Nigerian Breweries Reports Q1 2018 Results - PBT and PAT Declined By -13% and -11% YoY Respectively


Tuesday, April 24, 2018 /06:05PM/FBNQuest Research 

: Nigerian Breweries reports Q1 2018 results
Implications: Neutral reaction expected from the market  
Positives: Gross margin expanded 126bps y/y
Negatives: PBT and PAT down -13% y/y and -11% y/y respectively

Late yesterday, Nigerian Breweries (NB) published its Q1 2018 results which showed that sales of N83.0bn declined by -9% y/y. PBT and PAT declined by -13% y/y and -11% y/y to N15.2bn and N10.2bn
respectively. Although operating expenses declined by -5% y/y and gross margins expanded by 126bps y/y, these were offset by the sales decline, and a 37% y/y rise in net finance charges, leading to the weaker PBT.

On a sequential basis, sales declined by -8% q/q. However, PBT and PAT advanced by 25% q/q and 13% q/q respectively
, owing to a combination of factors:  1) a 481bp q/q gross margin expansion 2) a 7% q/q decline in operating expenses and 3) an -8% q/q decline in net interest expense. Compared with our estimates, sales and PBT were behind by 8% while PAT was behind by 12%.

On an annualised basis, Q1 sales are 11% behind consensus FY estimate
. However, PBT is well on track to meeting consensus’ FY PBT estimate of N55bn.

According to Heineken’s (NB’s parent) trading statement, unit volume
s for the group grew by high single digits due to growth from a number of  countries including Nigeria. Consequently, we believe that the topline was reflective of a weaker price / volume mix skew as consumers continue to down-trade to economy brands. We would look to management for further clarification.

On the back of these results, we expect to see a neutral reaction from the market. NB shares have declined by -3.9% this year and have underperformed the index which is up 6.6%.

We rate the shares Underperform. Our estimates are under review.

Nigerian Breweries Q1 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)
Proshare Nigeria Pvt. Ltd.
Source: NSE; FBNQuest Estimates

Proshare Nigeria Pvt. Ltd.

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