Earnings Analysis 2013 FY: Guinness Nigeria Plc Hurt By Poor Revenue Growth

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Guinness Nigeria Plc released its 2013 FY results showing “net revenues” grew 5.2% to N122.4billion (2012: N116.4billion). Gross profit however remained flat growing by just 1.6% to N56billion. Operating profit however dropped 6.4% to N19.8billion (2012). Profit after tax at the end of the period was 11.8billion a 16.5% drop from the N14.1billion posted a year earlier

Key Highlights

• Revenue growth of 5.2% is an improvement from the 2.1% posted between 2011/2012. However it is much lower than the preceding 13% CAGR.
• Nigeria Breweries for example post a revenue growth of 17% in 2012 and 7% in the first half of 2013. 
• Gross Profit margins dropped 3%. This was due to the 8.3% increase in Cost of sale
• Operating expenses as a percentage of Gross profit also rose to 64.7% (2012: 61.7%). This is as a result of a N2billion addition to expenses.
• It’s main competitor NBL has a Opex to Gross Profit percentage of under 55%
• Finance cost also more than doubled in 2013 to N3.6billion as the company added about N4billion more in debt during the period
• Total external debt at the end of the year was about N21billion (2012: N16.7billion)
• Debt to equity remains moderate at 46%
• Guinness ended the year with a negative working capital of N19billion.
• The company is still able to generate an impressive operating cash flow of about N24billion. But this is basically because it owes its suppliers more money that its debtors owe them. The extra N24billion could easily had been wiped out had they paid their trade creditors.
• The company has been investing aggressively in the last few years. It spent N14billion in Net investment in 2012 and easily matched it in 2013.
• Despite the drop in profitability, return on equity and return on asset is still high at 28% and 17% respectively. 
• Profit Margins are also fairly okay at 9% and asset turnover crosses the 100% band.
• Guinness proposed a dividend of N7 per share which translates to a current yield of about 2.6%. Current share price is N256.
• They close their register on October 21, 2013.