Economy
Competition to Further Weaken Nigerian Breweries Earnings
By Dipo Olowookere
Investors have been advised to offload Nigerian Breweries shares in their holdings because things look gloomy for the brewery giant.
Recently, the company released its financial statements for the year ended December 31, 2018 and from the numbers, analysts at Cordros Research said they “expect net earnings to decline further in 2019E on intense competition from International Breweries and Guinness Nigeria, a further increase in excise duty, and still-weak consumer demand environment.”
In their report, they said Nigerian Breweries will suffer a 3.6 percent decline in net revenue, flattish gross margin and 15.2 percent EBITDA and 26.9 percent net profit declines.
It further said volume growth will remain weak in 2019 given cautious macro outlook, amidst a still pressured consumer wallet and a more intense competitive environment.
“Although a bright spot for volume exists in the premium segment leveraging Heineken, we expect the depression in the economy (the new mainstream) segment will continue for the next 2-3 years.
“On the whole, we revise our 2019E net revenue forecast lower by 1.2 percent to N312.84 billion (-3.6 percent y/y),” Cordros Research said.
Commenting on the gross margin estimate for 2019E, Cordros revised this 72 bps lower to 38.6 percent, and estimates over 2020-2021E to average 39 percent.
It pointed out that margin impairment is expected to continue until 2021FY, with Nigerian Breweries facing costs, excise, and selling price pressures.
It was predicted that excise duty should grow by N0.35/cl by H1-19, further impacting net revenues of the company.
“Although management has stated it is prepared to take price increases throughout the year, we think this will be greatly dependent on competition (NB hastily hiked, then reversed, prices on Star Radler, Life, Gulder, and Goldberg in H1-18 following the increase in excise, however, competitors retained prices),” the report said.
The report further stated that it is slashing the 2019E EBITDA forecast by 14.6 percent on the back of rise in the OPEX, which will reflect increased marketing expenditure in pursuit of the shift from a sell-in to more of a sell-out strategy to address dwindling volumes.
“We forecast only a marginal decline in NB’s net finance costs (vs. 28.2 percent decrease in 2018FY), with borrowings (N41.13 billion in 2018FY) expected to moderate in line with a decline receivables,” the report stated.
On the valuation, Cordros Research said the net impact of the changes to its model is a cut to 2019E EPS estimate to N1.78 (from N2.63 previously) and a target price of N57.98 (previously N68.96), with SELL rating.
On a year-to-date basis, shares of Nigerian Breweries have dropped 6 percent.
“On our estimates, NB currently trades on 2019E P/E and EV/EBITDA multiples of 45.1x and 11.0x respectively, relative to MEA peer averages of 22.24x and 11.7x respectively,” it said.
By Aduragbemi Omiyale
The Debt Management Office (DMO) on Monday allotted bonds worth N929.3 billion to investors from the N1.7 trillion bids it received from subscribers.
The exercise, which took place on Monday, July 20, 2026, was oversubscribed by market participants, reflecting the confidence investors have in the government’s ability to redeem the debt instrument on maturity.
On offer for sale for the July auction was N1.2 trillion worth of the FGN bonds, but the DMO allotted below this, despite receiving bids above the offer.
The papers were offered in 10-year, 15-year, and 20-year tenors, at N400 billion each.
For the decade-old note, investors staked N444.47 billion, but the debt office sold N245.73 billion at an 18.34 per cent coupon rate. For the one and a half-decade-old paper, bids valued at N518.00 billion were received by the DMO, with a non-competitive bid of N50.00 billion, with N302.13 billion allotted to investors at 18.40 per cent, and for the two-decade paper, the DMO got competitive bids of N665.19 billion and N381.46 billion was sold to bondholders at 18.35 per cent.
By Adedapo Adesanya
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, disclosed that Nigeria’s external reserves had risen to $52.5 billion, enough to finance about nine months of imports.
He disclosed this on Tuesday at the end of the 306th meeting of the Monetary Policy Committee (MPC) held in Abuja, where the Monetary Policy Committee (MPC) retained the benchmark interest rate at 26.50 per cent as well as the standing facilities corridor at +50/-450 basis points around the MPR.
Similarly, the Cash Reserve Requirement (CRR) was maintained at 45 per cent for Deposit Money Banks, 16 per cent for Merchant Banks, and 75 per cent for non-Treasury Single Account (TSA) public sector deposits.
Speaking on FX developments, the central banker said at the $52 billion level, the country’s external reserves were significantly above the internationally recommended threshold of three months of import cover.
On the Naira exchange rate, Mr Cardoso said the foreign exchange market had deepened and was now operating on a transparent willing-buyer, willing-seller basis.
He said the apex bank remained committed to maintaining a liquid and functional foreign exchange market, adding that daily market turnover sometimes exceeded $1 billion.
According to him, the long-term stability of the naira would depend on key economic fundamentals, including increased oil exports, foreign direct investment, and improved domestic productivity to reduce dependence on imports.
He also added that the MPC welcomed the federal government’s renewed commitment to stronger policy coordination, particularly collaboration between fiscal and monetary authorities, which he said had helped reduce the impact of the Middle East crisis on the Nigerian economy.
Mr Cardoso said members of the committee also commended efforts to improve crude oil production and urged relevant agencies to intensify reforms in other sectors, including solid minerals, to boost government revenue.
On the regulatory forbearance granted to banks during the COVID-19 period, he reiterated that this had been discontinued because it had served its purpose.
According to him, the policy had “outlived its time” and was no longer necessary in assessing the health of the banking sector.
“Forbearance, we felt, had outlived its time. Many of you will recall this is something that came as a result of COVID. And now we are in 2026; we did not see the reason why that should continue to form part of the analysis of the banking system,” he said.
Mr Cardoso explained that banks had begun recalibrating their portfolios following the end of the policy, leading to a temporary reduction in outstanding risk assets.
He, however, assured that the development was part of a transition towards a stronger and more sustainable credit environment.
“It reflects a transition to a more sustainable and better quality credit environment, which is what we all want. We don’t want unanticipated shocks that come in a boom-and-bust fashion,” he said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its recent positive run by 1.17 per cent on Tuesday, July 21, triggered by appreciation seen in four bellwethers.
Leading the pack was FrieslandCampina Wamco Nigeria Plc, which added N12.00 to its value to close at N153.15 per share compared with the previous day’s N141.15 per share. NASD Plc appreciated by N1.90 to N36.00 per unit from N34.10 per unit, Food Concepts Plc improved by 23 Kobo to N2.48 per share from N2.25 per share, and Afriland Properties Plc grew by a marginal 1 Kobo to N15.01 per unit from N15.00 per unit.
As a result, the market capitalisation of the bourse increased by N30.40 billion to N2.637 trillion from Monday’s N2.606 trillion, and the NASD Security Index (NSI) gained 50.70 points to finish at 4,393.97 points, in contrast to the 4,343.27 points it ended a day earlier.
The unlisted securities exchange recorded a price loser yesterday, and it was Geo-Fluids Plc, which shed 1 Kobo to settle at N2.30 per share versus N2.31 per share.
During the trading day, the volume of securities traded by market participants on Tuesday dropped 99.4 per cent to 322,147 units from the previous day’s 52.6 million units, the value of securities dipped by 89.8 per cent to N19.4 million from the preceding session’s N191.2 million, and the number of deals contracted by 3.6 per cent to 27 deals from 28 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis, with 3.4 billion units traded for N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units transacted for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 75.4 million units exchanged for N5.3 billion.
GNI Plc also closed the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units valued at N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
