Guinness Nigeria Plc recently filed its result for the financial year ended June 30, 2017. Guinness is Nigeria’s second largest brewer and is listed on the consumer goods sector (Beverages -Brewers/Distillers) subsector of the Nigerian Stock Exchange.
With a market capitalisation in excess of N145.062billion, shares outstanding of 1.505billion units, and share price at N96.33 (as at Monday), Guinness Nigeria Plc is classified among the top-30 most capitalised stocks on the Nigerian bourse.
The results
The brewer reported a 23 percent increase in revenue for the full year at N125.919billion against N101.973billion in the preceding year 2016.
Gross Profit rose by 15.56percent to N48.315billion from N41.810billion in 2016. An operating profit of N10.2billion represents an increase of 131percent against N4.415billion in 2016.
Profit before (PBT) and after tax (PAT) came in at N2.66billion and N1.9billion respectively, recovering from the N2.35billion and N2.02billion losses recorded in financial year 2015/2016.
Amid this result, the directors recommended, subject to approval at the company’s next annual general meeting (AGM), the payment of a final dividend of N964million against N753million which represents a dividend of 64kobo per share (against 50kobo per share in 2016).
Guinness Nigeria Plc recently embarked on a Rights Issue of N40billion to its existing shareholders. The Rights offering will be listed in October 2017 with the capital injection expected to increase outstanding shares to 2.2billion units, market watchers noted.
The Rights offering is aimed at refinancing the company’s working capital borrowings and deleveraging the brewer’s balance sheet.
The parent company-Diageo Plc – with about 50percent stake had earlier indicated it will take up its Rights in full by way of debt-to-equity swap of its foreign currency loan of N20.3billion –the exercise is generally expected to be successful.
Board members comments on the results
Peter Ndegwa, Managing Director/CEO, Guinness Nigeria Plc said the company’s results were driven by a relentless focus on executing our strategy and keeping costs down.
His words: “Despite the challenging economic conditions, we have remained focused on executing our company’s total beverage strategy which gained further traction with strong growth in our international premium spirits portfolio following our first full year of distribution.”
In December 2015, Guinness Nigeria Plc became the first total beverage alcohol company in Nigeria when it acquired the rights to distribute International Premium Spirits (IPS) including Johnnie Walker Scotch whisky and Bailey’s liqueur in Nigeria. This was quickly followed in January 2016 by the acquisition of the rights to distribute McDowell’s, a United Spirits Limited (USL) whisky brand.
Ndegwa also stated that “Our gross profit of N48.3bn is as a result of volume growth, pricing benefit and a favourable sales mix as we continued to invest in our expanded brand portfolio during the year. Part of that investment includes the N4.7billion spirits line for locally manufactured spirits which we commissioned in Benin”.
“These strategic acquisitions and expansions have filled the gaps in the spirits brand base allowing us to compete across all categories of the alcoholic beverage market in Nigeria. We remain committed to executing our productivity agenda with a strong focus on cost reduction, distribution and operational efficiencies,” he said.
Babatunde Savage, Chairman, Guinness Nigeria Plc, said that the company remains committed to the Nigerian market. “It is pleasing to see that the decisions we have taken in recent years have helped to position the company for sustained business growth. We are grateful for the strong support that our shareholders have afforded us over the years. With our continuing focus on driving performance and our determination to positively impact the lives of Nigerians. We look forward to continuing to give Nigerians a reason to celebrate life every day and everywhere.”
Research analysts’ view
Research analysts at United Capital Plc updated their estimates for the brewer based on the recently published numbers and reviewed their expectations for the next financial year. They have reviewed upwards their target price (TP) for Guinness Nigeria Plc shares to N101.7 and urged investors to hold the stock.
“With an overwhelming FY-2016/17 performance driven by total beverage portfolio advantage, we expect performance to further improve over the next 12 months amid a stronger balance sheet position, increased FX availability, as well as efforts to contain operating expenses. PBT and PAT are expected to come in stronger by FY-17/18,” United Capital research analysts noted in their earnings update.
In their first reaction to Guinness Nigeria Plc results, FBN Quest research analysts said they believe that Guinness’ results were driven by higher pricing rather than volume growth.
“We note that brewers implemented average price increases in the mid-teens range towards the latter part of last year. We also believe that the relative ease of sourcing FX from the NAFEX window which was introduced in April also helped with the gross margin expansion.
Given that Guinness’ 2017 PBT of N2.6billion was ahead of the pre-tax loss of –N1.2billion that consensus had forecast for the line, we expect to see upward revisions to consensus earnings forecast. We expect the market to react positively to these numbers. We rate Guinness Nigeria shares Neutral. Our estimates are under review,” FBN Quest analysts said.
Iheanyi Nwachukwu
