Avior Capital Markets - Nigerian Breweries (NB) NB NL | Losing its froth

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Avior Capital Markets

Ross Hindle

NB NL | Losing its froth

The Nigerian beer market continues to experience intense competition. International Breweries' (IntBrew) aggressive push for market share negatively affected Nigerian Breweries' (NB). IntBrew now has 25% market share (FY '13: 6%) and NB's market share has declined 10pp to 60% over the past five years. IntBrew's aggressive pricing strategy forced NB to maintain prices. As a result, NB had to absorb input cost inflation and an excise increase, impacting operating margins (-5.2pp y/y). Backed by the large balance sheet of AB InBev, we expect IntBrew to continue its quest for market share gain (citing a target of 40% market share by 2021). We therefore do not forecast any ease in the current operating environment. We believe NB will struggle to grow volumes above the market over the next 24 months (averaging c.2% y/y vs c.4% y/y) and thus downgrade our rating on the counter.

22/02/2019 13 EN

Underlying

Nigerian Breweries

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NGNB00000005 Nigerian Stock Exchange Nigeria

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

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Analysts

Ross Hindle

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