Guinness Nigeria yesterday posted the company’s Q2-17/18 results showing a net profit of NGN2.09 billion (vs. NGN2.44 billion loss last year).
According to the report, the net profit was possible due to continued revenue growth, better margin, and lower opex and finance charges. The net profit was equally higher compared to Q1-17/18’s NGN41.4 million but below our NGN2.70 billion estimate and the consensus expectation of NGN2.8 billion.
The giant brewer’s revenue grew by 11% y/y and 36% q/q, with sales sustained by festive demand, strong marketing effort, and relatively higher prices.
Diageo, the parent company of Guinness Nigeria Plc, in its report said that over the last quarter, the group enjoyed positive price in Nigeria. The report also states that the company’s mainstream spirits and value beer (Dubic precisely) also recorded faster growth during the period. Sales volume was reported to have grown by about 17% y/y over H1-17/18. Value beer (23% y/y), Guinness (14% y/y), Malta Guinness (6% y/y), and mainstream spirits (22% y/y) recorded net sales growth in the first half.
While gross margin remained higher relative to the last financial year (+601 bps y/y), there was a 118 bps decline compared to the first quarter. Gross margin was lower by c.650 bps and has weakened consistently since reaching record 55% in Q3-16/17, reflecting, growing contribution of value beer and inflation of key raw materials (Sorghum to be precise).
Also worth highlighting is the opex which was lower by 12% y/y with admin and distribution expenses falling to 25% y/y and 24% y/y respectively. Marketing expenses, following strategic campaigns on Guinness, grew to 20% y/y. EBITDA margin of 15.4% was reported, significantly higher y/y, but lower by 96 bps q/q.
There was 65% y/y decrease in finance charges, comprising NGN583 million loss (NGN857 million in Q2-16/17) on foreign exchange transactions and N374 million (vs. NGN1.9 billion in Q2-16/17) related to interest expense on loans and borrowings and overdraft facilities. Compared to Q1, FX loss and interest expenses were lower by 74% and 77% respectively.
The company’s gross debt now stands at NGN12.5 billion post-Rights Issue, and the consequently reduced interest burden will remain supportive of earnings for the rest of 2018.
This post first appeared on Spirit Magazine