Nigerian Breweries Plc FY’19 – Moderating Interest Rate Could Offset Current Finance Expense Pressures

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CardinalStone Research 
Nigerian Breweries Plc (NB: TP 66.68 – BUY)  released its FY’19 audited result, which revealed a 17.1% YoY decline in profit after tax to N16.1 billion (vs. our estimate of N15.5 billion). Although net cash balance also contracted by 56.8% YoY to N6.4 billion, the brewer proposed a final dividend of N1.51 per share, bringing the total dividend to N2.01 (vs. N2.33 in FY’18) with a dividend yield at 3.9%.
Some positives
  • Amidst a strong double-digit inflation environment, NB was able to reduce the cost of sales and administrative expenses by 2.9% YoY and 6.9% YoY respectively to N191.8 billion and N19.4 billion apiece. Notably, the moderation in administrative expense reflected declines in employee benefits such as salaries & wages and transportation allocations.
  • The company recorded N2.7 billion in origination and reversal of temporary differences that reduced the effective tax rate to 31.0% in FY’19 compared to 33.9% in FY’18.
  • Net operating cash flow improved by N8.4 billion YoY to N38.7 billion in FY’19. On this front, we note improvements in the management of working capital (particularly with respect to trade and other receivables).
  • Management maintained CAPEX intensity at FY’18 levels of 9.3% in FY’19, highlighting its intention to maintain market dominance.
  • NB is in the market to raise N45.0 billion as part of its N100.0 billion Commercial Paper (CP) program. This move is likely to result in a reduction in the effective interest rate in the current financial year given current yield levels.
Some concerns
  • Aggressive competition and sin taxes continued to mute growth in revenue in FY’19 (-0.4% YoY at N323.0 billion). FY’19 revenue is largely in line with our forecast of N329.8 billion.
  • Marketing and distribution expenses (+10.9% YoY) was pressured by advertising, sales promotion, and transportation. Although this marketing effort supported Q4’19 revenue, its impact was largely muted over the full-year period.
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Nigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand Spur

Nigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand Spur

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Nigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand SpurNigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand Spur

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Nigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand SpurNigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand Spur

Latest News

Asia Pacific Rayon Raises US$300m from National and International Affiliated Banks to Expand Production Capacity

  • Continued capital expenditure aims to boost production and support the recovery of Indonesian economy
  • Loan agreements aligned with Indonesian Government's strategy to drive investment growth in 2021
  • APR is a member of the RGE group of companies


JAKARTA, INDONESIA - Media OutReach - 12 April 2021 - Asia Pacific Rayon (APR), the largest integrated rayon fiber producer in Indonesia, today announced that it has secured a syndicated loan facility of Rp 4.5 trillion (US$300 million) with national and international affiliated banks. The funding will be used to support continued capital investment in the company's production facilities at Pangkalan Kerinci, Riau Province, Sumatra.

APR is vertically integrated through its supply chain, from renewable fiber plantations to high-value textile development. It commenced operations in 2019 and was formally inaugurated by President Jokowi Widodo in February 2020. APR plans to increase its production capacity over the coming year to capture the strong growth potential of viscose staple fiber (VSF), strengthening its market position in Indonesia and in export markets across the region. APR is a member of the RGE group of companies. Founded by Sukanto Tanoto, RGE manages a group of resource-based manufacturing companies with global operations.

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The syndicated loan participating banks are PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Central Asia Tbk, PT Bank Pan Indonesia Tbk, PT Bank Pembangunan Daerah Jawa Barat, PT Bank Woori Saudara Indonesia 1906 Tbk and PT Bank KEB Hana Indonesia

The joint mandated lead arrangers and bookrunners for the syndicated loan are PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Central Asia Tbk, and PT BANK Pan Indonesia Tbk.

Basrie Kamba, Director, Asia Pacific Rayon, said: "This funding will be used to support continued investment in our operations in Kerinci. Rayon fiber, or viscose, is a textile raw material derived from sustainably managed plantations. As rayon is both renewable and biodegradable, it supports the trend towards sustainable fashion in Indonesia and in other markets around the world."

APR's planned expansion is aligned with the Indonesian Government's strategy to increase investment and boost employment to support the recovery of the country's economy and address the continued impact of the COVID-19 pandemic. Following the passing into law of the Omnibus Bill in October last year to streamline investment and stimulate job creation, President Widodo said last month that investment would be the key factor in achieving 5% economic growth in 2021.

"This loan facility and our continued investment in our operations are evidence of the growth potential of the viscose rayon sector in Indonesia and around the world. We are committed to supporting the Indonesian Government's efforts to improve the investment climate in export-oriented manufacturing industries, and its efforts to create upstream jobs in plantations and the processing of raw materials, and downstream opportunities in textile factories and related businesses," said Basrie.

Hari Setiawan, Executive Vice President of PT Bank Rakyat Indonesia (Persero) Tbk said : "As Representative of JMLAB and all lenders, I hope this collaboration will be useful to support the growth and development of PT Asia Pacific Rayon in increasing production and operations and also supporting the recovery of Indonesia's export growth."

"Support from BCA and other Banks reflect our confidence in APR, and as our contribution to promote a sustainable and environment friendly industry. We hope this cooperation will tighten our relationship as well," said Susiana Santoso, Executive Vice President of PT Bank Central Asia Tbk.


About Asia Pacific Rayon

Asia Pacific Rayon is the first fully integrated viscose rayon producer in Asia. Located in Pangkalan Kerinci, Riau, the company uses the latest production technology to produce high-quality rayon to meet textile needs. APR is committed to becoming a leading viscose rayon producer with the principles of sustainability, transparency and operational efficiency, serves the interests of the community and the country, and provides value to customers. APR is part of the RGE (Royal Golden Eagle) group of resource-based manufacturing companies. Sustainability is fundamental to APR. The APR Sustainability Policy, updated in September 2020, include additional commitments on pulp sourcing and clean manufacturing.


About RGE

RGE Pte Ltd manages a group of resource-based manufacturing companies with global operations. Our work ranges from the upstream, comprising sustainable resource development and harvesting, to downstream, where our companies create diverse value-added products for the global market. Our commitment to sustainable development underpins our operations, as we strive towards what is good for the community, good for the country, good for climate, good for customer, and good for company. RGE was founded in 1973. The assets held by RGE companies today exceed US$20 billion. With more than 60,000 employees, we have operations in Indonesia, China, Brazil, Spain and Canada and continue to expand to engage newer markets and communities. www.rgei.com

Nigerian Breweries Plc FY'19 - Moderating Interest Rate Could Offset Current Finance Expense Pressures - Brand Spur
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