International Breweries (IB), based in Ilesha, Ogun State, recently released its first quarter (Q1) 2015 results on the Nigerian Stock Exchange (NSE), showing 0.24 per cent increase in revenue.
Revenue stood at N5.224 billion from N5.211 billion in Q1 2014, according to its statement of comprehensive income for the period ended June 30, 2015.
IB started production in December 1978 with capacity for 200,000 hectolitres per annum, which increased to 500,000 hectolitres per annum in December 1982.
It became a public limited liability company on April 26, 1994 and was listed on the NSE.
The company’s cost of sales, direct costs attributable to the production of goods sold, rose 3.29 per cent to N2.618 billion from N2.534 billion.
Gross profit, the difference between revenue and the cost of making products, decreased 2.65 per cent to N2.606 billion from N2.676 billion.
Marketing, administrative, and other expenses dipped 17.09 per cent to N1.615 billion from N1.379 billion.
IB has a technical services agreement (TSA) with Brauhaase International Management GMBH, a subsidiary of Warsteiner Group of Germany, which owns 72.03 per cent equity.
On January 1, 2012, SABMiller took operational management control of IB from BGI Castel. Brauhaase International Management owns 72.03 per cent equity of the company, L.A. Pro-Shares (5.04 per cent), individuals (15.9 per cent).
IB reported Q1 2015 profit before tax (PBT) decline of 40.58 per cent to N618.829 million from N1.041 billion in Q1 2014.
Profit after tax (PAT), which better assesses what a company is really earning, declined to N420.805 million from N708.216 million, down 40.58 per cent.
Basis earnings per share (EPS) dropped to 13 kobo from 21 kobo.
The results came in slightly weaker than rival Nigerian Breweries (NB’s) Q2 2015 numbers. NB recorded sales growth of 12.7 per cent year-on-year (y/y).
IB products include Trophy lager (Pale lager), Betamalt (non-alcoholic malt drink), and Trophy Black (Black lager).
“Although global average prices over the April-June period for sugar and maize (raw materials) declined by around 31 per cent y/y and 21 per cent y/y respectively, it appears that the price declines were more than offset by the devaluation of the naira, thereby limiting the gross margin expansion,” said research analysts at FBN Capital, led by Olajumoke Okeowo.
“Raw materials account for about 80 per cent of the company’s cost of sales. While the company sources maize locally, all of its barley is imported.”
They rated the shares of IB ‘neutral’ while indicating that their estimates are under review.
Finance income rose to N118.255 million from N991,000.
Finance cost – the cost and interest and other charges involved in the borrowing of money to build or purchase assets – increased to N369.199 million in Q1 2015 from N154.874 million in Q1 2014.
“International Breweries has a significant amount of foreign exchange (FX) long term loans on its books (amounting to $25 million).
“Until the company pays down the loan or is able to convert the dollarised loans to local currency, it is likely that we will continue to see elevated interest charges.
“We believe the flat y/y sales that International Breweries reported may have been due to price declines, as opposed to weak volumes.
“Our channel checks show that prices for Betamalt (which accounts for about 20 per cent of sales) declined during the quarter,” FBN Capital said.
Year-to-date (ytd), the shares of IB have shed in excess of 20 per cent, in line with other brewers, and has underperformed the NSE All Share Index (ASI), which has lost about 13 per cent this year.
Analysts still expect to see downward revisions to their consensus estimates on IB stock performance.
IB is listed on the beverages-brewers/distillers subsector of the consumer goods sector on the NSE.
The company’s share price stood at N18.45 kobo on Tuesday, August 18.
It has a market capitalisation in excess of N60.778 billion and shares outstanding of 3,294,249,280 units.
