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INTBREW Pre-tax and Post-tax Losses Widened to –N1.2bn and –N1.4bn Respectively in Q2 2018 Results

Proshare

Thursday, November 2, 2017 10:50 AM /FBNQuest

Event:
International Breweries reports Q2 2018 (end-Sep) results

Implications
: Negative reaction expected by the market

Positives
:  Gross margin expanded by 39bps y/y and 133bps q/q

Negatives
: Pre-tax and post-tax losses widened to –N1.2bn and –N1.4bn respectively 

The NSE published International Breweries’ Q2 2018 (end-Jun) results
today. They showed that sales of N8.0bn grew by 20% y/y. However, the company reported pre-tax and post-tax losses of –N1.2bn and –N1.4bn respectively compared with –N216m in Q2 2017. The sales growth and a 39bp y/y gross margin expansion was not enough to offset a 41% y/y rise in opex and a –N945m reported on the other gains/losses line, leading to the pre-tax loss. Stripping out the –N945m, pre-tax loss was –N279m. 

The after tax loss widened to –N1.4bn due to a tax figure of –N190m versus N0 in Q2 2017. On a sequential basis, sales declined by -1
6% q/q – the decline, we attribute to seasonality. The end-Sep quarter is typically one of the weaker quarters for the brewers. Despite a gross margin expansion of 133bps q/q, the company reported losses due to the q/q sales decline, 99% q/q and 25% q/q rises in finance costs and operating expenses respectively and the operating exchange loss of -N945m. 

Compared with our estimates, Q2 sales were behind by 8%. We had forecast PBT and PAT of N1.4bn and N984m respectively. On an annualised basis, H1 sales are tracking behind consensus FY estimate by 9%. PBT and PAT are tracking significantly behind consensus’ forecast
s of N6.7bn and N4.5bn respectively. 

International Breweries’ Q2 2018 results makes the third poor set of end-Sept numbers reported by the brewers following Nigerian Breweries and Guinness Nigeria. Although all three companies managed to grow their topline y/y, their bottom lines surprised negatively. For International Breweries, operating expenses and the operating exchange loss weighed on earnings.
We had been more positive on International Breweries because of the favorable segment (value segment) it operates in and its merger with Pabod Breweries and Intafact Breweries. We await comments from management on both the opex and other gains/losses lines.

Year to date, International Breweries shares have gained 170% (we attribute the rally partly to the merger news) and have significantly outperformed the broad index which is up 37% this year.
 

We rate International Breweries shares
Underperform. Our estimates are under review. 

International Breweries Q2 2018 (end-Sep) results: actual vs. FBNQuest Research estimates (N millions)
Proshare Nigeria Pvt. Ltd.
Source: NSE; FBNQuest Estimates
 

NB: Please note that the 2017 Financial Calendar of INTBREW Plc ended 0n 31st March 2017. The company has notified the NSE of the change in financial year end from 31 March to 31 December of every year. The first application would be for a nine month ending December, 2017. 


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1.       INTBREW Proposed Merger with Intafact Beverages and Pabod Breweries
2.      INTBREW Announces Changes in Financial Year End from March 31 to December 31
3.  INTBREW Announced Proposed Merger with Intafact Beverages Ltd and Pabod Breweries Ltd.
4.   International Breweries Reports Q1 2018 Results as Gross Margin Contracted by 411bps YoY
5.      International Breweries Q4 2017 Results Review - Neutral Rating Maintained
6.       INTBREW Declares N1.03 Bln PAT in Q1'17 Results,(SP:N28.56k)
7.     International Breweries Plc Reports Q4 2017 Results - Operating Expenses Grew by 115% YoY
8.     International Breweries Plc Changes Company Registrars
9.       International Breweries Plc Appoints new Chairman and Chief Operating Officer
10.   INTBREW Declares N436.79 mln Loss in Q3'17 Results,(SP:N17.29k)
11.   International Breweries Plc Reports Q3 2017 Results – Operating Expenses
12.   International Breweries Q2 2017 Results Review - Positive Revenue outlook blurred by FX Issues
13.   International Breweries Plc Records Pre-tax and Post-tax Losses in Q2'17 Results
14.    INTBREW Declares N1.87 bln Loss in Q2'17 Result,(SP:N19.92k)
15.    International Breweries Plc: FX Loans Weighing on Outlook
16.  INTBREW Declares N1.66 bln PAT in Q1'17 Result,(SP:N19.00k)

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