BY BAMIDELE FAMOOFO
Leading brewers, Nigerian Breweries Plc enjoyed the benefits of price increase and lower net finance cost in the financial year ended December 31, 2021 as revenue grew by 29.7%.
Standalone Profit after Tax in the fourth quarter of the financial year rose by 939.0% while shareholders are expecting a final dividend of N1.20 per share, representing a dividend yield of 2.5% on the last closing price of N47.50 per share on February 17.
Full year EPS came in at N1.57 as against N0.92 recorded in 2020, reflecting a 70.4% y/y increase.
“Revenue grew by 24.3% y/y in Q4-21 on price and mix gains, with revenue also benefitting from price increases implemented across its products portfolio in the period. Sequentially, net revenue grew 28.0% q/q – reflective of the impact of the price increases and Q4 being a seasonally strong quarter due to the year-end festivities,” NB disclosed in a report released to the Nigerian Exchange Limited.
In its 2021FY earnings call, Heineken NV (NB’s parent company) highlighted that the premium portfolio led the volume growth in Nigeria as it grew above 30%, led by “Tiger”, “Heineken”, and the successful launch of “Desperados”. In addition, “Malts” led the growth of the non-alcoholic portfolio growing by double-digits. Overall, volume grew in the low teens in the Nigerian market.
Further breakdown of the result showed that Gross profit margin expanded by 111bps to 39.0% in Q4-21, the strongest reading since Q4-19 (40.2%). The margin expansion is indicative of the continued productivity gains as revenue growth (+24.3% y/y) outpaced the growth in COGS (+5.2% y/y), amid continued growth in the high margin premium segment.
Other Operating Expenses rose by 68.5% y/y in Q4-21, resulting in an operating expense ratio (OER) of 28.8%.
Cordros Research explained that the growth in OPEX was due to a 52.0% y/y increase in advertising and sales promotions (76.5% of total OPEX) reflecting its focus on increasing brand visibility – a ‘sell-out’ strategy. “Other income grew 1441.8% y/y on the back of a one-off gain on right-of-use derecognition, which offset the rise in OPEX. Accordingly, EBIT and EBITDA grew significantly by 135.5% y/y and 65.4% y/y, with accompanying margins of 13.1% (+620 bps) and 22.1% (+550 bps), respectively.”
Elsewhere, net finance costs declined by 11.1% y/y, due to lower finance costs (-8.1% y/y) amid a 634.3% y/y increase in finance income. We attribute the decrease in finance costs to NB’s less reliance on loans and borrowings in the period. Precisely, the loans and borrowings declined by 82.0% y/y in 2021FY to NGN6.83 billion (2020FY: NGN39.64 billion).
Overall, NB’s PBT surged by 1730.1% y/y to N10.96 billion in Q4-21 (2021FY: +104.7% y/y to N23.70 billion). Following a tax expense of N6.51 billion in the period, PAT came in significantly higher at N4.46 billion (Q4-20: N0.43 billion).
“In line with our expectations, NB’s Q4-21 topline performance was underpinned by improved demand following year-end festivities and price increases. Despite the prevailing FX issues and elevated inflation, NB recorded expansions in gross and EBITDA margins in the quarter, which is impressive in our view. Looking ahead, we believe that NB still represents a value stock in the brewer industry given its healthy margins, robust balance sheet, and attractive dividend payout. We expect NB to deliver strong topline and bottom-line performance in Q1-22 supported by its premiumisation strategy amidst higher beer prices. YTD, the share price is down 5.0%,” Cordros said in a comment on the performance of NB Plc.
