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NIGERIAN BREWERIES PLC FY'20 - A good pace of recovery

Nigerian Breweries Plc released its FY’20 Financial Statements where although topline performance was an impressive surprise, the strength could not filter through to profits due to an already weakened bottom-line. However, should the company maintain this pace, we expect a relatively quick recovery in profits.

Frothing Revenue despite early setbacks Given the disruptions to activity in October and the ensuing vandalism to several wholesale and retail outlets (domestic trade contracted by 3% in Q4’20), we remained cautious on our revenue projections for the final quarter and expected a modest ₦96.1 billion in turnover (a 10% y/y growth expectation). Thus, the company’s performance of ₦103.0 billion (+17% y/y) represents a 7% beat to our expectation. Whilst we believe that the revenue beat was as a result of the usual high demand from the festive season, we highlight some other potential undercurrents. Firstly, we believe that Guinness Nigeria’s de-prioritization of its Lager business (Guinness has the third largest market share in the lager space) added to NB’s push of its Goldberg and Tiger brands and may have expanded market share for the company. Furthermore, we believe that the volume increase from the company’s recent commission of its ₦5 billion ultra-modern PET factory (Polyethylene terephthalate is a strong and lightweight plastic used in packaging foods and beverages), which has the capacity to produce 24,000 plastic bottles per hour boosted its malt numbers as malt is a typical favourite during the festive period. Another tailwind, albeit probably mildly, may have been its recent launch of another premium segment drink, Desperados, a tequila-flavoured drink which could appeal to millennials who are more spirit-inclined but could also favour a beer. That said, after a devastating year to the brewery sector (as observed among other major players as well) and despite the weak performance in Q2’20 which bore the brunt of the lockdown, FY’20 topline grew 4% y/y to ₦337.0 billion (Vetiva estimate: ₦330.1 billion).

A brewing future NB has made several strides in the past quarter and year that we expect to monitor over this year. We believe that the continued push of its Tiger, Goldberg and now Desperados brands - which are premium brands - will support Revenues and Margins. Furthermore, the adaptation of most of its SKUs to plastic and can packaging and the possible market share gain from Guinness Nigeria could sustain this momentum. Thus, we expect an 8% y/y growth in turnover for 2021 to ₦ 364.0 billion, driven mainly by a return to normal volumes.