Guinness Nigeria Plc FQ2 17 - Currency pressures drive another sober result
​Guinness Nigeria Plc (Guinness) released its unaudited 6M 17 financial statements which revealed post-tax loss of ₦4.66 billion. The weakness in earnings was largely driven by elevated input cost (+55% YoY to ₦43.9 billion) which offset impact of revenue growth (+19.4% YoY to N59.5 billion) in the review period.
FX loss and unfavourable sales mix weigh on margins: Similar to FQ1 17, Guinness was faced with an elevated input cost environment which drove COGS sharply higher (+72% YoY, +67% QoQ) to N27.5 billion (FQ2 17E: N27.0 billion). At the earnings call, management noted that 53% of input cost pressures emanated from FX fluctuations as, relative to FQ2 16, the naira was 55% weaker. Elsewhere, Guinness reported further pressures from higher refined sugar prices (+191% YoY) as well as sharp jumps in sorghum (+227% YoY) and maize (+ 104% YoY) prices. Accordingly, gross margin plunged (-18.4 pps lower YoY) to a 20- quarter low of 24.6%.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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