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NIGERIAN BREWERIES PLC H1'21 Earnings - Elevated Opex wipes out Q2 Earnings

Nigerian Breweries’ Q2’21 performance showed a stronger 51% y/y growth
(Q1’21: +27% y/y), bringing the H1’21 performance (+38% y/y) to ₦209.3
billion, 1% lower than our Revenue expectation of ₦210.3 billion. Whilst we
believe that the lower base from the pandemic-induced slump in the previous
year was quite instrumental in the significant growth reported this year, we
recall a number of initiatives that the company had implemented in the past
year. Nigerian Breweries implemented a can repackaging strategy across
several of its SKUs (Store Keeping Units), whilst introducing a tequila-flavored
beer product Desperados into the market and increasing its malt-bottling
capacity. In addition to these initiatives, we believe that the company’s
market share has increased in the past year, given a key-competitor’s decision
to deprioritize their Lager focus and was thus significant in volume growth for
the brewer. That said, driven by the existing tailwind factors and in line with
the H1’21 run rate, we expect NB’s FY’21 Revenue to print at ₦397.7 billion
(+18% y/y).

Meanwhile, Opex presented a negative surprise as marketing and admin
expenses were marked by steep (62% y/y and 41% y/y respectively)
increases in the Q2 period, mostly spurred by advertising and sale expenses
as well as employee benefits and repair and maintenance expenses. However,
EBIT for the H1’21 period rose 32% y/y to ₦20.0 billion, driven by the stellar
performance in the Q1’21 period, as depreciation expenses remained largely
flat. Furthermore, whilst finance income dropped 45% y/y, finance costs
increased 21% y/y with net finance costs coming in at ₦8.0 billion for the half
year. Overall, NB’s PAT shrank 22% y/y to ₦0.07 billion, despite the low base
from last year.
In line with this track record, we revise our estimates and project that the
company’s EBIT for the FY’21 period will print at ₦38.6 billion (+30% y/y),
culminating in a PBT figure of ₦27.6 billion (+1.3x y/y) and a PAT figure of
₦18.8 billion (+1.5x y/y). Thus, we project a target price of ₦61.01 per share and rate NB a HOLD.