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GUINNESS NIGERIA PLC 9M'22 Earnings Release - Record Q3 profit props 9M Earnings

Upbeat margins in Q3 propel earnings The company's topline grew by 18% in the third quarter, with revenue reaching ₦50.3 billion (Vetiva: ₦53.7 billion). Spirits, which has witnessed significant growth across both the Mainstream (MSS) and International Premium (IPS) sub-segments and continues to produce significant margin, remains a major driver of the company's turnover. While we believe that volumes have improved y/y (especially with the company’s increased production capacity), we also believe that a rise in prices has had a greater impact on topline. As such, Guinness' gross margin improved 9ppts y/y to 41% as gross profit increased 49% to ₦20.7 billion during the time. Furthermore, with a ₦1.2 billion rise in OPEX, EBIT margin showed a significant jump from 9% in Q3’21 to 19% in Q3’22. Accounting for net finance income of ₦0.2 billion, and tax of ₦3.0 billion, PAT printed at a record high of ₦6.5 billion.

Sustained momentum consolidates 9M performance Meanwhile, given that topline growth in Q2 was slower than growth in the H1’22 period (+51% y/y), the company’s 9M Revenue grew at a slower pace (+39% y/y) to ₦154 billion. Likewise, the company's overall cost of sales was cushioned by the slower rise in Q3 cost of sales, with gross profit climbing 76% y/y to ₦57.2 billion for the 9M period (Gross margin: +8ppts to 36%). Largely supported by this, EBIT rose by 200% in the period to ₦22.9 billion, resulting in EBIT margin of 14% (9M’21: 6%). Overall, PAT came in at an impressive ₦15.3 billion, 12% higher than our ₦13.7 billion estimate for the period.

To close out the financial year, we expect Q4 Revenue to come in strong at ₦57.2 billion (+26% y/y), maintaining the trend observed in the 9M period. However, we leave our Revenue forecast unchanged at ₦216.6 billion (+35% y/y), given the slight topline miss in the 9M period. Meanwhile, we adjust our margin expectations modestly and project a PAT figure of ₦20.4 billion (FY’21: ₦1.3 billion).