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Quick Take: Poor performance extends into Q3

International Breweries (IntBrew) reported a 16.7% y/y growth in Net Revenue to N97.3 billion in 9M 2019 from N83.3 billion in 9M 2018.

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poor, performance, International Breweries, Quick Take: International Breweries' poor performance extends into Q3

Poor performance: In its recently released financial reports for 9M 2019, International Breweries (IntBrew) reported a 16.7% y/y growth in Net Revenue to N97.3 billion in 9M 2019 from N83.3 billion in 9M 2018. On a q/q basis, Revenue dipped 14.6% q/q to N28.6 billion on the back of fewer festivities within the quarter.

Comparing Q3 2019 to Q3 2018 (an attempt to see Revenue trends ex the impact of seasonality), we observed weakness in Q3 2019 Revenue as it declined 5.3% y/y compared to Q3 2018. Revenue was also down in Q2 2019 compared to Q1 2019. This may signal a slowdown in revenue growth for IntBrew who eroding competitors’ market share using discount pricing strategy.

[READ MORE: Quick Take: Seasonality and high leverage weigh on earnings]

Cost of Sales (adjusted for depreciation) grew 29.0% y/y to N55.1 billion in 9M 2019 from N42.7 billion in 9M 2018. The growth in Cost of Sales was driven by a 28.0% growth in Raw material cost which is faster than the growth in Revenue which implies increasing cost per unit. We believe the growing cost is due to higher barley prices.

Consequently, gross margin declined, down 5.4ppts y/y to 43.4%. Nevertheless, Gross profit was up 3.8% y/y to N42.2 billion in 9M 2019 from N40.7 billion in 9M 2018 while it dipped 22.3% q/q to N11.0 billion in Q3 2019.

Operating expenses grew significantly, up 33.1% y/y to N33.1 billion in 9M 2019. The rise in Opex was driven by surge in Marketing & Promotion Expenses (up 36.0% y/y) and Administrative Expenses adjusted for depreciation (up 27.3% y/y). Marketing & Promotion Expenses was higher for 9M 2019 as all key line items – Transport & Distribution (up 36.5% y/y), Employee Benefit Expense (up 33.9% y/y) and Advertising & Promotion Expense (up 36.1% y/y) – were up for the period.

Meanwhile, higher Staff and Business Running costs drove Administrative Expenses higher. Consequently, EBITDA fell 48.6% y/y to N8.0bn in 9M 2019 from N15.6 billion in 9M 2018 while EBITDA margin declined 10.5ppts to 8.2% in 9M 2019.

Furthermore, Depreciation Expense grew significantly, up 61.5% y/y to N20.3 billion in 9M 2019 from N12.6 billion in 9M 2018. We note the jump in Depreciation Expense is due to the commencement of booking depreciation charge on Property, Plant & Equipment associated with the opening of the Sagamu plant. These assets were previously classified as Assets in Course of Construction and were not depreciated. Against this backdrop, IntBrew recorded a Loss before Interest & Tax of N10.9 billion in 9M 2019.

Deal book 300 x 250
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[READ ALSO: Quick take: Stanbic IBTC’s decent performance]

IntBrew’s bloated debt book continues to pressure earnings as Net Finance cost increased 45.8% y/y to N13.1 billion in 9M 2019 from N9.0 billion in 9M 2018. The company took additional short-term debt of N29.0 billion in 9M 2019, bringing outstanding long-term debt obligation to N153.5 billion and debt to equity to a precarious 13.0x. Consequently, loss before tax worsened to N24.1 billion in 9M 2019 from N9.2 billion in 9M 2018 while a tax credit of N7.6 billion cushioned loss after tax to N16.4 billion.

performance, poor, International Breweries

______________________________________________________________________

CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Stanbic 728 x 90

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,

NIGERIA.

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Business

Twitter to establish its first African presence in Ghana

Twitter has announced Ghana as headquarter of its operations in Africa.

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Jack Dorsey, CEO of Twitter Inc has announced today in a tweet that the company is establishing a presence in Africa.

“Twitter is now present on the continent. Thank you, Ghana and Nana Akufo-Addo,” Dorsey tweeted.

As part of its mission to serve the public conversation, Twitter is making it easier for everyone to join in and provide more relevant experiences for people across the world.

Why Ghana as a choice…

Twitter stated that it chose to expand to Ghana first because the country is an advocate of free speech, online freedom, and the Open Internet.

In a blog post the company said, “In line with our growth strategy, we’re excited to announce that we are now actively building a team in Ghana. To truly serve the public conversation, we must be more immersed in the rich and vibrant communities that drive the conversations taking place every day across the African continent.”

“Furthermore, Ghana’s recent appointment to host The Secretariat of the African Continental Free Trade Area aligns with our overarching goal to establish a presence in the region that will support our efforts to improve and tailor our service across Africa.

“Whenever we enter new markets, we work hard to ensure that we are not just investing in the talent that we hire, but also investing in local communities and the social fabric that supports them. We have already laid foundations through partnerships with Amref Health Africa in Kenya, Afrochella in Ghana, Mentally Aware Nigeria Initiative (MANI) in Nigeria, and The HackLab Foundation in Ghana. As part of our long-term commitment to the region, we’ll continue to explore compelling ways we can use the positive power of Twitter to strengthen our communities through employee engagement, platform activation, and corporate giving,” Twitter stated.

The company is also looking to hire specialists to join several teams to operate in product, design, engineering, marketing and communications.

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Reacting to Dorsey’s announcement, Ghanaian President, Nana Akufo-Addo, in a tweet said that the government and people of Ghana welcome welcomed the micro-blogging site.

“The choice of Ghana as HQ for Twitter’s Africa operations is excellent news. Government and Ghanaians welcome very much this announcement and the confidence reposed in our country,” President Akufo-Addo tweeted.

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Business

Youths need critical skills to strengthen Nigerian economy – Bankers Committee’s FITC

Nigerian youths need to embrace adequate skills and create a pool of well-engaged workforce to directly strengthen the nation’s economy.

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Financial Institutions Training Centre (FITC)

Bankers Committee’s FITC has called on Nigerian youths to embrace adequate skills and create a pool of well-engaged workforce to directly strengthen the nation’s economy.

This was disclosed by the Managing Director, FITC, Chizor Malize, during the launch of its Future of Work Academy for Youths on Monday.

According to her, the initiative is to continuously bridge the knowledge gap in the country and Africa at large, as it is expected to equip the youths for the peculiar needs of the Future of Work.

It also seeks to solve the prevalent issue of producing university graduates with degrees and skills that have limited practical use in the current global job market, as well as the requirements for the Future of Work.

She said, “The world of work is changing rapidly, and competition for the right talent is fierce. Graduate talents have for decades been primarily identified and employed based on academic excellence, however, in the emerging world of work, creativity, innovation, and work-ready skills have become the non-negotiable indicators for competitive advantage, and to evaluate capabilities.

“It is therefore important for youths to build critical skills, that will equip them for the requirements of the Future of Work in the ever-evolving business landscape. The value FITC FOWA is bringing to corporations at this time cannot be overemphasized. By equipping youths and creating a pool of well-engaged workforce for organizations, FITC FOWA will be directly strengthening the economy and the society in general.”

Malize added that the initiative offers essential courses in Data Science, Data Analytics, Coding, Digital Marketing, Graphics Designs, MS Excel & Analytics, Digital Marketing, Use of PowerPoint, and other key areas that have been strategically packaged to educate, enlighten, and upskill undergraduates and graduates with the vital skills for the Future of Work.

What you should know

Owned by the Bankers Committee (CBN, NDIC and all Nigerian deposit money banks), FITC was established in 1981 as a non-profit organisation limited by guarantee to provide capacity building and serve as a knowledge hub for the Nigerian Financial Services Sector.

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