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GUINNESS NIGERIA PLC 9M'21 Earnings Release - PAT expands on improved optimization

In its 9M’21 earnings release, Guinness Nigeria reported a 35% y/y expansion in PAT to ₦1.8 billion (Vetiva Estimate: ₦0.8 billion), driven by a significantly higher y/y revenue performance as well as cost-containment across some major expense lines. In Q3, Guinness’ topline grew 54% y/y to ₦42.6 billion, outpacing our expectation of 44% y/y (₦39.9 billion) and was mainly driven by the segments which the company has chosen to focus on strategically; Spirits, Malts and Stout (Guinness). Specifically, its Guinness segment has performed well in local markets, especially its recently released Guinness smooth brand. Furthermore, during the year, the company increased prices across its Spirits (Mainstream and International Premium) and RTD segments. Additionally, we recall that the company had to de-stock its distributors last year and had been focused on returning to a normal stock level; we believe that the company’s re-stocking efforts have met some success.

Revenue performance smooths over in 9M’21 Due to the significant growths in this quarter as well as in its Q1’21 period, Guinness’ 9M’21 Revenue came in 20% stronger y/y at ₦115.0 billion despite its less impressive y/y performance in its Q2’21 results, caused by logistics challenges during the quarter. For Q4’21, we believe that there is room for expansion in the spirits market, given its increased focus on the space. We also expect a possible price increase in the beer segment, following an increase by market leader, NB in this quarter. Lastly, in Q4’20, the company made its lowest revenue in years, providing a significantly low base and an avenue for exponential y/y growth in Q4’21. In line with these expectations and its performance so far in 9M’21, we revise our FY’21 revenue estimate to ₦156.8 billion (Previous: ₦137.6 billion).