Reasons Nigerian Breweries was moved to medium price segment

Yesterday, Nigerian Breweries (NB) was taken down its cachet by the Nigerian Stock Exchange (NSE). They were degraded from their previous status of high-priced stock to medium-priced stock.

According to the NSE, Nigeria Breweries’ stock price dropped below the N100 paradigm on August 31, 2018 and traded below N100 up till close of business on December 31, 2018. This implied that Nigerian Breweries’ stock price traded below N100 in the past four months.

What the rules say 

Stock market rules set down by the NSE, classify stocks into three price categories.

Group A (high-priced stocks) for stocks priced at N100 and above.

Group B (medium-priced stocks) for stocks priced more than N5 but less than N100.

Group C (low-priced stocks) for stocks priced between N0.01 to N5.00.

Going by the rules, Nigerian Breweries can be categorized under group B, hence their new status of a medium-priced stock.

Effect of the category change

An implication of the shift could be a relative stickiness in terms of price. Medium priced stocks require a minimum of 50,000 units for a movement in price. Stocks in the Group A category, on the other hand, require a minimum of 10,000 units for the price to move.

Drivers of the decline

The decline in the company’s share may be largely due to the negative sentiment in the markets as a whole, as well as the company’s poor performance.

Competition from other brewers (notably International Breweries) firms, a weak macroeconomic environment, and higher excise duties kicking in, could lead to the firm recording a dip in profit for the 2018 financial year.

Nigerian Breweries is currently trading at N75.35 in today’s trading session on the Nigerian Stock Exchange, down N4.50, from the prior day. Year to date, the index is down

Results for the nine months ended September 30, 2018 show that revenue fell from ₦270 billion in 2017 to ₦254 billion in 2018. Profit before tax also dropped from ₦34.4 billion in 2017 to ₦22.4 billion in 2018. Profit after tax also dropped from ₦24 billion in 2017 to ₦14.7 billion in 2018.