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Nigerian Breweries Records Fastest Margin Expansion Since 2015

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Nigerian Breweries Plc has shrugged off the Covid-19 crises and hefty levies by the government as the largest brewer by market capitalization has been magnifying sales over the past five years while maintaining margins expansion.

The brewer is netting more profit from its revenue as net margin increased to 7.52 percent in March 2021 from 6.63 percent the previous year.

Net income spiked by 39.05 percent to N7.65 billion as at March 2021, the fastest margin expansion in five years, according to MoneyCentral calculations.

Notably, the company makes money from core operations and has enough earnings to cover exceptional items such as finance expense and revaluation losses as operating income increased by 32.57 percent to N14.49 billion in the period under review.

Nigeria Breweries has fought battles on many fronts, but the combinations of focus and market penetration strategies are pivotal the company surmounting the headwinds.

The outbreak of the coronavirus pandemic added another layer of concern for the brewery industry as pubs were shuttered completely in adherence to the lockdown policies of the government.

Also, the disruption in global supply chains, and foreign exchange scarcity significantly undermined brewery players. added more concerns for companies with sizable

That is on top of inflationary pressures and utility bills squeezing consumer wallets.

While inflation fell to 18.20 percent in the month of April from 18.17 percent March, it is still far below the central bank target range.

Africa’s largest economy achieved economic growth of 0.11 percent in the last three months of 2020, but recovery is slow.

Unemployment rate, which surged to the second highest on a global list of countries monitored by Bloomberg, rose to 33.3 percent in the three months through December, according to a report published by National Bureau of Statistics (NBS).

A weaker naira will balloon input costs as brewers import some of their raw material components. The unavoidable hike in utility bills is expected to spur costs across sectors.

Analysts at United Capital in its recent report on the economy said of the three major players (Nigerian Breweries, Guinness, and International Breweries),  in the brewery space, they have a conviction that only Nigeria Breweries NB is in the best position to  ride the tide, given its efficient distribution system and its wide factory footprints across the  country.

Nigerian Breweries is sitting on a cash pile, which means it has the financial strength to embark on capital projects that will help increase its share of the market.

For instance, cash flow from operating activities surged by 401.35 percent to N22.21 billion in March from N4.32 billion as at March 2020.

Net cash flow from operating activities stood at N14.62 billion in the period under review, that compares with a negative figure of N1.16 billion as at March 2020.

Nigerian Breweries is efficient in converting sales to cash as cash margin increased to 21.01 percent in March 2021 from 16.86 percent.

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