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GUINNESS NIGERIA PLC 9M'24 Earnings Release - Macro headwinds drag performance

Topline expands on price increases. In Q3’24, Guinness Nigeria demonstrated robust revenue growth, despite the prevailing macro challenges. The company delivered a satisfactory topline performance, driven primarily by increased pricing amid a decline in sales volume. Revenue for the quarter surged 44% y/year to ₦77.7 billion, as a result of this higher pricing. However, the company’s margins came under pressure due to rising costs. The jump in cost of sales outpaced revenue growth, rising by 56% y/y to ₦56 billion. Consequently, gross margins contracted by 5.5ppts y/y to 28% (Q3’23: 33.5%). This resulted in a more moderate expansion of gross profit, which grew by 20% y/y to ₦21.7 billion. The quarter’s topline result extended what was observed in previous quarters of the 2024 fiscal year, given the persistent macro challenges being faced. Thus, 9M’24 gross margin declined by 4ppts to 31%. As a result, we only saw a moderate expansion in gross profit (12% y/y) for the period to ₦67.7 billion.

Outlook: bottom-line to stay pressured amidst headwinds, full year loss expected. Looking ahead, we expect the macro headwinds to persist in Q4’24. Consequent upon this, we have modified our full year projections for GUINNESS. For revenue, we project a 28% rise y/y to ₦293.7 billion, as prices are expected to stay elevated. On the cost front, we still expect to see pressures, given higher inflation and currency pressures. Thus, we project a 36% increase y/y in cost of sales to ₦205.6 billion, while we anticipate an 11% rise y/y in OPEX to ₦6.6 billion. This will bring operating profit to ₦23.5 billion, up 18% y/y. Meanwhile, given the company's exposure to foreign exchange-denominated loans, we anticipate higher finance charges, primarily due to the pass-through effects of the currency devaluation. Thus, we see finance costs printing at ₦119.7 billion, up 125% y/y. On this note, our full-year bottom-line projection indicates a loss of ₦55.6 billion.