INTBREW | International Breweries FY2023 Earnings Update: Low-pricing, inefficient operation and FX loss drag profitability

    International Breweries showed repressed performance across key metrics in 2023. The renowned trophy lager brewer recorded Revenue growth of 19.2% y/y to N260.6bn, amidst the nation’s high inflation which has weakened consumer purchasing power. Throughout the year, sales volume remained sluggish as consumers adjusted their spending patterns toward essential items. Nevertheless, and in line with our expectation, there was a slight uplift in demand during the holiday season, offering a modest cushion to overall sales volume. This was evident in the fourth quarter, where sales soared by 38.3% to N80.5 bn, compared to the preceding quarter. 

    Management at International Breweries has initiated the deployment of gas-powered trucks for nationwide product distribution. The plan involves acquiring a total of 540 gas-powered trucks, with an annual delivery of 180 trucks over three years. This move is anticipated to have a positive effect on their Selling, General & Distribution expenses, given the substantial increase in diesel prices. Currently, the company possesses approximately 900 diesel-powered heavy goods trucks nationwide. The strategy entails converting 20% of the fleet into gas-powered trucks each year.

    IntBrew has gained and increased its market share from pre-merger level (2017) of c.5.9% to c.22.3% in the brewing sector, this was possible through low pricing of the company’s limited products which has helped boost sales. However, the current inflationary economic reality, which has caused a significant spike in cost of doing business has greatly impacted margins. Hence the need for upward price adjustment across product segments. We do not expect a return to profitability in 2024e and we maintain a Sell recommendation with a price target of N4.2/s. Current Price N4.5/s.


    Download (586.74 KB)