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NIGERIAN BREWERIES PLC FY'23 EARNINGS - Price increases mask volume decline

Robust revenue growth in a challenging landscape
Nigerian Breweries navigated a turbulent business landscape in Q4'23, marked by significant shifts in the Nigerian economy. Despite these challenges, the company achieved a commendable 26% y/y growth in revenue, reaching ₦197.8 billion in Q4’23. This growth, in the face of cash shortages, high inflation rates, and overall thinning consumer wallets underscores the impact of the price increases implemented across its catalogue during the period. Ultimately, revenues for FY’23 rose 9% to ₦599.6 billion.

Other cost profiles remain elevated
Despite the company’s commitment to cost-saving measures, operating expenses rose slightly by 3%, totaling ₦44.4 billion in Q4’23. Thus, the company's operating profit experienced a marginal 2% growth for the quarter, reaching ₦16.7 billion. This did little to salvage the FY results where the operating profit came in 16% lower y/y at ₦41.5 billion.
The company’s profitability was also dragged down by ballooning net finance expenses, driven by huge leaps in FX losses and interest costs. In Q4’23, Nigerian Breweries recorded a total of ₦66.4 billion (Q4’22: ₦14.1 billion) in FX losses and ₦17.5 billion (Q4’22: ₦2.1 billion) in finance expenses. At the end of the year, FX losses rose to ₦153 billion (FY’22:  ₦26.3 billion) while finance costs rose 4.3x y/y to ₦36.4 billion due to elevated borrowings.

Earnings outlook
Nigerian Breweries’ latest performance reflects its resilience in a challenging economic environment. The strategic acquisition of Distell Wines & Spirits Nigeria demonstrates a localised approach to diversification and premiumisation. Also, the company has further reiterated its commitments to cost-cutting measures and seeking local input alternatives. Finally, the recent 20%+ price increase announced for its catalogue indicates a willingness to trade off volumes to preserve margins alongside growth in 2024. 
Thus, we project a FY’24 revenue of ₦671.6 billion (+12% y/y). We also expect an easing in bottom-line loss to ₦78.3 billion (FY’23:  ₦106.3 billion loss).