In FY'22, passthrough from foreign exchange losses took the shine off earnings, with after-tax profit rising by only 4.1% to N13.2 billion, despite a 29.4% surge in operating profit. Without the associated foreign exchange losses (N26.3 billion), NB would have recorded a 211.9% surge in profit to N39.2 billion in the review year. As expected, this currency pressure was linked to the company's strong reliance on imported raw materials (c.45.0% of total) and other foreign inputs, contributing to the 69.8% increase in net foreign currency exposure to € 139.1 million.

In FY'23, we expect NB to record a 12.2% growth in revenue to N617.8 billion on the impact of the projected capacity-induced volume increase. To this point, we note that the completion of the Southeast Brewery, Ama, in October 2022, has already started supporting volumes, considering the remarkable recovery in Q4'22. However, our FY'23 sales growth projection is 1.8ppts lower than that implied by our previous forecast on the impact of naira scarcity, which began in February 2023 and is likely to drive weakness in Q1'23. According to Bloomberg, management highlighted that Heineken's local unit depends on cash for c.80.0% of its retail sales. The report also noted that the cash crunch has already led to the company's worst February in fifteen years. That said, we see latitude for revenue rebound in subsequent quarter