Guinness Nigeria Plc 9M’20 – Another Weak Quarter

Must Read

Osun State – Broke and broken

Data from BudgIT has shown that for every ₦100 shared to the Osun State government as revenue allocation from...

How To Block Your Bank Account And SIM Card In Case Of Emergency

Losing your phone and wallet or having them stolen can be very frustrating. However, in case that happens to...

List of Access Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...
- Advertisement -

Guinness Nigeria Plc reported a year-on-year profit decline in its Q2’20, to follow up from a relatively weak Q1’20. Although revenue grew for the first time in the last five quarters, higher operating expenses and higher finance costs dampened the bottom-line.


Negative – We think that lack of improvements, in the form of increased earnings, will continue to worry the already unconvinced investors (reflected in the drastic decline in stock prices), especially for shareholders who had expected increased profitability owing to the capital raising exercise conducted in 2017. In addition, we think that slower-than-expected revenue growth in its beer segment will raise concerns about the Company’s overall revenue growth potential in FY’20. Overall, we think that a weaker macro demand environment combined with the increase in excise duties, and heightened competition in the industry is taking a toll on the Company, as the current trend is also peculiar among its industry peers.


- Advertisement -

We forecast that by FY’20, revenue will grow by 1% to N133.30bn. The basis for our forecast is on the back of slightly improved sales in H2’20. The annual increase in excise duties already ended in December 2019 (except for spirits, an area where Guinness has a significant presence in). Nonetheless, we expect the top-line to normalize. However, owing to weak demand and the intense battle for market share, we believe that brewing companies will continue to hemorrhage margins, to keep the price-sensitive consumers at bay. Consequently, we have an FY’20 EPS estimate of N1.67, 33% lower than FY’19 actual EPS of N2.50.


Given our lower estimates, we arrived at a lower fair value estimate of N30.63 from N48.65, or approximately 18x our FY’20 estimates. At our fair value price, earnings yield stands at 5%. Based on our dividend forecast of N1.00, the dividend yield estimate is 3%. Furthermore, the estimated return on equity of 4% for FY’20 is below our estimated cost of equity of c.20% – 22% for the Company.


- Advertisement -

We are unconvinced about the prospects of Guinness Nigeria Plc, due to the current
bottlenecks to growth in the industry where it operates. While we expect an overall
improvement in sales growth, we believe that margins will continue to be under pressure. The stock currently trades at our fair value estimate. Hence, we recommend a hold for the stock.

Read Also:  StarTimes boosts DSO with Digital TV sets


Rebound in revenue growth after 5 consecutive quarters of decline: Revenue grew by 4% in Q2’20, the first quarter of revenue growth since Q4’18. We also realized that revenues from both the domestic markets and export sales grew in Q2’20. In Q1’20, export sales declined by as much as 75% to N692.46mn from N2.79bn. The rebound in exports sales in Q2’20 supported revenue growth.

Improved cash flows generation: Operating cash flows rose by 22% year-on-year from N14.81bn in 6M’19 to N18.38bn in 6M’20, majorly resulting from reduced inventories during the period. Meanwhile, free cash flow (FCF) spiked by 80% to N10.44bn in 6M’20 from N5.79bn in 6M’19. On the other hand, free cash flow to equity (FCFE) rose by 218% to N13.38bn in 6M’20 N4.20bn in 6M’19. The spike in FCFE was due to a higher net borrowings of N5bn during the period. In our view, we posit that the Company refinanced costly short-term debts (overdrafts), possibly taking advantage of the low-yield environment.

- Advertisement -


Worsening Margins: Despite revenue growth in Q2’20, the Company recorded higher cost and operating expense margins, thus it could not fully maximise the higher revenue earned. Specifically, the operating expense margin worsened to 22% in Q2’20, from 21% in Q2’19. On a 6M basis, opex margin worsened to 24% in 6M’20 from 23% in 6M’19.

Read Also:  Guinness Nigeria Announces H1F19 Results, Records N251m PBT Growth

High finance costs: The Company, in 2017, raised equity capital of c.N40bn which was used to pay down outstanding loan obligations. However, resulting from weak revenues and rising costs in the last few quarters, the working capital requirements of the Company necessitated a drawdown of overdraft facilities to support operations. As a result, finance cost grew. However, we noted that the Company possibly made efforts to paydown debts (including overdraft facility), as reflected in the lower finance cost of N626.80mn in Q2’20 from N934.44mn in Q2’19. The Company had earlier recorded a 116% spike in finance cost in Q1’20 to N1.26bn from N593.11mn in Q1’19. The impact of the high finance cost in Q1’19 weighed on the overall finance cost in 6M’20.


Risks to our estimates include macro-demand slowdown, inconsistent government policies, slower revenue growth, and FX instability.

WSTC Securities Limited (WSTC)

- Advertisement -
Guinness Nigeria Plc 9M’20 – Another Weak Quarter - Brand SpurGuinness Nigeria Plc 9M’20 – Another Weak Quarter - Brand Spur

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Guinness Nigeria Plc 9M’20 – Another Weak Quarter - Brand SpurGuinness Nigeria Plc 9M’20 – Another Weak Quarter - Brand Spur

Latest News

Osun State – Broke and broken

Data from BudgIT has shown that for every ₦100 shared to the Osun State government as revenue allocation from...

Here is how to use Instagram Reels

It’s been about a week since you could have noticed a new feature on Instagram called Reels. Those short videos feature a little video...

How To Start A POS Machine Business In Nigeria

The whole world, including Nigeria, is trying to go cashless. As a result, POS machines are now appearing in every Nigerian area to make...

Gains in Industrial goods sector failed to sustain previous positive sentiment, as NSE-ASI shed 0.15%

The Nigerian equity market today (Friday) ended the trading week on a negative note, shedding 0.15% to reverse the previous day positive momentum. The...

BUA Foundation donates 100,000 Facemasks, 5 Ambulances to Akwa Ibom State (Photos)

Akwa Ibom State Governor Udom Emmanuel has restated his administration’s total commitment to decimating coronavirus in the State even as school resumes for exit...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -Guinness Nigeria Plc 9M’20 – Another Weak Quarter - Brand SpurGuinness Nigeria Plc 9M’20 – Another Weak Quarter - Brand Spur