Event

Guinness Nigeria Plc (“the Company”) achieved a 44% revenue growth to N77.71 billion in Q3 2024 (Q3 2023: N54.03 billion), driven by implemented pricing strategy to combat inflationary pressures amid volume decline, and optimised product offerings, with focus on premium categories.

However, the intense competition for a share of consumers income in the highly competitive breweries industry limited the extent of pricing power. Hence, the revenue growth was inadequate to offset the impact of rising input and operating costs on margins.

Adding to the Company’s operating challenge, FX losses worsened to N57.68 billion (Q3 2023: N448.03 million), owing to the further depreciation of the Naira. Consequently, the Company sustained its net loss position for the second time in the 2024 fiscal year, as it reported a loss after tax of N56.42 billion in Q3 2024, from a net profit position of N1.84 billion in Q3 2023.

Corporate Action.

In June 2024, investors were notified of Tolaram’s acquisition of Diageo’s 58.02% stake in Guinness Nigeria at N81.60 per share. According to the press release, Tolaram will establish a long-term license and royalty agreements for the continued production of the Guinness brand, and its locally manufactured Diageo ready-to-drink and mainstream spirits brands. The transaction is slated for completion within the 2025 fiscal year, subject to regulatory approvals. Investors responded positively to this news, driving the company’s share price up from its pre-announcement level of N54.80, to the current level of N64.05.

Outlook

Although we expect that the Company’s profitability will suffer from foreign exchange losses, the proposed Tolaram’s acquisition of Diageo’s 58.02% stake offers potential for enhanced performance in the medium term, supported by expected synergy. We opine that Guinness Nigeria stands to benefit from leveraging Tolaram’s extensive operation, prompting us to adjust our fair value for the stock to N67.82 (previous: N65.91). However, given the recent stock price appreciation, our revised fair value offers a total return of 6%, hence our recommendation for the stock is now a HOLD (previous recommendation: BUY).

Please follow the link “Guinness Nigeria Plc Q3 2024 – Proposed Acquisition Bodes Well for Company” to view the whole report.                                                                                                             

Thank you.