SAT 19 FEB, 2022-theGBJournal- NB published its 2021FY audited results Friday. The report revealed that Q4-21 standalone PAT rose by 939.0% y/y to NGN4.46 billion while EPS surged to NGN0.56 (Q4-20: NGN0.05) buoyed by impressive revenue growth (+24.3% y/y) and a lower net finance cost (-11.1% y/y).
Consequently, 2021FY EPS came in at NGN1.57 (2020FY: NGN0.92), reflecting a 70.4% y/y increase. The board has proposed a final dividend of NGN1.20/s, which implies a dividend yield of 2.5% on the last closing price of NGN47.50/s (17 February).
Revenue grew by 24.3% y/y (2021FY: +29.7% y/y) in Q4-21 on price and mix gains, with revenue also benefitting from price increases implemented across its products portfolio in the period. Sequentially, net revenue grew 28.0% q/q – reflective of the impact of the price increases and Q4 being a seasonally strong quarter due to the year-end festivities.
In its 2021FY earnings call, Heineken NV (NB’s parent company) highlighted that the premium portfolio led the volume growth in Nigeria as it grew above 30%, led by “Tiger”, “Heineken”, and the successful launch of “Desperados”. In addition, “Malts” led the growth of the non-alcoholic portfolio growing by double-digits. Overall, volume grew in the low teens in the Nigerian market.
Gross profit margin expanded (+111bps) to 39.0% in Q4-21 (2021FY: +150bps to 36.7%) – the strongest reading since Q4-19 (40.2%). The margin expansion is indicative of the continued productivity gains as revenue growth (+24.3% y/y) outpaced the growth in COGS (+5.2% y/y), amid continued growth in the high margin premium segment.
OPEX rose by 68.5% y/y in Q4-21, resulting in an operating expense ratio (OER) of 28.8%. (Q4-20: 21.2%). The growth in OPEX was due to a 52.0% y/y increase in Advertising and sales promotions (76.5% of total OPEX) reflecting its focus on increasing brand visibility – a ‘sell-out’ strategy. Other income grew 1441.8% y/y on the back of a one-off gain on right-of-use derecognition, which offset the rise in OPEX. Accordingly, EBIT and EBITDA grew significantly by 135.5% y/y and 65.4% y/y, with accompanying margins of 13.1% (+620 bps) and 22.1% (+550 bps), respectively.
Elsewhere, net finance costs declined by 11.1% y/y, due to lower finance costs (-8.1% y/y) amid a 634.3% y/y increase in finance income. We attribute the decrease in finance costs to NB’s less reliance on loans and borrowings in the period. Precisely, the loans and borrowings declined by 82.0% y/y in 2021FY to NGN6.83 billion (2020FY: NGN39.64 billion).
Overall, NB’s PBT surged by 1730.1% y/y to NGN10.96 billion in Q4-21 (2021FY: +104.7% y/y to NGN23.70 billion). Following a tax expense of NGN6.51 billion in the period, PAT came in significantly higher at NGN4.46 billion (Q4-20: NGN0.43 billion).
In line with our expectations, NB’s Q4-21 topline performance was underpinned by improved demand following year-end festivities and price increases. Despite the prevailing FX issues and elevated inflation, NB recorded expansions in gross and EBITDA margins in the quarter, which is impressive in our view.
Looking ahead, we believe that NB still represents a value stock in the brewer industry given its healthy margins, robust balance sheet, and attractive dividend payout. We expect NB to deliver strong topline and bottom-line performance in Q1-22 supported by its premiumisation strategy amidst higher beer prices. YTD, the share price is down 5.0%. Our estimates are under review.
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