NIGERIA | BREWERS | GUNNESS PLC

Quick take: Another loss quarter despite price hike.

Guinness Nigeria Plc released its Q3 2024 (Jan-March) unaudited numbers. The renowned foreign extra stout brewer recorded double-digit Revenue growth of 43.8% y/y to N77.71bn from N54.03bn (Q3 2023). Although there was a marginal decline of 6.4% on a q/q basis. The Q3 2024 impressive topline performance despite the absence of seasonal demand which buoyed Q2 2024 numbers, can be attributed to price increase of c.35.6% across their product segments during the quarter.

The Cost of Sales grew faster than Revenue, up 55.8% y/y to N55.99bn in Q3 2024 from N35.93bn in Q3 2023 and up marginally 1.3% q/q. This resulted in a decrease in Gross Margin to 28.0% in Q3 2024 from 33.5% in Q3 2023. Gross Profit, however, grew 20% y/y to N21.72bn in Q3 2024 from N18.09bn in Q3 2023 but declined 21.9% q/q.

Operating Expenses (OPEX) grew 19.7% y/y. While Administrative Expenses increased by 20.4%y/y to N4.97bn in Q3 2024 from N4.13bn (Q3 2023), Marketing and Distribution Expenses increased by 19.4% y/y to N11.47bn in Q3 2024 from N9.6bn in Q3 2023. Regardless, EBITDA improved, up 21.0% y/y to N5.27bn (Q3 2024) from N4.35bn (Q3 2023), although EBITDA margin was marginally down by 1.3pts to 6.8%.

Other Income increased marginally y/y to N551m from N529m in Q3 2023, and we saw a 19.3% y/y increase in Earnings Before Interest and Tax (EBIT) to N5.82bn from N4.88bn Q3 2023.

Business liquidity slowed, with Cash and Cash Equivalents declining by 25.65% to N68.5bn as of 9M 2024 compared to N92.12bn in FY 2023, attributed to Management's decision to pay down some of its borrowings which is down 38% to N39.36bn from N63.75bn (FY 2023). Despite this, Finance Income grew significantly by 320% to N4.49bn from N396m in Q3 2023, largely on the back of gains on remeasurement of FX balance howbeit, soaring Finance Costs of N66.33bn, with FX losses accounting for 91.97%, overshadowed the positive impact. Consequently, Net Finance Loss amounted to N61.85bn, significantly higher than N2.57 bn in Q3 2023.

In summary, the business reported a Net Loss of N56.42bn in Q3 2024 compared with a profit of N1.84bn in the corresponding quarter of 2023 and N7.83bn loss in Q2 2024.

We have a Buy recommendation on Guinness with a price target of N93.01/s. Current Price: N54.0/s. Our price target and recommendation are being reviewed.

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Analyst: Goke Adetoyinbo

Email: CSLResearch@fcmb.com"‹

Address: 44 MARINA, LAGOS ISLAND, "‹

Website: www.cslstockbrokers.com