Like its peers in the breweries industry, International breweries (‘the Company’) reported a bolstered revenue performance in Q2 2023 subsequent to the suspension of the Naira redesign policy which tanked sales in Q1 2023. However, the extent of its resurgence was limited to the top-line, as the Company grappled with an elevated input cost and heightened FX loss during the reporting period. This confluence of factor culminated in yet another net loss, amounting to N21.29 billion. The 15% revenue growth to N61.73 billion in Q2 2023 from N53.88 billion in Q2 2022 is believed to have been driven by higher pricing, as shrinking purchasing power continue to subdue demand.

Due to elevated input cost, the gross margin contracted by 600 basis points to 23% from 29% in Q2 2022. However, operating cost optimisation efforts enhanced operating profit margin by 300 basis points.

The Company suffered steep FX losses due to the devaluation of Naira. The revaluation of its foreign liabilities subsequent to the devaluation resulted in a considerable surge of its FX loss to N33.92 billion in Q2 2023 from N1.60 billion in Q2 2022. In addition, increased borrowings also resulted in a 253% increase in finance cost.

These factors, especially the substantial FX loss exacerbated the Company’s net loss to N21.29 billion from the N385million net loss reported in Q2 2022.


Despite the commendable uptick in revenue during the quarter, and our expectation of sustained revenue growth based on price hike albeit moderately, the Company’s profitability in the near term appears dim as the persistent burden of input costs continues to exert significant downward pressure on the Company’s margin.

Adding to this concern is the Company’s elevated financial leverage, which is expected to further erode profitability as the Company is going to deploy more funds to finance the debt. Also, the high debt profile exposes it to considerable financial risk.

While we hold the expectation that the management will further improve on cost management, the current cost landscape underscores the potential difficulties ahead. Hence, our fair value for the stock is N3.53, and we maintain our SELL recommendation for the stock.

Please follow the link “International Breweries Plc Q2 2023 – Challenging Operational Conditions Highlight Financial Vulnerabilities” to view the whole report.

Thank you.

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