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Home Opinions Blurb

Initial Analysis: Looks Like Nigeria Breweries Is In Trouble Waters

Nairametrics by Nairametrics
October 27, 2016
in Blurb, Spotlight
Nigerian Breweries Plc, Nigerian Breweries considers price increase as excise duties hike bites, Nigerian Breweries annual general meeting AGM
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Nigerian Breweries Plc (NB) released its unaudited 9M 16 financial statements, wherein revenues rose 3.6% YoY to₦223 billion while PBT and PAT declined 26% and 23% YoY to N37 billion and N26 billion respectively. In particular, Q3 16 result reveals significant deterioration in earnings with PBT and PAT plunging 66% YoY and 78% YoY to N2 billion and N1 billion respectively. Nonetheless, NB declared an interim dividend of ₦1 per share which implies a dividend yield of 0.7% using last trading price of ₦146.

 

Overall, steep decline in earnings stemmed from sizable gross margin pressures over the quarter (-13pps YoY to 36%) with NB’s substantial local raw material sourcing exposing it to pressures from elevated domestic cereal prices (YoY: sorghum: +66%, Maize: +70%). In addition, we believe rising share of lower margin value beer in sales mix heaped more pressure on gross margins.

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In the review period, NB’s 49% YoY cut in administrative expenses led to significant decline in OPEX (-12% YoY) and drove moderation in operating pressures with EBIT margins shedding a relatively tamer 8pps YoY  to 6.1%.

 

Currently, NB trades at a P/E of  35.6x compared to Bloomberg Middle and East Africa Peers at 36.45x. Our model is under review.

 

More analysis to follow.

 

nb

Tags: Consumer GoodsNigeria Breweries
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Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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