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Company Results

Guinness share price declines by 54.91% YTD

Guinness share price declined by 13.14%, since its released audited results.

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Baker Magunda, Guinness Nigeria Plc, Baileys, Why Guinness is a stock to pick - RenCap 

The share price of Guinness Nigeria Plc, the third-largest brewer by market capitalization, has declined by 13.14% since the 28th of August, when the brewer released its audited financial results. 

Guinness Nigeria Plc, in its financial statements, indicated that revenue decreased by 21% to N104.38 billion, compared to the N131.5 billion revenue it reported in the same period of 2019. The company suffered a pre-tax loss of N17 billion, impacted by impairment losses amounting to N13.8 billion, due to the prevailing economic and COVID-19 impacted conditions.  

This has led to a reaction in the stock market, as the shares of Guinness on the day of this disclosure, shed a whopping 9.29% to close trading activities for the week in the red zone, at N14.15 per share. 

It is worthy of note that since the 28th of August, its share price declined by 13.14%, from N15.60 to N13.55 at the end of the trading session for today. It is 5 kobo higher than the N13.50 market open price from Monday, a week ago.

However, Guinness share price has lost 54.91% YTD, and it is currently trading 55 kobo higher than its all-time low of N13.00.

Threats to the financial strength of Guinness 

Recently, NAFDAC restated its plans to phase out alcohol sales in sachets, and small volume PET and glass bottles. This is a follow up to the 50% reduction in the production capacity of alcohol in sachets, and small volume PET or glass bottles. 

This policy has raised concerns, as it is expected to affect Guinness’ revenue, since the company expanded the Ogba Brewery, by adding a PET line in 2018. 

However, Guinness’ exposure to the complete phasing out of alcohol sales in sachets, comes from its popular Orijin Bitters brand, and in the light of this, the revenue impact of the policy is expected to be marginal, as the exposure of Guinness to its whole spirits segment is 18%. 

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The company is currently finding it hard to refinance its five-year outstanding related party loan of $22.5mn (N8.7bn), due to dollar scarcity. With the management stuck with a possible rollover, it has to decide whether to keep it as a dollar debt or convert the debt to local currency.

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Omokolade Ajayi is a graduate of Economics, and a certificate holder of the CFA Institute’s Investment Foundation Program. He is a business analyst, and equity market researcher, with wealth of experience as a retail investor. He is a business owner and a stern advocate of Financial literacy, who believes in the huge economic prospect of the Nigerian Payment channels and Fintech space.

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Company Results

Dangote Cement incurs N97 billion taxes in 2020

The cement giant incurred its taxes on record.

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One of Nigeria’s largest indigenous companies and the largest by market capitalization incurred a company income tax of N97 billion for the financial year ended December 2020.

This s according to the information contained in its full-year audited financial statements for the period under review.

Dangote Cement Taxes. 2018 was a tax credit.
Source: Nairalytics Research

Why this matters?

Dangote Cement has enjoyed Pioneer Status over the years and has often been criticized for not paying enough taxes despite its mega-profits.

  • The N97 billion incurred in 2020 is the highest company income tax reported by Dangote Cement since it became listed on the Nigerian Stock Exchange.
  • It incurred N49 billion in taxes in 2019 and got a tax credit of N89.5 billion in 2018.
  • Despite incurring N97 billion in taxes during the year, Dangote Cement’s actual tax paid was just N20.9 billion in 2020 compared to N4.6 billion paid a year earlier.
  • Tax incurred in the profit and loss statement is an accounting provision and is not always the actual tax paid in cash.
  • Putting it into context, the dividend paid during the year is N272 billion and interest payments to its creditors totals N48.2 billion.

Improved Cement Revenues

Despite the Covid-19 Pandemic, the Cement Giant reported full-year revenue of N1 trillion, the highest it has ever recorded since it was privatized almost 20 years ago. The company also reported a profit before tax of N373.3 billion only and a profit after tax of N276 billion, its highest since 2018.

Nigeria like most countries in the world has faced a challenging 2020 due to the impact of Covid-19 on the economy, especially the private sector. However, mega-corporations like Dangote Cement appear to have even performed better during the year. The cement industry in general also appears to have performed well during the year as the combined revenue of the top 3, Dangote Cement, Lafarge, and BUA rose to N1.47 trillion from N1.28 trillion.

The impressive result nonetheless, Dangote Cement’s margins remained strong during the year posting a gross profit margin of 57% in line with its 3-year averages. However, the higher taxes incurred in 2020 dropped profit margins to 26.7%. When compared to 2018 when it still enjoyed Pioneer status, the company posted profit margins of about 43%.

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Company Results

Dangote Sugar yearly revenue surge by 33%, announces a dividend of N1.50

Dangote Sugar Refinery Plc. recently declared a 33.0% Year to year growth in earnings to N29.8 billion for the financial year of 2020

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Dangote Sugar Refinery to merge with Savannah Sugar, Dangote was $4.3 billion richer in 2019, Dangote Sugar announces closed period, ban insider shareholders from trading , Dangote Cement: Weak revenue performance, elevated OPEX weigh on earnings

Dangote Sugar Refinery Plc via the Nigerian Stock exchange recently declared a 33.0% Year to year growth in earnings to N29.8 billion for the financial year of 2020

The company also announced a dividend of N1.50 (vs N1.10 total dividend in 2019).

Dangote Sugar’s revenue expanded by 33.0% YoY amid strong volume growth in its 50 kg sugar offering (c.96.0% of total sales).

The company’s impressive outing amazed a significant number of stock pundits despite a surge in tax charges which partially offset some of the positive passthrough from border closures on earnings.

READ: Dangote Sugar Refinery: Revenue soars amid rising cost of sales

Gross margin expanded by 1.31ppts Year to Year to 25.08%, which points to the effects of recent cost-containment measures and the slump in global raw sugar prices in 2020 amid the COVID-19 pandemic.

The raw sugar price dropped to as low $0.09/lb in 2020 and traded c.$0.13/lb on average during 2020 (-4.38% YoY)

What you should know: Dangote Sugar Refinery Plc (the Company) was incorporated as a Public Limited Liability Company on 4 January 2005, commenced operation on 1 January 2006, and became quoted on the Nigerian Stock Exchange in March 2007.

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Its current shareholding is 68% by Dangote Industries Limited and 32% by the Nigerian public.

The principal activity of the Group is the refining of raw sugar into edible sugar and the selling of refined sugar. The Group’s products are sold through distributors across the country.

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READ: Buhari to commission phase 1 of brand new refinery this week

That being said, in spite of such impressive results from the N217 billion valued company experienced a surge in operational cost partly due to persistent FX scarcity.

Dangote Sugar reported a four-fold increase in finance cost, which can be largely attributed to the foreign exchange loss in its ordinary business operations, driven by persistent FX shortages and naira repricing at the exchange rate windows.

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