Nigeria Breweries Reports Unimpressive Q3 2014 Earnings

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Nigerian Breweries (NB Plc) has announced an unimpressive financial numbers for  third quarter (Q3)  ended September 30, 2014 hampered by the unfavourable operating environment in the country.

Analysis of the results released by the Nigerian Stock Exchange (NSE) showed that its revenue of N53.24 billion declined moderately by 5.7 per cent year-on-year (YoY).

Despite a slight improvement in pre-tax and after tax margins, earnings on both counts declined 2.5 per cent. While profit before tax PBT declined to N8.70 billion, profit after tax PAT depreciated by 3.0 per cent to N5.98 billion.
Quarter-on-quarter (QoQ), the results were weaker.

Revenue declined by 26.6 per cent while PAT dropped by 56.9 per cent QoQ. Margin wise, there was a contraction of both the top and bottom line margins.

Gross profit margin contracted by 373 basis points to 47 per cent, PBT margin was down 1009 basis points to 16.34 per cent, and PAT shed 786 basis points to 11.19 per cent.

This was despite declines recorded in both cost of sales (18.3 per cent q-o-q) and operating expenses (15.0 per cent q-o-q).

Reacting to the result, analysts at Investment One Limited stated that overall, the pressure on margins are reflective of the shift in consumer preference from more expensive premium brands to cheaper value brands, restrictions to business operations due to infrastructural deficits (especially in power and transportation), as well as escalating insecurity issues (particularly in the Northern part of the country).

According to the analysts, “Going forward however, we believe recent investments in infrastructure by local and foreign stakeholders, particularly in the area of gas supply to Gencos, and several power initiatives such as ‘Power Africa’ (a 10,000-megawatt (mw) power generation project to boost power supply in the country) will boost production activities and translate to wider margins.

“Additionally, NB’s merger with Consolidated Breweries Plc, presents an opportunity for the company to widen its product portfolio, giving it more exposure to the value segment. The newly formed entity is expected to cover 70 per cent of the Nigerian beer market, presenting opportunities for positive economies of scale for the business. Consequently, we expect improved top-line performance in subsequent quarters.”

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