Economy
Guinness Nigeria Earnings Rebound Despite Weakening Margins
By Modupe Gbadeyanka
A subsidiary of Diageo Plc of the United Kingdom, Guinness Nigeria, on Tuesday, released its Q2-17/18 results, showing an improvement from what was obtained in the first quarter results.
Specifically, the brewer’s net profit increased to N2.09 billion against the N2.44 billion loss recorded last year.
This was mainly buoyed by continued revenue growth, better margin, and lower opex and finance charges.
The net profit was equally higher compared to Q1-17/18’s N41.4 million, but below our N2.70 billion estimate and consensus expectation of N2.8 billion.
In addition, the company’s revenue grew by 11 percent year-on-year and 36 percent quarter-on-quarter, sustained by festive demand, strong marketing effort, and relatively higher prices.
In a statement issued recently, DIAGEO said the group enjoyed positive price in Nigeria, and that mainstream spirits and value beer (Dubic precisely) recorded faster growth during the period.
Sales volume was reported to have grown by about 17 percent y/y over H1-17/18. Value beer (23 percent y/y), Guinness (14 percent y/y), Malta Guinness (6 percent y/y), and main stream spirits (22 percent y/y) recorded net sales growth in the first half.
According to analysts at Cordros Research, “While gross margin remained higher relative to the last financial year (+601 bps y/y), we are quite surprised by the 118 bps decline compared to the first quarter.
“Compared to our estimate, gross margin was lower by c.650 bps, and has weakened consistently since reaching record 55 percent in Q3-16/17, reflecting, as we stated in the Q1 note, growing contribution of value beer and inflationary pressure on key raw material input prices (Sorghum in this case).”
On the positive, opex was lower by 12 percent y/y and was below the estimate by 25 percent. Admin and distribution expenses were lower by 25 percent y/y and 24 percent y/y respectively while marketing expenses increased (following focused campaigns on Guinness) by 20 percent y/y.
EBITDA margin of 15.4 percent was reported, significantly higher y/y, but lower by 96 bps q/q.
Cordros said also worth highlighting is the 65 percent y/y decrease in finance charges, comprising N583 million loss (N857 million in Q2-16/17) on foreign exchange transactions and N374 million (vs. N1.9 billion in Q2-16/17) related to interest expense on loans and borrowings and overdraft facilities.
Compared to Q1, FX loss and interest expenses were lower by 74 percent and 77 percent respectively.
Gross debt now stands at N12.5 billion post-Rights Issue, and the consequent reduced interest burden will remain supportive of earnings for the rest of 2018.
Cordros noted that continued growth in revenue and the savings on both operating and financing costs bode well for GUINNESS’ earnings in 2018.
However, continued weakening margins dampens earnings growth expectation from 2019, as the effect of low revenue and finance cost bases tapers.
The stock has gained 20 percent YtD, and positive reaction to the result is expected with estimates under review.
By Adedapo Adesanya
Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.
The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.
During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.
This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.
Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.
At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.
Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.
The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.
As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.
By Adedapo Adesanya
The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.
Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.
At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.
Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.
Also, a stronger greenback has generally put significant pressure on emerging-market currencies.
Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).
The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.
If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.
At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.
On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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