous

    February 4, 2013 at 2:46 pm

    This is awesome,nigeria breweries worth investing in their stock like dangote group because it is more profitable and investors can put in their money and go back to 2006 Dangote sugar refinery plc sold their 500 unit shares for 1000Naira

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CBN “Naira 4 Dollar Scheme” Explained

What the CBN’s Naira 4 Dollar scheme means for your money.




In what appears to be an attempt to incentivize dollar remittances by all means possible, the Central Bank of Nigeria (CBN) released a circular to Deposit Money Banks (DMBs), International Money Transfer Operators (IMTO), and the General Public, advising that remittances paid into a bank account will attract an additional credit alert for every USD$1 received!

Yes, you read that correctly. The CBN will facilitate a special additional credit alert of N5 for every USD$1 received. In other words,

  • if someone sends you $10,000, you get an additional special credit alert for N50,000.
  • If someone sends you $100,000, you get an additional special credit alert for N500,000.

Who is eligible?

To be eligible, the diaspora remittances need to be processed and received from one of the registered IMTOs and funds received into a Bank account operated by the DMBs. (So, if you are receiving funds via Crypto sorry you are not eligible).

Additionally, the circular says this “incentive runs from Monday 8th March 2021 to Saturday 8th May 2021″. So, if you have plans to receive dollars, you can plan accordingly.

The circular is not clear how exactly the commercial banks will know which account to pay the extra special credits into. Although, that may be a question diaspora funds recipients will need to ask their DMB accounts officers to clarify for them.

How will this be funded?

The circular notes that the “CBN shall through commercial banks, pay to recipients the N5 incentive for every USD$1”. In other words, it is the CBN funding the cost of this special extra credit.

  • One would argue that given the costs of alternative incentives to attract dollars such as the special OMO window for FPI, this may be a cheaper alternative for the CBN.
  • But we will need to see the volume of expected remittance to be certain of that. Nigeria attracts about $5billion per quarter in remittances and only trails oil in terms of foreign earnings.

Why this matter to Nigerians?

Following the collapse of US Dollar inflows into the country, the CBN initially tried to balance its current account deficits and avoid an official devaluation by tackling FOREX demand (Think ban of 41 items, etc).

Finally, this short-term Naira-4-Dollar scheme will not be called an official Naira Devaluation. But a question is what do we call the new short-term price of N412.50 + N5.00? Maybe we can call it Naira Modulation.


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Nigerian Breweries leveraging, but stacking cash through rising input costs

The marathon continues for Nigerian Breweries with its 2020 financials.



Humanity might need more booze to survive the increasingly daunting intricacies of life, but Nigerian Breweries 2020 financial statement is proof that even the best can get caught up in the reality of changing business lifecycles.

Nigerian Breweries Plc had floored the market providing both alcoholic and non-alcoholic premium quality beverages across the nation. But with brands like Star lager beer launched as far back as 1949, Gulder lager beer launched in 1970, and even the family-friendly Maltina introduced as far back as 1976, it is only natural that both the old and new generation competition gives them a run for their market share.

Much like other old money companies, Nigerian Breweries has done its bit to remain relevant in the industry from creating new variants of existing favoured brands to paying dividends consistently annually for the past few years. Yet within the same period, the company’s financial statements have been a testament to its streamlined market share and reducing profits. The marathon continues with its 2020 financials. The industry giant may as well be setting itself up for a debt quagmire peradventure its projections do not match the true reality of events.

READ: How COVID-19 has changed Nigeria’s consumer goods & industrial markets –KPMG

2020 financials: A tale of higher costs & larger debts

2020’s unfavourable financial/ business environment led to the increase in the prices of raw materials and disruptions in logistics for many Nigerian-domiciled businesses including Nigerian Breweries. Raw materials and consumables witnessed a 17% increase despite the marginal growth in revenue.

While the group’s 2020 results revealed a 4.35% increase in revenue from N323 billion in the prior year to around N337 billion, these gains were curtailed by a higher-than-par increase in cost of sales which had risen by 13.9%, from the N191.8 billion expended in 2019 to N218.4 billion as its 2020 financials reveal and interest rates going way up.

READ: Flour Mills and its diverse challenges

The company’s lower operating expenses were not enough to salvage the disruption caused by the raging interest expense following increased charges paid on bank loans and overdraft facilities as well as the significant increase in overall debt. Between 2019 and 2020 alone, long term loans and borrowings increased by 974% from N4.8 billion to as much as N51.8 billion. Even trade and other long term payables increased by 35%.

In its financials, the company noted that it has revolving credit facilities with five Nigerian banks to finance its working capital. The approved limit of the loan with each of the banks range from ₦6 billion to ₦15 billion (total of ₦66 billion) and each of the agreements had been signed in 2016 with a tenor of five years. The Company had also obtained Capital and Working capital finance from the BoI in 2019.

READ: Manufacturing sector in Nigeria and the reality of a “new normal”

It is no news that the company is involved in diversified lease arrangements. Following reclassifications made in 2019 to some of its lease assets, the 2020 asset base also witnessed significant increase in Right of Use Assets which increased by 288%% from N11.1 billion to N42.9 billion. Yet, the fact that in one year, interest expense on Lease Liabilities rose from N19.7 million in 2019 and to a whopping N4.171 billion shows that the company is taking way more debt than its books require.

But what’s it using all the cash for?

Beyond rising material costs, borrowing costs have been huge and the annual interest payment by virtue of these loans make the possibility of higher profits for the company a mirage. That said, the overall increase in total liabilities might not have been such a bad idea if the funds were being used to increase revenue and profits. But having a huge chunk of all that money in cash creates a different kind of challenge. Cash and bank values in its statement of financial position significantly increased by 377% from N6.4 billion in 2019 to N30.4 billion in 2020.

Is the cash being held to mitigate possible challenges of the volatile economy or are they being used to pay dividends? Even at a share price of N52 per share, the company’s price-to-book value sits at 2.5816, testament of its dire overvaluation. Consequently, there is an ardent need for the company to come up with newer ways to attract the wider market and keep its book in the green with a little less external funding.

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