International Breweries reported a 70% YoY revenue growth in Q2 2021. We attribute the
revenue growth to a combination of price and volume growth. On volume growth, we posit that
the Company consolidated its strategy of increased market penetration, as its products
continued to enjoy strong demand. On price growth, we posit that the higher input costs
necessitated the need to raise prices. We also link the overall revenue growth to base effect,
given a lower-than-average revenue in Q2 2020 during the peak of the coronavirus pandemic.
Cost margin improved to 79% in Q2 2021 from 87% in Q2 2021, on account of slower pace of
increase in cost of sales (+56% YoY to N34.06bn). We believe that economies of scale and
price realisation resulted in the lower cost margin recorded in Q2 2021.
Gross profit, therefore, rose by 165% YoY to N8.93bn in Q2 2021. Operating expense
increased by 52% YoY to N11.27bn in Q2 2021, driven by higher marketing expense (+220%
YoY to N4.71bn) during the period. We link this to heightened competitive pressures in the
brewing industry, amid declining households’ purchasing power.