SAT, JULY 29 2023-theGBJournal |Guinness Nigeria Plc reported revenue growth of 10.9% y/y in 2023FY (2022FY: +28.9% y/y), but higher net finance cost weighed on overall earnings.
According to management, the revenue growth was driven by strategic pricing across categories like Stout, Ready-to-Serve, and Mainstream Spirits to counter cost inflation and, successful positioning of its product mix.
On pricing, our findings reveal that the brewer increased prices by c.18.3% in the year, with a larger portion of the price increase in the Stout (c.26.5%) category.
On a quarter-on-quarter basis, revenue grew by 5.4%, supported by higher pricing in the period.
However, gross profit margin contracted by 108bps y/y to 34.1% (2022FY: 35.1%) in 2023FY, driven by the increase in the cost of sales (+12.8% y/y), which outpaced revenue (+10.9%) for the year.
Cost pressures from the double-digit inflationary environment, currency depreciation and FX illiquidity underpinned the higher cost of sales.
In line with the brewer’s strategic focus and growth drive, operating expenses rose by 14.0% y/y in 2023FY (2022FY: 40.3% y/y). As a result, EBIT and EBITDA margins settled lower at 10.2% (-138 bps) and 14.3% (-140bps), respectively.
Meanwhile, net finance cost surged (201.4x increase year-on-year) to NGN45.50 billion in 2023FY, following a 24.0x increase in finance cost to N53.29 billion (2022FY: NGN2.13 billion).
The higher finance cost arose from a significant unrealized FX loss of NGN49.10 billion (compared to N1.43 billion in 2022FY).
This loss was driven by various factors, including remeasurement of other foreign currency balances (17.5x increase to N21.44 billion), as well as substantial increases in exchange differences on foreign currency letters of credits (N19.61 billion) and foreign currency intercompany loans (39.8x increase to N8.05 billion).
Furthermore, GUINNESS recorded a loss before tax of N22.14 billion in 2023FY (vs profit before tax of N23.67 billion in 2022FY). With a tax credit of N3.97 billion, the net loss came in at N18.17 billion (vs net income of N15.65 billion in 2022FY).
The audited results published after market close Thurday, also showed a loss per share of N8.29 (vs EPS of N7.15 in 2022FY). The negative outturn in earnings resulted from higher net finance charges.
Analysts at Cordros Research believe that GUINNESS’ performance in the period, particularly in Q4-23, was significantly affected by challenges resulting from the devaluation of the local currency and ongoing FX illiquidity.
”Despite these increased cost pressures, we like that the brewer’s operating profit remained resilient,” Cordros said.
Looking ahead, Cordros say that thet expect GUINNESS to benefit from price increases in various segments, including stout, ready-to-serve, mainstream, and premium spirit offerings.
Also, the company’s efforts to optimize its route-to-market strategy, enhance distribution channels, and position its innovative portfolio should contribute to its growth.
Nevertheless, the brewer continues to face significant hurdles due to weak consumer spending, unfavourable regulations, and currency devaluation.
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