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NIGERIAN BREWERIES PLC Q1'20 - Stable performance despite rough terrain

In its unaudited Q1’20 results released recently, Nigerian Breweries reported a revenue figure of ₦83.2 billion, flat compared to Q1’19. Given the pressure from the pandemic at the tail end of the quarter, we see this revenue as decent and in line with estimated sector growth (INTBREW and GUINNESS’ domestic sales came in flat y/y). Although we note that the company recently increased pricing across its malt and beer segments, we believe that a significant boost may have come from looser credit policies evinced by the 33% q/q increase in Receivables. Revenue however declined 4.72% q/q, coming off the seasonal Q4 high and reflecting the challenging end to Q1’20 owing to the start of social distancing in key cities across Nigeria. Looking forward, for as long as the pandemic lasts, we expect beer volumes to suffer considering that sizable demand from entertainment centers such as bars, lounges, clubs and hotels – which constitutes a substantial part of beer demand - would be significantly reduced. Furthermore, research from the World Health Organization attributing reduced immune levels to alcohol consumption should also prove to be a negative for beer consumption. Although we expect the company’s innovativeness through discounts and strategic partnerships to drive sales in this period, we expect further depressed consumption levels and expect revenue to decline 29% y/y to ₦227.0 billion for the full year. Our view is based on the expected shrinkage to income as the economy suffers twin shocks from reduced activity and the slump in oil prices.