NIGERIA – International Brewery Nigeria (IBN) PLC, which has been consistently improving its operational performance since SABMiller acquired a majority stake in the company two years ago, saw its profit surged by 32.46 percent, for the three month period ended June 2014.
Net income surged to N708.20 million from N534.0 million in the same period of the corresponding year Q1 2013, while revenues for the period were up 19.93 percent to N5.21 billion.
This above stellar performance has been the trajectory of the company’s financial condition since SABMiller, the world’s second largest brewer by volume, bought 72.9 percent of the Nigerian brewer.
The gains of the acquisition were instantaneous as the parent company expanded its subsidiary’s Ilesha operations by 30 percent.
Additionally, this is the best performance among Nigerian brewers given the operational challenges crimping their growth potentials.
“Compared with other Nigerian brewers, International Breweries appears to be continuing to gain market share,” said Olajumoke Okeowo, analyst with FBN Capital, a research and investment firm in an email note.
Net margin, a measure of profitability and efficiency, moved to 20.09 percent in 2014, from 18.20 percent last year.
Earnings per share (EPS) moved to 22k in Q1 2014, from 16K as of Q1 2013.
The industry has been hit by high operating costs from unstable power supply and bad roads culminating in spiralling distribution costs. Furthermore, barley, a major material used in the manufacturer of beer, is imported, which makes it susceptible to foreign exchange volatility and thus spiking input cost.
Marketing/administrative and other expenses were up by 32.07 percent to N1.37 billion in Q1 2014, from N1.04 billion as of Q1 2013, while operating expenses margins moved to 26.46 percent in 2014, from 23.96 percent in 2013.
Cost-of-sales margin was as high as 51 percent fuelled by the peculiar environmental challenges in the country.
International Breweries is aggressively swooping on the brewery industry with its market penetrating product “Hero” Larger beer. Hero is called Oh Mpa, meaning “Oh Father” among the Igbo speaking people of the country, because the bottles bear the rising sun of the Biafra flag, which brings memories of the civil war.
However, the product seem not to have penetrated in other parts of the country as it is mostly predominant in the Southern part of the country.
The company was able to better manage direct costs as gross profit increased by 22.96 percent to N2.57 billion from N2.09 billion as of Q1 2013. Total assets were up by 20.86 percent to N27.17 billion in the review period compared with N22.48 billion as of Q1 2013.
Debt to equity ratio was 57.76 percent, which mean that over 50 percent of IBN’s balance sheet is funded by lenders.
The company’s share price closed at N27.50 August 15, 2014, on the floor of the Nigerian Stock Exchange, while market capitalisation was N89.71.
“The figures appear to confirm the view that the mid- to low-end segments of the market is faring much better,” said Okeowo.