Friday, May 29, 2026
30.4 C
Lagos

Guinness Nigeria: Earnings Rebound From Q1 Low Despite Weakening Margins

Yesterday, GUINNESS released Q2-17/18 results showing net profit of NGN2.09 billion (vs. NGN2.44 billion loss last year), driven by (1) continued revenue growth, (2) better margin, and (3) lower opex and finance charges.

The net profit was equally higher compared to Q1-17/18’s NGN41.4 million, but below our NGN2.70 billion estimate and consensus expectation of NGN2.8 billion.

Revenue grew by 11% y/y and 36% q/q, sustained by festive demand, strong marketing effort, and relatively higher prices. DIAGEO (GUINNESS’ parent company) stated in a press release recently that the group enjoyed positive price in Nigeria, and that mainstream spirits and value beer (Dubic precisely) recorded faster growth during the period.

Sales volume was reported to have grown by about 17% y/y over H1-17/18. Value beer (23% y/y), Guinness (14% y/y), Malta Guinness (6% y/y), and main stream spirits (22% y/y) recorded net sales growth in the first half.

While gross margin remained higher relative to the last financial year (+601 bps y/y), we are quite surprised by the 118 bps decline compared to the first quarter. Compared to our estimate, gross margin was lower by c.650 bps, and has weakened consistently since reaching record 55% in Q3-16/17, reflecting, as we stated in the Q1 note, growing contribution of value beer and inflationary pressure on key raw material input prices (Sorghum in this case).

On the positive, opex was lower by 12% y/y and was below our estimate by 25%. Admin and distribution expenses were lower by 25% y/y and 24% y/y respectively while marketing expenses increased (following focused campaigns on Guinness) by 20% y/y. EBITDA margin of 15.4% was reported, significantly higher y/y, but lower by 96 bps q/q.

Also worth highlighting is the 65% y/y decrease in finance charges, comprising NGN583 million loss (NGN857 million in Q2-16/17) on foreign exchange transactions and N374 million (vs. NGN1.9 billion in Q2-16/17) related to interest expense on loans and borrowings and overdraft facilities.

Compared to Q1, FX loss and interest expenses were lower by 74% and 77% respectively. Gross debt now stands at NGN12.5 billion post-Rights Issue, and the consequent reduced interest burden will remain supportive of earnings for the rest of 2018.

Continued growth in revenue and the savings on both operating and financing costs bode well for GUINNESS’ earnings in 2018.

However, continued weakening margins dampens earnings growth expectation from 2019, as the effect of low revenue and finance cost bases tapers. The stock has gained 20% YtD, and positive reaction to the result is expected. Our estimates are under review.

spot_img
spot_img
spot_img
spot_img

Hot this week

Mutual Benefits Delivers Strong 2025 Financial Performance, Record Profit Growth, Balance Sheet Expansion

Mutual Benefits Assurance Plc has announced its audited financial...

Heirs Insurance Group Opens Entry for 5th Essay Championship with ₦11.5m Prizes for Students, Teachers, Schools

Heirs Insurance Group, Nigeria’s fastest-growing insurance group, has opened...

NGX Seeks Cross-Listing Opportunities with Nairobi Securities Exchange

Alhaji (Dr) Umaru Kwairanga, Group Chairman, Nigerian Exchange Group...

NAICOM Issues First Insurtech Licence, Reinforcing Commitment to Innovation, Market Integrity

L-R: Mr. Suleiman Olalekan Ajani, MD/CEO, CBI Insurtech and...

NDIC Reiterates Commitment to Strong Deposit Insurance Funding to Enhance Financial System Stability

L – R: Executive Director, Corporate Services, Nigeria Deposit...

Topics

May 29: Unpromising Start, Promising Future                        

  Tim Akano Click-click-click-click-click-click-click-click-click-click-click is the loud, weird, grinding vroom reviving...

Union Bank Earns BBB+, Stable Rating from GCR

Global Credit Ratings Co. (GCR) has affirmed Union Bank...

Ecobank Renews Health Partnership with Global Fund

Ecobank Transnational Incorporated, the leading Pan-African financial institution, through...

Zenith Bank Marks Successful Public Offer, Achievement of Recapitalisation at NGX

Zenith Bank Plc yesterday marked a significant milestone with...

Entrepreneurs, Customers Relive Experience at Polaris Bank Sponsored Fashion Souk

Polaris Bank, Nigeria's premier digital retail Bank, showcased its...

Nigeria, SA Lead April Air Traffic in Africa

The International Air Transport Association (IATA) announced global passenger...

FCMB Plans African Expansion in 2 Countries

As Nigeria suffers from the actual global plunge in...

Marriott Completes Starwood Acquisition, Creating World’s Largest Hotel Group

Marriott International, Inc. has completed its acquisition of Starwood...
spot_img

Related Articles

Popular Categories

spot_imgspot_img