Thursday, May 03, 2018 /02:09 PM/FBNQuest Research
Event: International Breweries reports Q1 2018 results
Implications: Negative reaction expected by the market
Negatives: Pre-tax and post-tax losses of –N2.6bn and –N2.2bn respectively
Earlier today, the NSE published International Breweries’ Q1 2018 results. The company officially merged with Pabod Breweries and Intafact Beverages on November 13, 2017 and changed its year end to December. The company did not provide comparable numbers for the prior quarter and corresponding quarter of the prior year. As such, we are unable to do y/y and q/q comparisons in our analysis.
Sales were N30.0bn and came in -18% behind our estimate. The company reported a pre-tax loss of –N2.6bn for the quarter, mainly driven by a relatively low gross margin of 35%, a high opex-to-sales ratio of 30% and a high net finance charge. The gross margin and opex-to-sales reported compare with average figures of 45.6% and 22.4% respectively reported by International Breweries alone over the last five years.
The loss after tax narrowed to –N2.2bn because of a tax credit of N317m. Similar to the previous quarter’s results, we find the results disappointing because we had expected improved cost efficiencies following the merger and the stable fx environment to positively impact the results.
We expect the market’s reaction to these numbers to be negative.
Year to date, International Breweries shares have shed -9.6% compared with an +8.0% gain by the NSEASI.
We rate International Breweries shares Neutral. Our estimates are under review.
International Breweries Q1 2018 vs. FBNQuest Capital Research estimates (N millions)