International breweries Plc (“the Group”) net loss widened in FY 2023, as it grappled with macroeconomic headwinds which includes declining volume sales, higher inflationary pressures which adversely impacted expenses, and substantial foreign exchange loss due to the devaluation of the Naira. At the start of the year, the Naira redesign policy which resulted in a cash crunch negatively impacted volume sales given their numerous vendors rely primarily on cash-only transactions. Notwithstanding the suspension of the policy before the end of Q1 2023, volume sales remained pressured throughout the year due to high inflation which shrunk consumers disposable income.

To mitigate the impact of the volume decline on revenue, the Group, in line with its industry peers, implemented price increases, and as a result, revenue went up by 19% to N260.60 billion (2022: N218.65 billion).

Players in the breweries industry sustained pricing strategy in Q1 2024, as they aim to safeguard margins amid volume sales decline and elevated input costs. However, despite achieving a robust revenue growth of 90% to N103.22 billion (Q1 2023: N54.40 billion), gross margin declined yet again by 336 basis points to 28% (Q1 2023: 31%). This was primarily due to a 99% increase in cost of goods sold, reflecting the impact of the higher inflation which averaged 31.60% in Q1 2024 (Q1 2023: 21.92%).


In its bid to raise capital and strengthen its balance sheet, the Group announced a rights issue of 161,172,395,100 ordinary shares of 2 kobo each, at N3.65 per share, on the basis of six new ordinary shares for every one existing ordinary shares held. The application list for the rights issue opened on May 21, 2024, and closed on June 10, 2024. Furthermore, the approval for converting a $379.90 million shareholder loan from AB InBEV into equity is expected to reduce the Group’s FX liability and further strengthen its balance sheet.

Considering the anticipated near-to-medium term effect of these measures, we recommend a HOLD for the stock, with a revised fair value of N3.77 (previous: N3.45).

Please follow the link “International Breweries Plc FY 2023 & Q1 2024 – Implementation of Strategic Corporate Actions to Weather the Storm” to view the whole report.                                                                                                                                              

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