Guinness Nigeria Plc (Guinness) released its unaudited financial results for 6 months ended 31st December 2015 reporting a revenue drop of 9.8% YoY to N49.8 billion while pretax profits and profit after tax dropped 64.5% and 65.5% YoY to
N1.7 billion and N1.2 billion respectively.
- In contrast to the last four quarters where top-line growth averaged 10.2%, Guinness reported 17.9% YoY contraction in FQ2 16 revenue to
N28.1 billion. Parsing through management commentary, sales decline largely stemmed from declining Orijin volumes, which offset double digit performance of Guinness, Malta Guinness, and Satzenbrau.
- In a similar vein, FQ2 16 Opex declined slower than revenues (-9.5% YoY to
N10.3 billion) with opex-to-sales ratio expanding 338bps YoY to 36.5%.
- The opex pressures reflect slower cutback in S&D expenses over the festive period to support Guinness sales. Consequently, FQ2 16 EBIT plunged 52.7% YoY to
N1.9 billion with related margins falling 5.1pps YoY to 6.9%.
- Guinness trades at a current PE of 22.3x relative to domestic peers Nigerian Breweries Plc and International Breweries Plc at 20.4x and 32.2x respectively.
- Whilst last trading price is at a 20.5% discount to our last published FVE (
N139.20) for the stock, the steep decline in earnings should result in a downgrade on our previous STRONG BUY Rating on Guinness post adjustments to our forecasts.