Guinness Nigeria is charting a new course and this time it is under new leadership. With the Tolaram Group now steering the ship and cost-saving measures like the halt in International Premium Spirits (IPS) imports, we are seeing strong signs of a turnaround. Our latest report, “Brewing a Comeback”, dives into the business’ 9M:2025 numbers and factors behind the company’s recovery. Guinness currently trades at a price/earnings (P/E) ratio of 26.06x, though slightly above the industry average ...
Topline expands on price increases.In Q3’24, Guinness Nigeria demonstrated robust revenue growth, despite the prevailing macro challenges. The company delivered a satisfactory topline performance, driven primarily by increased pricing amid a decline in sales volume. Revenue for the quarter surged 44% y/year to ₦77.7 billion, as a result of this higher pricing.However, the company’s margins came under pressure due to rising costs. The jump in cost of sales outpaced revenue growth, rising by...
Cost of sales outpaces revenue growth. In Q1'24, GUINNESS saw an improved topline performance, reporting a revenue of ₦59.5 billion, representing a 13% increase y/y. This came as a result of sustained price increases. This was followed by a higher increase in costs of sales (19.6% y/y) to ₦41.4 billion. This led to gross profit margin dropping to 30% (Q1’23: 35%), bringing gross profit to ₦18.1 billion (down 10% y/y). Cost containment proves effectiveOperating expenses for Q1'24 amounted to ...
Somber fourth quarter dampens FY earnings momentumAlthough the company had shown an impressive performance in the 9M period, the FY performance was below expectation as PAT (most evidently) increased by only ₦0.4 billion in the Q4 period, compared to an average of ₦5 billion for the preceding three quarters. The dismal Q4 performance was a combination of higher operating expenses and weaker demand, as consumers began to trade off against volumes in response to tougher product pricing and g...
Upbeat margins in Q3 propel earningsThe company's topline grew by 18% in the third quarter, with revenue reaching ₦50.3 billion (Vetiva: ₦53.7 billion). Spirits, which has witnessed significant growth across both the Mainstream (MSS) and International Premium (IPS) sub-segments and continues to produce significant margin, remains a major driver of the company's turnover. While we believe that volumes have improved y/y (especially with the company’s increased production capacity), we also b...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
In its 9M’21 earnings release, Guinness Nigeria reported a 35% y/y expansion in PAT to ₦1.8 billion (Vetiva Estimate: ₦0.8 billion), driven by a significantly higher y/y revenue performance as well as cost-containment across some major expense lines. In Q3, Guinness’ topline grew 54% y/y to ₦42.6 billion, outpacing our expectation of 44% y/y (₦39.9 billion) and was mainly driven by the segments which the company has chosen to focus on strategically; Spirits, Malts and Stout (Guinness). Sp...
Guinness reported a surprising YoY growth in their revenue over Q221 (3 months ending in December) despite the muted holiday celebrations. However, their revenue performance was once again overshadowed by rising cost of sales (+4.2%YoY) which dragged gross profit down by 2.8%YoY. Further highlighting their issue with costs is the performance of their EBITDA which declined 12%YoY over H121 and now has a margin of 10.8% in H121 (vs13.1% in H120). Guinness are also facing financing cost pressure ...
The lockdown phase of the pandemic in several cities enforced the decline in patronage of bars and lounges for a part of the company’s Q4 period, while the curfew and social distancing measures imposed during and after the lockdown phase continues to impact night-time activity. Additionally, in the last quarter, two of their brewing houses (Benin and Ogba) had been closed for some time and this had affected production and trading activities. This disruption to sales and production severely impac...
In the summer of 2015, I met Prof. Ed Altman at a lecture in New York. He devised the Altman Z-score in 1968 and first published his formula 50 years ago, after doggedly sifting through thousands of pages of annual reports to obtain the data for his analysis. The Altman Z-score became the gold standard for bankruptcy analysis. The Altman Z-score is a formula for determining whether a company is headed for bankruptcy. It takes into account profitability, leverage, liquidity, solvency, and acti...
Revenue decline driven by weak demand Guinness Nigeria PLC released its Q1’20 results, posting a loss after tax of ₦0.4 billion, compared to a profit of ₦0.8 billion in Q1’19 (Q4’19: ₦1.2 billion). Notably, this negative result in earnings was down to two factors: weaker revenues and higher finance costs. Revenue fell 4% y/y and 11% q/q to ₦26.9 billion. Aside from the existing competition which has seen lager sales moderate, we believe...
Guinness Nigeria's (Guinness) revenue declined 4% y/y for the quarter ending Sep'19 (Avior: +1% y/y) due to a economic environment and intense competition. We believe a decline in beer volumes (and subsequent loss of market share) contributed to the revenue decline. High cost inflation, together with the increase in the excise tax rate (+16.7% on beer and +20% on spirits) during the quarter negatively impacted Guinness's input costs. Thus, the operating margins declined 3.4pp y/y to 2.5% duri...
Sector valuation is now closer to fair value. Our coverage of Nigerian consumers stocks is down 21% ytd on aggregate, and currently trades at a median FY 20f PE and EV/EBITDA of 22.8x and 10.3x, respectively (average 30% discount to the 2-year historical median). In our view, the sector historically traded at unjustifiably rich multiples, and is now closer to our fair value estimates (FY 19f PE and EV/EBITDA of 23.9x and 7.9x), hence our broadly neutral stance, despite cuts to our target prices....
Nigeria H2'19 Outlook - Feeble feet on thorny grounds Narrow opportunity window amid easing global monetary conditions: A sense of urgency is required for Nigeria to derive optimal benefits from the sudden increase in global liquidity conditions occasioned by the switch to accommodative monetary policy by central banks in developed markets. IMF projections indicate, that global GDP growth could ease to 3.3% for FY’19 due to weaker growth in the...
9M 18/19 EPS fell by 16% yoy to NGN54.78, trending ahead of our FY 19 forecast for a 27% yoy dip in earnings. Despite lower operating costs (down 2.2% yoy) as well as finance charges (down 61% yoy), we attribute Guinness’ earnings weakness to the poor top-line trend. Turnover declined by 4% yoy (in line with our FY 19 growth forecast of 6%), largely driven by lower volumes as prices remained relatively flat. On the upside, there was a sharp drop in finance charges (noticed across other consume...
We are bullish on the Africa Consumer sector and identify Nigerian Breweries (NB NL), Nestle Nigeria (NESTLE NL), and East African Breweries (EABL KN) as our top picks. In this report we introduce a proprietary valuation metric, Productive Exposure to the Poor (PEP), that rates companies based on the extent to which their business model targets Africa’s poorer segments. We also focus on Nigeria and provide individual company analysis of the eight Nigerian Consumer names in our coverage.
Expect bottom line recovery to persist in FY’19 GUINNESS FY’18 (year ended 30 June 2018) revenue grew 14% y/y to ₦143 billion, only slightly below our ₦144 billion estimate, with the growth driven by a 10% y/y increase in volumes for the period. According to parent company Diageo, beer sales grew by 15% y/y supported by sustained momentum in accessible beer brands as well as a recovery in Guinness stout which w...
The beer industry across Africa has been under strain over the past two years, as political and economic headwinds continued to hamper consumer spending. Brewers across the continent experienced margin contraction following a period of consumer downtrading. Following an economic turnaround, we expect consumption across the continent to grow at a CAGR of 4.5% over the next ten years, with East Africa our favoured region.
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