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GUINNESS NIGERIA PLC FY'22 Earnings Review - Dividend surprise on record PAT performance

Somber fourth quarter dampens FY earnings momentum Although the company had shown an impressive performance in the 9M period, the FY performance was below expectation as PAT (most evidently) increased by only ₦0.4 billion in the Q4 period, compared to an average of ₦5 billion for the preceding three quarters. The dismal Q4 performance was a combination of higher operating expenses and weaker demand, as consumers began to trade off against volumes in response to tougher product pricing and generally shrinking wallets. Nevertheless, looking at comparable years, GUINNESS’ Revenue in this year was quite spectacular. This was supported by stronger pricing (across both mainstream and premium segments) and volume growth from a rebound in on-trade sales, especially in their H1 period, although the most significant volume growth came from Malt, RTDs (Ready-to-drink) and Mainstream Spirits (MSS). Overall, Revenue shot up by 29% to 206.8 billion (Vetiva: ₦216.8 billion).

The journey to 20%                GUINNESS currently targets an operating margin of 18.2% by FY’23 (and 20% by FY’24), which is an 8.2% y/y rise from current margin levels. Given the magnitude of the expected increase, we suspect that it would largely be supported by price increments (notably across premium brands). However, given consumers’ increasing sensitivity to already high price points, we expect volumes to be weaker on the implementation of this strategy.