Feb 16 (Lagos) - Late yesterday, Nigerian Breweries (
NB ) published its Q4 2017 results which showed that PAT grew by 9% y/y to N9.0bn despite a marginal (-1% y/y) decline in sales. The single-digit earnings growth was mainly driven by a -15% reduction in net interest expense. However, a lower effective tax rate of 25.9% (vs. 30.1% in Q4 2016) also contributed.
Although gross margin fell by -87bps y/y to 41%, while other income declined by 12% y/y, the reduction in net interest expense completely offset these negatives and was the major factor behind the PBT growth of a 3% y/y.
On a sequential basis sales grew by 22% y/y. However, thanks to base effects in the prior quarter, PBT and PAT advanced by around 33x q/q and 35x q/q respectively. Compared with our forecasts, sales, PBT and PAT missed by 10%, 23% and 19% respectively. NB’s PBT also came in significantly below consensus 2017 PBT forecast of N52bn.
On a full year basis, sales grew by 10% y/y to N344.6bn. However, PBT and PAT expanded by 18% y/y and 16% y/y respectively to N46.7bn and N33.0bn. Compared with our forecasts, sales missed silghtly (-2.7%) while PBT and PAT missed by 7% and 6% respectively.
The management of Nigerian Breweries (
NB ) has proposed a final dividend of N 3.13 per share, in line with N 3.08 estimate of analysts at FBN Quest in Ikoyi. The proposed dividend is around 21% higher than the final payout of 2.58 in 2016 and implies a yield of 2.4%. Having paid out an interim dividend of N1.00 per share previously , the total dividend implies a dividend payout ratio of 99.1%.
Pending comments from management, we believe that the weak topline was underpinned by a weaker price / volume mix skewed in favour of value brands. We also believe that higher prices of soft agricultural commodities required by brewers was also likely responsible for the y/y contraction in gross margin. Barley prices increased by around 24% y/y in the final quarter of 2017.
On the back of these results, we expect to see downward revisions to consensus 2018 PBT forecast and a neutral to negative reaction from the market.
NB shares have underperformed the index this year. The shares have shed -3% compared with the 11% gain delivered by the index.
Analysts at FBN Quest in Ikoyi rate the
NB shares Underperform. Their estimates are under review.
| NGN (MILLIONS) |
Full Year
2017 |
|
CHNG Y/y |
| Sales |
344,563 |
|
9.80% |
| Cost of sales |
-201,013 |
|
12.80% |
| Gross profit |
143,549 |
|
5.90% |
| -Gross margin |
41.70% |
|
-153bps |
| Dist. and admin. exp |
-88,647 |
|
6.50% |
| Operating profit |
54,902 |
|
5.00% |
| Other income |
2,219 |
|
260.40% |
| Net interest expense |
-10,491 |
|
-20.70% |
| PBT |
46,630 |
|
17.50% |
| -PBT margin |
13.50% |
|
89bps |
| PBT |
46,630 |
|
17.50% |
| - PBT margin |
13.50% |
|
89bps |
| Tax |
-13,581 |
|
20.60% |
| -Tax rate |
29.10% |
|
75bps |
| PAT |
33,049 |
|
16.30% |
| - PAT
margin |
9.60% |
|
53bps |
reporting for easykobo.com on Friday, Feb 16 from Lagos, Nigeria
Source - analysts at FBN Quest in Ikoyi. All opinions, views, targets and forecast expressed in this article are those of analysts at FBN Quest in Ikoyi. Easykobo does not endorse or oppose any views expressed in this article.