NIGERIAN BREWERIES PLC Q1'22 Earnings Release - Premium focus yields margin gains
| In the first quarter of the year, NB reported significant improvement in its performance, with topline and bottom-line expanding by 30% y/y and 78% y/y respectively. We believe that the growth in the beer maker’s Revenue came down to a mix of volume and price increases. The Malt segment, which has been gaining traction industry-wide may be responsible for the growth in turnover. Still, we recall that management indicated (as at FY’21) the success of its push for increased volumes from its premium brands across Lager and Malt. Furthermore, we believe the price increases implemented mid-FY’21 across its segments was also key to growing Q1 Revenue to ₦137.8 billion. | |||||
| However, the company reported a negative cash flow from operations of ₦11.2 billion, which it had to supplement through additional debt. Although NB borrowed ₦19.6 billion in the quarter, interest expense declined 61% y/y to ₦1.2 billion. Accounting for this reduced interest expense and a ₦1.8 billion loss on foreign exchange transactions, PBT grew 80% y/y with PBT margin at 15%, while PAT printed at ₦13.6 billion. With this improvement, NB’s EPS for the Q1 period increased sizably from ₦0.90 to ₦1.69. This bodes well for investors who plan to hold the stock till the end of the year, given NB’s 100% dividend policy. | |||||
| Looking ahead, we adjust our estimates in line with the company’s current performance. However, we remain cautiously optimistic, given the disruptions to global supply chains. Furthermore, we still maintain our expectation of dampened margins (albeit slightly), given the anticipated impact of inflation on expenses. Overall, we adjust our Revenue forecast 9% higher to ₦535.7 billion, with PAT projected to print at ₦29.8 billion. We update our one-year target price to ₦58.52 and rate the stock a HOLD. |
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