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INTERNATIONAL BREWERIES PLC Q1'22 Earnings Release - Impressive Q1 profit underpinned by pricing upswing

International Breweries PLC released its Q1’22 financial statements, where it reported a sizable 48% y/y growth in topline as well as a PAT of ₦0.7 billion (its second quarterly profit since the consolidation) from a loss of ₦2.5 billion the previous year. The impressive PAT performance was underpinned by significant growth in margin, as well as increased reported finance income. Like its counterparts in the brewery industry, International Breweries in the past two quarters raised prices across its portfolio, which, added to its ramped-up volumes and pushed Revenue 48% higher to ₦57.5 billion for the quarter.

Furthermore, despite the 35% y/y rise in admin and marketing expenses to ₦12.1 billion and a ₦4.0 billion jump in other expense (from ₦0.1 billion in Q1’21) arising from net FX losses; International Breweries’ EBIT and EBIT margin improved considerably to ₦3.7 billion and 6% respectively, from a loss of ₦2.5 billion and operating margin of -7%, induced by the marked rise in gross margin. Identically, whilst the company’s net finance costs snowballed 176% y/y to ₦1.8 billion, subdued by a ₦1.5 billion rise in finance income; the company turned a profit, with PBT placing at ₦1.9 billion (Q1’21 Loss before tax: ₦3.2 billion) and PAT at ₦0.7 billion (Q1’21 loss after tax: ₦2.2 billion).

So far, despite the significant progress made, specifically on margins, the pressure points for International Breweries remain, its FX exposure and financial leverage and improving these, would also be key to sustaining its nascent profitability. However, with persisting challenges in sourcing FX and a still-high debt level, would continue to keep profit in check. Overall, in line with the improved margin for the Q1 period, we forecast PAT for the full year at ₦4.0 billion, with gross margin and EBIT margin at 32% and 4% respectively.