Guinness Nigeria Plc’s (GUINNESS) FY numbers showed mixed performance across key metrics. The renowned foreign extra stout brewer recorded a double-digit Revenue growth of 10.9% y/y to N229.44bn, amidst high inflationary pressure which has weakened consumer purchasing power. Despite a moderate rise in Cost of Sales (13% y/y to N144.7bn) and Operating expenses (13% y/y to N55.4bn), a net FX loss of N49.1bn resulted in a Pre- tax loss of N22.1bn compared with a Pre-tax profit of N23.6bn in FY 2022.
To mitigate environmental risk, the business is shutting down its sachet mainstream spirit (MSS) products. This, in addition to the lingering effects of the fuel subsidy removal and the FX unification policy on demand, may result in a minimal decline in Revenue in the short term especially as there is little room for price increases without a dent to volumes.
We however maintain a positive long-term outlook on GUINNESS Nigeria Plc, given its widely accepted products, improved production efficiency, its market position and plans by the company’s management to pay up dollar-denominated loans. We retain a Buy recommendation on Guinness and increase our price target slightly to N95.60/s from N93.13/s previously. We derive our price target using a 40/60 blend of sector relative valuation estimates and a DCF valuation.
