Q1 2020 Earnings Update- NB
Growth in Input Cost without Growth in Profit
Nigerian Breweries Plc (NB) Q1’20 Results- NB recorded a Profit After TAX (PAT) of N5.51 billion, representing significant decline of 31.38% when compared with N8.03 billion recorded in Q1’19. This was majorly due to 14% increase in marketing and distribution expenses as well as 16% growth in administrative expenses.
• Revenue declined marginally by -0.09% QoQ to N83.20 billion, whereas gross margin narrowed by -18bps to 41.91% (Q1’19: 42.09%). Net margin however declined sharply by -302bps to 6.62% (Q1’19: 9.64%).
• Marketing and distribution expenses grew by 14% to N18.08 billion from N16.55 billion in Q1’19, reflecting strong competitive headwinds in the beer market as well as the quest to maintain market share. Advertising and sales expenses grew to N6.31 billion (Q1’19: N4.24 billion) while repairs and maintenance declined marginally to N3.62 billion (Q1’19: N3.95 billion).
• Cost to sales ratio is 58.09% (Q1’19: 57.91%), reflects higher input costs necessary to stay strong in the competitive market while providing quality products for the market. Total cost of sales, marketing and distribution and administration expenses grew by 4.45% to N72.47 billion (Q1’19: N69.38 billion).
• The significant decline in Profit After Tax by -31.38% to N5.51 billion QoQ is largely attributed significant growth in operating expenses accompanied by flattish sales QoQ. Also, PBT was down by -27.75% from N11.46 billion in Q1’19 to N8.28 billion in Q1’20.
• Net finance cost increased marginally by 1.54% N2.64 billion. We note that the company raised N53.8 billion via commercial paper early this year. This came at an average yield of 6.2%, which compares favourably to the 13.6% average yield for the papers it issued in 2019. As such, we expect a reduction in the company’s finance costs in 2020.
Download full report here Q1’20 Earnings Update- NB