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Nigerian Breweries’ Earnings More Stable than Peer Rivals

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Nigerian Breweries Plc has the most stable earnings among the largest consumer goods firms in Africa’s most populous nation and largest oil producer.

The brewer recorded earnings before interest  depreciation and amortisation (EBITDA) margins of 24.30 percent as at June 2021.

And that compares with Nestle’s profit margin of 23.60 percent; Dangote Sugar, (21.20 percent); Guinness, (12.0 percent); PZ Cussons, (11.70 percent); WAMCO, (10.90 percent); Flour Mills, (9.70 percent); UACN, (6.30 percent), Unilever, (4.80 percent), and International Breweries, (2.0 percent).

It must be noted that the higher EBITDA margin indicates Nigerian Breweries’ operating expenses are smaller in relation to its revenue, leading t0 a more profitable operation.

An EBITDA margin is a measure of a company’s operating profit, shown as a percentage of its revenue. EBITDA stands for the Earnings Before Interest, Taxes, Depreciation and Amortization that a company makes.

It is a popular and widely used metric that allows for a direct comparison between companies in terms of what they each earn, as it strips out expenses that may well obscure how a company is truly performing.

It is a more preferable measure by most analysts compared to net income because it is analyzed alongside cash margins that are not susceptible and cannot be easily manipulated.

Nigerian Breweries has been growing earnings in the last three quarters surmounting the coronavirus pandemic crisis and a myriad of challenges bedeviling the consumer goods industry.

The company’s resilient result is due to the reopening of the economy that paves the way for drinkers to hit bars after several months of sit at home orders by the government to curtain the spread of the coronavirus pandemic.

It also befitted from price increases in key products and excellent distribution and marketing strategy that added impetus to the top lines. Its revenue increased by 37.84 percent to N209.25 billion as at June 2021, the largest expansion at the top line (sales) in six years, based on data gathered by MoneyCentral.

The year on year increase was largely driven by the continued double-digit growth in Heineken and a resurgence in Star Lager volumes.

Nigerian Breweries, with an installed brewing capacity of 21.2mhl and 54.3 percent of industry market share by revenue as at 2019, saw gross profit margins increase by 31.71 percent to N77.91 billion in June 2021 from N59.14 billion the previous year.

Net income was up 38.15 percent to N7.71 billion in the period under review from N5.58 billion the previous year.

To increase or deepen its share of the market and fend off competition Observably, the company continues to leverage product innovations which it combines with efficient pricing policy to woo customers at the lower end of the market.

The management of the company embarked on volume focused strategy as it relaunched & refreshed some brands (Heineken, Star, Goldberg and Life) as well as introduced a 45cl bottles (for Tiger Lager and Legend Extra Stout) and a new 33cl can (for Heineken & Legend Extra Stout).

Nigeria Breweries is efficient in the use of its fixed asset to generate sales as the fixed asset turnover increased to 97.03 percent in June 2021 from 75.04 percent the previous year.

It is noteworthy that Nigerian Breweries is a step away from overtaking Nestle Nigeria as the largest consumer goods firm by profit.

It recorded earnings before interest and taxation depreciation and amortization (EBITDA) of N79.30 billion, which is next to Nestle’s N80.80 billion as at June 2021.

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